There are specific rules for working out the decline in value of grapevines that only apply to grapevines planted and used by you in a primary production business before 1 October 2004.
If a grapevine is planted and first used by you in a primary production business on or after 1 October 2004, the decline in value of the grapevine is worked out under the provisions relating to horticultural plants.
The decline in value of grapevines is calculated at a specified rate of 25%, provided:
- you own the grapevines, or
- you established them on your leased Crown land that you use in a primary production business.
Capital expenditure is written off pro rata over a period of four years from the time you first use the grapevines in a primary production business to produce assessable income.
If you are not entitled to work out your deduction for the decline in value under the provisions relating to grapevines because these conditions are not met, a deduction may be available for the decline in value under the provisions relating to horticultural plants.
If a grapevine was planted and first used by you in a primary production business on or after 1 October 2004, the decline in value of the grapevine is worked out under the provisions relating to horticultural plants.
Under these provisions, deductions for the decline in value of a grapevine planted on or after 1 October 2004 can only be claimed from the income year in which the grapevine's first commercial season starts, not when it is first used in a primary production business.
The decline in value of a grapevine will not be worked out at an annual rate of 25%, but will be based on the effective life of the grapevine.
The Commissioner has determined effective lives for grapevines as follows:
- dried grapes: 15 years
- table grapes: 15 years
- wine grapes: 20 years.
The income tax law provides an annual write-off rate for a horticultural plant with an effective life of 13 to fewer than 30 years of 13%.
Alternatively, a taxpayer can estimate their own effective life for grapevines.
Your deduction for the decline in value of grapevines is based on the capital expenditure incurred in establishing the grapevines (and horticultural plants). Capital expenditure incurred in establishing grapevines does not include the costs of:
- purchasing or leasing land
- draining swamps or low-lying land
- clearing land.
However, it would include, for example, the costs of:
- preparing the land - ploughing, contouring, fertilising, stone removal and topsoil enhancement
- planting the vines, and
- the vines.
Where ownership of the grapevines changes, the new owner is entitled to continue claiming the balance of the capital expenditure incurred in establishing the grapevines on the same basis, while they use the grapevines in a primary production business.
If a grapevine is destroyed before the end of its effective life you are allowed a deduction in that year for the remaining unclaimed expenses less any proceeds (for example, insurance).
Any recoupment of the expenditure is assessable income. Where the expenditure is deductible over more than one income year, special rules apply to determine the amount of any recoupment to be included in your assessable income in the year of recoupment and later income years.
These deductions are not available to a partnership. Costs incurred by a partnership in establishing grapevines are allocated to each partner who can then claim the relevant deduction in respect of their share of the expenditure.
Last Modified: Friday, 18 February 2011