Page 28 - Nexia Cape Town 2018 TG Digital

FARMING TAX

The First schedule of the Income Tax Act regulates farming taxes� The most
important sections are:

Valuation of livestock and produce
Only livestock and produce need to be brought into account at year-end and
not consumables like seed, fertiliser, fuel etc� Produce is valued at the lowest of
average cost of production or market value� Livestock can be valued at standard
values or the farmer may elect his own values which may not differ more than
20% of standard values (once a value has chosen, it must be used consistently)�
Purchases of livestock cannot create a loss because of using standard values�
This gross loss must be carried forward to the next year� See www�sars�gov�za
for the standard values�
Capital development expenditure
The following capital development expenditure may be deducted in full:
Eradication of noxious plants, alien invasive plants and prevention of soil erosion�
The following capital development expenditure is restricted to taxable income
from farming: dipping tanks, dams, irrigation schemes, boreholes and pumping
plants, fences, additions/erection of/extensions and improvements to farm
buildings, costs of establishing the area for and the planting of trees, shrubs and
perennial plants, building of roads and bridges for farming operations, carrying of
electric power from main power lines to farm machinery and equipment�
Special depreciation allowance
Machinery, implements, utensils and articles for farming purposes are written off
over three years on a 50:30:20 basis�
Rating formula
Because a farmer’s income fluctuates from year to year, an individual farmer may
elect to be taxed in accordance with a rating formula in terms of special provisions�

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