Income equalisation scheme: How the scheme works

What is income equalisation? How does it work?

The income equalisation scheme allows taxpayers to deposit income from farming, fishing or forestry with Inland Revenue.  The money is paid into a special account and earns interest at 3% per annum on amounts left on deposit for more than 12 months.  The interest paid becomes part of the deposit for tax purposes.  The deposit is held for a maximum period of five years.

Deposits are tax deductible in the year for which they are made.  And withdrawals (including interest) are assessable in the year for which they are made.

In normal circumstances an amount may not be withdrawn unless it's been on deposit for at least 12 months.

Just after 31 March each year Inland Revenue sends a statement to all taxpayers who have income equalisation deposits, showing their current balance and any interest credited to the account.

Date published: 06 Jul 2005

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