It suits farms whose income swings from year to year. Your accountant can model whether it saves you money over five years.
Quick facts
- Tax on
- Average of 5 years' profits
- Minimum stay
- 5 years
- Step out
- One year at a time
- Leaving
- Revenue reviews past years
How it works
"Income averaging allows farmers to pay tax based on the average of five years' farming profits and losses." A fifth of the 5 years' profits is taxed each year.
"If you opt-in to averaging, you must remain on averaging for a minimum of five years."
Stepping out
"You may also elect to temporarily step-out of averaging for a single year." You pay on that year's actual profit and defer the tax on the average.
"If you revert to the normal basis of assessment, a review will be done." Revenue may adjust earlier years.
Common questions
What is income averaging for farmers?
Paying tax on the average of five years' farming profits and losses, instead of each year's actual profit.
How long must I stay on income averaging?
At least five years once you opt in.
Can I leave income averaging for a bad year?
Yes, you can step out for a single year and pay on that year's actual profit.