South Australian River Murray Sustainability Irrigation Industry Improvement Program

The Irrigation Industry Improvement Program (3IP) supports the restoration of a healthy Murray-Darling Basin environment. It recovers water access entitlements from participating irrigators, and provides them with access to industry assistance funding. To achieve this, irrigators can participate in the 3IP program by entering into a Deed of Grant as grantees on the terms and conditions of the deed.

The 3IP is delivered through three funding streams using a competitive grants process. Grantees have access to funding from one or more of these investment streams. Funds are payable under each stream following the successful completion of each milestone outlined in the Deed of Grant.

Find out about:

• Irrigation efficiency
• Water returns
• Irrigation industry assistance

Irrigation efficiency

Under irrigation efficiency, a grantee has secured funds to undertake activities to improve the water efficiency of your irrigation operations. You will receive total payments of up to 2.5 times the prevailing market value of the water access entitlement (WAE) you transfer to the SA Minister for Agriculture, Food and Fisheries (the Minister). You must use all of your irrigation efficiency payments to fund the improvements described in your project.

On execution of the Deed of Grant, the first milestone is the transfer of a WAE to the Minister. Payment is made within one month of the milestone achievement date, pending confirmation of the water transfer and receipt of an acceptable tax invoice.

If you withdraw from the project after the first milestone payment, you do not have to repay your first milestone payment under the repayment policy for the program. In these circumstances, the first milestone payment is consideration (payment) for the WAE.

WAE transfer subject to CGT

If you participate in irrigation efficiency, your water access entitlements (WAE) are capital gains tax (CGT) assets.

A CGT event happens at the time of the transfer of the WAE.

You will make a capital gain if the amount received for the transfer of the WAE is more than the cost base of the WAE.

You will make a capital loss if the amount received for the transfer of the WAE is less than the reduced cost base of the WAE.

See also:

• Capital gains tax

Eligibility for the CGT discount on capital gains

As an individual or a trustee participating in irrigation efficiency who transfers their WAE after holding it for at least 12 months you are eligible for the CGT discount on the capital gain made. A company is not eligible for a CGT discount on a capital gain.

Small business CGT relief

You may be entitled to small business CGT relief if you participate in irrigation efficiency.

See also:

• Capital gains tax concessions for small business

Payments received subsequent to the first milestone payment

These payments are a bounty or subsidy in relation to carrying on your business and are assessable income.

Deduction for expenditure on improvements

A deduction is available over a number of years for expenditure on water facilities and the decline in value of depreciating assets - for example, equipment.

Other expenditure may be deductible in the year it is incurred.

See also:

• Income and deductions for business

Taxable supply

By entering into the obligation of carrying out the activities under the On-Farm Projects and Off-Farm Projects, you make a supply for which the payment is consideration.

Provided you make the supply in the course or furtherance of your enterprise, the supply is connected with Australia and you are registered or required to be registered for GST, the supply will be a taxable supply.

Tax implications for water returns

Under water returns, a grantee transfers their WAE to the Minister for an agreed value, which is no more than the prevailing average market price.

Subject to CGT on the transfer of WAE

Your WAEs are CGT assets.

In this case, a CGT event happens at the time of the transfer of the WAE.

You will make a capital gain if the amount received for the transfer of the WAE is more than the cost base of the WAE. You will make a capital loss if the amount received for the transfer of the WAE is less than the reduced cost base of the WAE.

Eligibility for the CGT discount on capital gains

If you are an individual or a trustee participating in water returns and you transfer your WAE after holding it for at least 12 months, you are eligible for the CGT discount on the capital gain you make. A company is not eligible for a CGT discount on a capital gain.

Small business CGT relief

You may be entitled to small business CGT relief under water returns.

See also:

• Capital gains tax concessions for small business

GST free supply

A supply of water is GST-free as is the transfer of the WAE.

Irrigation industry assistance

Under, irrigation industry assistance, grantees receive funding to increase the productivity, competitiveness and resilience of farm businesses.

Payments received for irrigation industry assistance

Amounts received are a bounty or subsidy in relation to carrying on your business and are assessable income.

Taxable supply

By entering into the obligation of carrying out the activities under irrigation industry assistance, you make a supply for which the payment is consideration.

Provided you make the supply in the course or furtherance of your enterprise, the supply is connected with Australia and you are registered or required to be registered for GST, the supply will be a taxable supply.