Understanding the IRD’s Livestock Valuation Schemes: Herd Scheme vs. National Standard Cost
5 June 2025
The way you value your stock can make a big difference come tax time. Find out which method fits your farm best - Herd Scheme or NSC.
For many New Zealand farmers, livestock is one of the biggest assets in the business - and how you value that stock at the end of each financial year can have a big impact on your taxable income. The IRD offers two main livestock valuation methods: the Herd Scheme and the National Standard Cost (NSC) method.
Understanding the difference between these schemes - and which one is right for your operation - is key to managing tax and planning for the future. We've broken it down into a top-line overview:
What Are Livestock Valuation Schemes?
Each year, farmers need to assign a dollar value to their livestock. This isn’t just for the balance sheet - it also determines how much income or loss is recognised for tax purposes. The IRD allows you to choose between two main methods for certain livestock types:
- Herd Scheme
- National Standard Cost (NSC) method
1. The Herd Scheme (Market Value Approach)
This method treats livestock more like capital assets (think long-term investments, not just inventory). Livestock are valued based on average market values set by the IRD each year.
How it works:
- Values are published annually by the IRD for each livestock class (e.g. dairy cows, beef cattle, sheep).
- You don’t track the individual costs for animals.
- Once you enter the Herd Scheme for a livestock class, it’s generally considered a long-term election (you can’t switch in and out easily).
Best for:
- Long-term farmers who want stable, less volatile tax outcomes.
- Those who are building up or holding steady livestock numbers.
Pros:
- Simpler over time - less record-keeping.
- Smooths out income fluctuations (less taxable income when stock values go up).
- Useful for succession planning and long-term strategies.
Cons:
- You can’t easily change back to NSC once you elect into the Herd Scheme.
- In the year you switch, increased values may create a tax bill if values are higher than your NSC book value.
2. National Standard Cost (NSC) Method
This method values livestock based on standardised cost calculations - the average cost of rearing and purchasing livestock, adjusted annually by the IRD.
How it works:
- You calculate the cost of raising livestock (e.g. feed, vet, labour, depreciation).
- The IRD provides guidelines for this cost each year, depending on stock type.
- Tax is paid on increases in value (from births or purchases).
Best for:
- Growing farms that are increasing stock numbers year-on-year.
- Farmers wanting to maximise deductible expenses upfront.
Pros:
- Can reduce taxable income in years when you’re building stock.
- More detailed control over accounting.
Cons:
- More admin - requires tracking costs and stock changes carefully.
- Can result in higher tax when selling livestock or reducing stock numbers.
Can You Switch Between Schemes?
Yes - but there are rules. You can elect into the Herd Scheme from NSC, but switching back is generally not allowed unless special permission is granted. So it’s a decision to make carefully, ideally with your accountant.
Which Scheme Is Right for You?
The right method depends on your farm’s size, goals, and stage. Many established farmers prefer the Herd Scheme for its simplicity and long-term stability. Meanwhile, newer or growing operations might benefit from NSC’s ability to lower tax early on.
Need Help Choosing?
Every farm is different - and the best tax choice today might not be the best for next year. If you're unsure which scheme suits your business, get in touch. We can walk you through the numbers and help you make a smart, tax-efficient decision for your operation.
How often do you get to the end of a working day and wonder where the time went? Perhaps you never got to item 3 (or even item 1!!) on your to-do list. How can you solve this problem without working longer hours? The answer is very simple, but the art in the solution is where the gold is. The answer to free up time is to delegate more – either to existing team members, new people you recruit, or externally to outside contractors. However, if delegation were that easy, everyone would be doing it now, right? So, what is the art of delegation? We say art, because delegation is not an exact science; different approaches are needed depending on who the ‘delegate’ is. Time and effort are required to effectively pass on tasks to others. Often, the time the delegator needs to put in initially is greater than if they did the work themselves – that’s why so many people don’t delegate. The view that ‘it’s quicker for you to do it yourself’ holds you trapped and unable to be more productive and effective yourself. It also stops others from developing better ways to do things than you already know, i.e. if you teach them your way, then they can master that AND add their own value – two minds being better than one. Here are some essential principles to apply to help you to delegate (as opposed to abdicate!): Delegation Assess the task, issue to the right person and support - helps build trust and respect Be specific and crystal clear for greater communication Request they repeat back instructions, so you know you were understood, enabling higher productivity Set a time frame and request clarification that the task has been achieved, ensuring jobs are completed on time and are profitable Both parties to review - opens the door for future work Abdication Issue tasks to anyone and forget about it - shows distrust and a lack of respect Giving unclear and little information results in poor communication Don’t ask if you were understood - results in low productivity Don’t set a time frame – it can mean jobs are delayed and over budget Different expectations can result in disgruntled clients No review results in no future work Delegation is a skill to be learned; applying these principles consistently will ensure long-term success. “No person will make a great business who wants to do it all himself or get all the credit” – Andrew Carnagie Action list: Which tasks am I currently doing that I could delegate to others? What can I do with the time I free up? Who are the best people for me to delegate these to? (Make sure they want to do these as part of their career development). What is the best way to document what is expected and how it should be done? What support and review process is needed to ensure success?
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