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  • Deductions and offsets for capital expenditure

    Primary producers and other landholders can claim specific deductions for certain capital expenditure.

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    Electricity and phone connections

    You can claim a deduction in equal instalments over 10 years for capital expenditure incurred:

    • connecting mains electricity or upgrading an existing connection to land on which you conduct a business
    • on a telephone line on, or extending to, land on which you conduct a primary production business.

    The capital expenditure may be incurred on a depreciating asset using simplified depreciation rules or the uniform capital allowance system (UCA). These deductions are not available to a partnership.

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    Landcare

    You can claim a deduction for capital expenditure you incur on a landcare operation in Australia, if you are:

    • a primary producer
    • a business using rural land, except for mining or quarrying
    • a rural land irrigation water provider.

    You may claim the deduction even if you are only a lessee of the land.

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    Shelterbelts

    A shelterbelt is a line of trees or shrubs planted to protect an area from fierce weather.

    Shelterbelts can be used to:

    • protect crops and livestock
    • improve biodiversity
    • prevent or fight land degradation – for example, soil erosion or degradation of vegetation.

    When you can claim a deduction

    If you establish a shelterbelt on land on which you conduct a primary production business, you can claim:

    • an immediate deduction for any costs for new fencing and reticulation (such as, pipes, fittings, sprinklers, pumps and bores)
    • a deduction for the costs of site preparation, chemicals and trees – if the shelterbelt is established mainly to prevent or fight land degradation.

    If you recoup any of the expenditure that you can claim as a deduction (for example, under a government assistance program), include that amount in your assessable income.

    When you can't claim a deduction

    You can't claim a deduction for:

    • a shelterbelt created for a private purpose, such as to protect a home
    • site preparation or tree planting costs if the shelterbelt is not established mainly to prevent or fight land degradation. The trees are not considered depreciating assets.

    You need to include these costs as part of the cost base of the land for capital gains tax purposes.

    See also:

    Fire preparedness and prevention

    If you are carrying on a primary production business on land in Australia, you can claim a deduction for capital expenditure you incur relating to both:

    • fire emergency preparedness and prevention assets
    • activities on your primary production land.

    You can't claim a deduction for fire preparedness and prevention expenses that are private in nature (for example, expenses related to protecting your private residence).

    When you can claim a deduction

    You can claim a decline in value (depreciation) deduction for the cost of the following assets based on their effective life:

    • fire extinguishers
    • fire shields made of non-combustible materials to protect water tanks and electrics on sheds
    • wind breaks of permanent materials like rocks and iron (where they have a limited effective life and can reasonably be expected to decline in value).

    When you can't claim a deduction

    You can't claim a deduction for the following capital costs – but you can add them to the cost base of the land for capital gains tax purposes (this will reduce your capital gain if you sell the land):

    • the cost of wind breaks of permanent materials like rocks and iron that do not have a limited effective life (and can be economically maintained for an indefinite period)
    • the initial costs of creating fire breaks.

    Other expenses you can claim

    You can claim a deduction for:

    • personal protective items such as goggles, gloves and fire trousers (but not conventional clothing)
    • low value capital items that cost up to $100 each (such as hand tools)
    • ongoing fire break maintenance (after the initial fire break is cleared)
    • the cost of recharging fire extinguishers.

    See also:

    Last modified: 23 Jun 2021QC 42313