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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
- carrying on a business for the purpose of producing assessable income from the use of rural land-except a business of mining or quarrying,
and is reduced to the extent it is not.
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 improvement
- 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. The decline in value of plant not deductible under the landcare provisions is worked out using the general rules for working out decline in value-see Working out decline in value.
In each case, apart from the construction of a levee, the operation must be carried out primarily and principally for the purpose stated. If a levee is constructed primarily and principally for water conservation, it would be a facility used to conserve or convey water and no deduction would be allowable under these rules. The decline in value of the asset would need to be worked out under the rules for primary production depreciating assets-see Primary production depreciating assets.
If you are carrying on a primary production business on the land, you may claim the deduction even if you are a lessee.
If the expenditure incurred arises from a non-arm's length dealing and is more than the market value of what it was for, the amount of the expenditure is taken to be that market value.
These deductions are not available in calculating the net income or loss of a partnership. The expenditure is allocated to each partner and deducted against the partner's income.
Any recoupment of the expenditure is included in your assessable income.
Last modified: 01 Jun 2005QC 27399