From 1 June 2017 interest will be charged by Fonterra on the Co-op Support Loan and deducted from your monthly milk payment. Interest will be charged at the rate of 2.47% p.a. for each of the three months June, July & August 2017. After which, Fonterra will reset the interest rate every three months and advise of the updated rate.
The first payment affected by this will be made on 20th July 2017.
Interest is an exempt supply for GST, so this will need to be coded separately from your milk income, to ensure the correct amount of GST is paid to Inland Revenue.
Repayment terms are triggered once the Advance Rate goes over $6.00. The current Advance Rate for the 2016/2017 season is $6.15. Based on this, the first repayment for (.15 x your 2016/2017 season total production kgMS) will be deducted from the October 2017 retro payment made on 20th October 2017.
As with the interest charge, the loan repayment is also an exempt supply for GST purposes, so will need to be coded separately from the milk retro payment to ensure you pay the correct amount of GST.
The current Advance Rate for the 2017/2018 season is $6.50. However the forecast advance doesn’t go over $6.00 until the October retro payment made on 20 October 2018. We will be in contact again if this changes.
If you are preparing your GST using a software package, it would be helpful if you dissected the interest and loan repayment amounts from the milk income. If you need assistance to set up additional codes in your accounting software, please call our office on 03 211 0801 and ask for our GST/software team, who will be happy to help.