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Proposed bloodstock changes for standout yearlings

In Budget 2018, the Government announced policy that would allow new investors in standout yearlings purchased to breed for profit to claim income tax deductions as if they had an existing bloodstock breeding business. The policy would apply to standardbred and thoroughbred yearlings.

Investors will also be taxable if the standout yearling is subsequently sold for a profit.

The amendments giving effect to this policy are in the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, Remedial Matters) Bill. The Bill is currently being considered by Parliament and is expected to become law in early 2019.

The bloodstock policy changes are intended to have a retrospective start date of 1 January 2019

A high-priced yearling must be purchased at a New Zealand premier yearling sale and cost more than:

Standardbred Fillies $84,000
Colts $119,000
Thoroughbred Fillies $467,000
Colts $402,000

A yearling purchased through a syndicate, or subsequently syndicated following its purchase at a New Zealand premier yearling sale, would also qualify the investor to claim income tax deductions under the policy.

However, to be eligible for the policy - investors will have to provide Inland Revenue with evidence within 4 months of acquiring the yearling at a New Zealand premier yearling sale, that they intend to derive a profit from breeding the high-priced yearling.

The key documents Inland Revenue is proposing be provided include:

  1. Notification of intention to breed
  2. Sale and purchase documentation
  3. Owners details, including IRD and GST numbers
  4. Copies of any syndicate/partnership agreements
  5. Copies of the breeding business plan

The above guidance is on a policy proposal that has not yet been passed by Parliament and may be subject to change. We recommend  investors seek professional advice if they are considering relying on this proposal.

Further guidance will be provided by Inland Revenue following the law being passed by Parliament.

Questions on the above can be sent to bloodstock@ird.govt.nz