Part D: Landcare operations and business deduction for decline in value of water facility
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Landcare operations expenses
Landcare operations expenses cover what were previously known as land degradation measures. You can claim a deduction in the year you incur capital expenditure on a landcare operation for land in Australia.
The deduction is available where the land is used wholly for either:
- a primary production business, or
- a business for the purpose of producing assessable income from the use of rural land – except a business of mining or quarrying.
You must reduce your deduction to the extent you do not use the land wholly for either of these purposes.
A landcare operation is one of the following operations:
- eradicating or exterminating animal pests from the land
- eradicating, exterminating or destroying plant growth detrimental to the land
- preventing or combating land degradation other than by the use of fences
- erecting fences to keep out animals from areas affected by land degradation to prevent or limit further damage and assist in reclaiming the areas
- erecting fences to separate different land classes in accordance with an approved land management plan
- constructing a levee or similar improvements
- constructing drainage works – other than the draining of swamps or low-lying areas – to control salinity or assist in drainage control.
No deduction is available if the capital expenditure is on plant unless it is on certain fences, dams or other structural improvements.
In each case, apart from the construction of a levee, the operation must be carried out primarily and principally for the purpose stated. This is to ensure that the deduction for landcare operation expenditure and the three-year write-off for facilities to conserve or convey water cannot both be claimed for the same item of expenditure. Where a levee is constructed primarily and principally for water conservation, the cost is an allowable deduction under the water conservation provisions – see Water conservation and conveyance facilities.
If you are carrying on a primary production business on the land, you may claim the deduction even if you are a lessee.
Any recoupment of the expenditure must be shown as assessable income either at Other business income or as part of your Income reconciliation adjustments in RECONCILIATION ITEMS, item P8 on your schedule. Phone the Small business infoline on 13 28 66 for further information.
Landcare operations expenses incurred in a partnership are allocated to each partner and deducted from the partner's income.
Water conservation and conveyance facilities
A deduction for the decline in value of a water facility is allowable. A water facility is plant or a structural improvement that is primarily or principally for the purpose of conserving or conveying water. The expenditure must be incurred primarily and principally for conserving or conveying water for use in a primary production business on land in Australia.
The deduction can be claimed in equal instalments over three years.
Items which can be deducted include dams, earth tanks, underground tanks, concrete or metal tanks, tank stands, bores, wells, irrigation channels or similar improvements, pipes, pumps, water towers, windmills and extensions or improvements to any of these items.
If you are carrying on a business of primary production on the land, you may claim the deduction even when you do not own the land. Therefore, if you are a lessee carrying on a business of primary production on the land, you can still claim the deduction.
The deduction is reduced where the facility is not wholly used for either:
- carrying on a primary production business on land in Australia, or
- a taxable purpose - for example, producing assessable income.
Any recoupment of the expenditure would be assessable income. Phone the Small business infoline on 13 28 66 for further information.
Costs incurred in a partnership for facilities to conserve or convey water are allocated to each partner and deducted from the partner's income.
STS taxpayers only
The amount you show at W should not include any amount relating to a depreciating asset used in your primary production business if you have chosen to claim a deduction for it under the STS depreciation rules.
Completing this part
Last modified: 18 Feb 2020QC 27547
Write your total deductions for primary production landcare operations expenses and for water facilities at Landcare operations and business deduction for decline in value of water facility, Primary production column, item P8 on your schedule. Do not show cents.
Write your total deduction for non-primary production landcare operations expenses at Landcare operations and business deduction for decline in value of water facility, Non-primary production column, item P8 on your schedule. Do not show cents.
Add up your primary production and non-primary production deductions for landcare operations and water facilities and write the total amount at W item P8 on your schedule.