The main proposal in the SOP is that new investors be entitled to claim tax deductions and be taxable on receipts as though they had a bloodstock breeding business, if they:
• purchase, from a New Zealand premier yearling sale, an interest in a yearling that has the qualities to be a future stud-founding horse (referred to as a “standout yearling”)
• notify the Commissioner of Inland Revenue of their intention to breed from the yearling for profit in the future and provide the owners’ details, and
• provide evidence as required by the Commissioner to support their stated intention, including a business plan.
The SOP sets out the method for setting bright-line price thresholds for thoroughbred and standardbred yearlings to distinguish standout yearlings from other yearlings. It also proposes that if a horse is sold to overseas investors or exported without first racing or breeding in New Zealand, the greater of all previous deductions or its market value be treated as income to the seller/exporter. This rule incentivises investors to undertake some racing activity in New Zealand before a standout horse is sold abroad or exported.
The amendments proposed in the SOP apply from 1 January 2019. This means that the legislation, expected to be enacted in early 2019, will apply to yearlings acquired at the New Zealand National Yearling Sales Series at Karaka in late January 2019.
The closing date for submissions on the SOP is Wednesday 24 October 2018.
Source: http://taxpolicy.ird.govt.nz