Spreading and Averaging Provisions
18.19. No less than four of the provisions referred to in paragraph 18.1 deal with the spreading of profits arising from the forced disposal of livestock. These provisions give relief against the bunching of income that occurs when income from the disposal (or loss) of a substantial number of livestock has to be brought to account. As indicated previously, two of the main causes of bunching of livestock profit are the adoption of minimum cost values for natural increase and the failure to include maintenance costs in the cost price valuation of livestock on hand at the end of the year of income. While adoption of higher cost values for natural increase, as recommended above, will remove one of these causes, the continued presence of other causes appears to the Committee to justify the retention of the provisions.
18.20. The spreading allowed by section 26BA where advance shearing is made because of flood, fire or drought and two wool clips are sold in one year would appear to be justified, and the Committee therefore recommends the retention of this section.
18.21. Consideration is given in Chapter 14 to the question of the averaging of incomes, and recommendations on this matter and on the use of drought bonds are made. If, as recommended, an averaging system that is not limited by a ceiling of incomes is adopted, section 160 can be repealed. The section ensures that a taxpayer who is entitled to be assessed by reference to an average income and whose taxable income exceeds $16,000 will be allowed the benefit of his average rate of tax in respect of that part of his income representing profit from the disposal of livestock made in the course of putting an end to his business. But if the present averaging system is retained, this provision should also be retained for reasons similar to those given in paragraph 18.19.