In May 2004 the Government announced, as part of its budget package, that certain irrigation water providers would be given access to the water facilities and landcare tax concessions which were then only available to primary producers and businesses using rural land. These changes have now been enacted as part of Tax Laws Amendment (2004 Measures No. 6) Act 2005 (No. 23, 2005), which received Royal Assent on 21 March 2005.
The water facilities and landcare concessions provide that:
- primary producers can claim a deduction for capital expenditure on water facilities (such as dams and wells) over three years, and
- primary producers and businesses using rural land can claim an immediate deduction for capital expenditure on landcare activities.
Under the new arrangements:
- the above concessions remain in place
- certain irrigation water providers have now been given access to the water facilities and landcare tax concessions, and
- both the water facilities and landcare tax concessions have been extended for primary producers, businesses using rural land and irrigation water providers to include certain 'reasonably incidental expenditure'.
The legislative amendments apply to expenditure incurred on or after 1 July 2004.
Which irrigation water providers are affected?
An irrigation water provider is an entity whose business is primarily the supply of water (other than by using a motor vehicle) to primary producers.
An irrigation water provider will have access to both the water facilities and the landcare tax concession from 1 July 2004.
An entity whose business is primarily the supply of water (other than by using a motor vehicle) to businesses using rural land (except for mining or quarrying) will also have access to the landcare tax concession.
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Note: Businesses using rural land do not have access to the water facilities tax deductions.
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Why has this change been made?
This change has been made to align the deductions available to primary producers and businesses using rural land with the deductions available to irrigation water providers that supply those primary producers and businesses with water.
Extension for 'reasonably incidental' expenditure
The legislation extends the application of the tax concessions to include certain reasonably incidental expenditure incurred on or after 1 July 2004.
Reasonably incidental expenditure will include structural improvements, or alterations, additions, extensions or repairs to structural improvements, that are reasonably incidental to conserving or conveying water, or in the case of the landcare concession, that are reasonably incidental to the construction of a levee or drainage works.
Examples of things reasonably incidental to conserving or conveying water include a culvert, a fence to prevent livestock from entering an irrigation channel and a bridge over an irrigation channel. An example of a reasonably incidental expense for the landcare concession would be a bridge over a drain that controls salinity.
Can I claim a deduction for these types of 'reasonably incidental' expenditure under these concessions if the expenditure was incurred before 1 July 2004?
No. 'Reasonably incidental' expenditure cannot be deducted under these concessions if it was incurred before 1 July 2004. This would include repairs of a capital nature, such as 'initial' repairs' and expenditure on a bridge or a fence that was only reasonably incidental to conserving or conveying water or the construction of a levee or drainage works. The water facilities and landcare concessions only apply to capital expenditure, but non-capital repairs would normally be immediately deductible under the usual repairs section (25-10), even if they were incurred before 1 July 2004.
The following additional information is available:
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For further details, businesses should ring 13 28 66 (access the income tax option) and tax agents 13 72 86 (FKC 2 1 3).
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Other information links which may be of interest include:
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- the water facilities provisions are contained in sub-division 40-F of the ITAA 1997, and
- the landcare operations provisions are contained in sub-division 40-G of the ITAA 1997.
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Last Modified: Friday, 19 December 2008