Income Equalisation for Flood Relief

The income equalisation scheme (IES) involves paying a lump sum into an IRD account the same way you pay your taxes. This payment is an expense that reduces your profit, and therefore changes your tax obligations in that year. The payment into the scheme must apply to the current trading year.

After a year, the deposited sum becomes available for you to withdraw over the course of 5 years. You can withdraw in increments or as a lump sum, and you will receive a payment of interest from IRD upon withdrawal. This withdrawal is used to bolster profit in years of low income, and to help manage tax obligations and cash flow.

Income equalisation is always available to agricultural and horticultural businesses. This is to address potential fluctuations in annual profits and create a smoother, more predictable sequence of annual tax obligations which can allow for better planning.

IRD recently introduced a flood relief rule that allows farmers and orchardists in flood affected areas to apply an income equalisation payment retroactively to the 2022 financial year, with the waiting period to withdraw the funds being reduced from a year to 20 days. This ‘late deposit, early withdrawal’ scheme is intended to provide relief for those affected by the extreme weather in early 2023.

 If your profit for 2023 reduced from 2022, and you are anticipating that profits will remain down or you are uncertain of your future position due to flood recovery, it may be advantageous to pay into the scheme to reduce your 2022 profit then use the funds to bolster profits in the 2023 financial year and beyond.

The benefits of using this scheme mostly come from preventing you from being bumped into a higher tax bracket in an unusually profitable period, as well as potentially reducing provisional tax obligations and thereby freeing up cashflow for the leaner years.

This article is for your information but does not constitute tax advice. Every trading entity will have a unique situation, so if you think you are eligible to enter this scheme it is important to consult with a tax agent. If you would like to discuss your eligibility, and whether this scheme is appropriate for your business, please contact us here at Rural Accountants.

The full list of regions deemed “flood affected” between 26 January 2023 and 1 January 2023:




Bay of Plenty


What Our Customers Think

Great local Accountants. They provide an excellent service with great explanations for the layman. They provide accounting services for non rural clients too.

Quinn Wilson, Restaurant Owner, The Wagon
What Our Customers Think

Rural Accountants is a real asset to our business.

The team at Rural Accountants pretty much manage all our administrative tasks for the group including payroll and tax planning, ensuring we don’t pay any more than necessary. They are at the forefront of technology and have helped us get up and running with Xero and Figured which is much more efficient than the way we used to work.

Sam Jones, Managing Director, Sybton Farm Ltd Partnership
What Our Customers Think

Christine is very knowledgeable, great to deal with and knows our business well. She is also a sheep & beef farmer so knows the industry really well and understands our needs.

Rural Accountants keeps us on track through strategic and forward planning meetings throughout the year. Christine knows our business inside out so she can deal with our questions instantly.

Mathew & Gemma Barham, Hawke’s Bay Farmer of the Year 2012
What Our Customers Think

What Our Customers Think

I used to work out my GST and process it manually which would take me at least a full day every two months. The team set up reconcilliation rules and other quick tools, and showed me how to do all my reconcilliations and process my GST returns through Xero which now takes me no time at all!

Mike O'Neill, Financial Services Northland Ltd
What Our Customers Think

As a farmer, Christine understands our business and how farmers and growers operate.

We use Rural Accountants to provide a full accounting service to an orcharding partnership which operates a number of orchards with a wide spread of varieties and management systems. Rural Accountants are always timely and accurate, and their annual financial accounts are extremely easy to understand and very grower-friendly.

Paul Jones, Orchardist