NZ meat companies likely to be hit by tax changes

Meat companies in New Zealand are likely to be among a number of rural businesses stung by property tax changes in the Budget.

The government announced on Thursday that it was removing a tax loop hole for residential and commercial properties by denying them the ability to deduct depreciation on buildings.

Deloitte tax expert Mike Shaw said closing the loop hole for residential properties is a good idea, but he said it is not fair for industrial buildings, including meat processing plants, coolstores, and dairy factories, which reduce in value over time.

Shaw said these industries have special purpose buildings and once that purpose is finished, the building is not worth anything.

He said it would be expected that industry could claim a deduction for that loss in value in the building, but the announcement means a lot of those buildings will not be able to be claimed as a tax deduction over time.

While company profits will be lower because of the reduction in value in the building, he says their tax bills will be higher, so they will be overtaxed compared to just about all other types of investment.

Shaw believes the tax change may cost the meat, dairy and horticulture industries hundreds of millions of dollars.

The Meat Industry Association said meat companies will probably look to be made exempt from the property tax change, because their processing plants have estimated lives of less than 50 years.