You are allowed a deduction for the decline in value of horticultural plants, provided:
- you own the plants - lessees and licensees of land are treated as if they own the horticultural plants on that land
- you use them in a business of horticulture to produce assessable income, and
- you incurred the expense after 9 May 1995.
Your deduction for the decline in value of horticultural plants is based on the capital expenditure incurred on establishing the plants. This does not include expenditure on the initial clearing of land. It may include, for example:
- the costs of acquiring and planting seeds, or
- part of the cost of ploughing, contouring, fertilising, stone removal and topsoil enhancement relating to the planting.
You cannot claim this deduction for forestry plants. If you claim this deduction for a grapevine, you cannot claim a deduction for the grapevine's decline in value under the provisions specific to grapevines - see Grapevines.
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.
The period over which you can deduct the expenditure depends on the effective life of the horticultural plant. You can choose to work out the effective life yourself or you can use the effective life determined by the Commissioner which is listed in Taxation Ruling TR 2000/18 Effective life of depreciating assets.
If the effective life of the plant is less than three years, the establishment costs can be claimed in full in the year in which the first commercial season starts.
If the effective life of the plant is three or more years, the establishment costs can be written off over the maximum write-off period, which generally commences at the start of what is expected to be the plant's first commercial season.
If the plant is destroyed before the end of its effective life, you are allowed a deduction in that year for the remaining unclaimed establishment costs less any proceeds - for example, insurance.
Effective life |
Annual write-off rate |
Maximum write-off period |
|---|---|---|
3 to less than 5 years |
40% |
2 years and 183 days |
5 to less than 6 2/3 years |
27% |
3 years and 257 days |
6 2/3 to less than 10 years |
20% |
5 years |
10 to less than 13 years |
17% |
5 years and 323 days |
13 to less than 30 years |
13% |
7 years and 253 days |
30 years or more |
7% |
14 years and 105 days |
Where ownership of the horticultural plants changes, the new owner is entitled to continue claiming the balance of capital expenditure incurred on establishing the plants on the same basis.
If you are a primary producer and an STS taxpayer, you must use the UCA rules to work out your deductions for horticultural plants. For more information about STS taxpayers, see STS taxpayers.
A recoupment of expenditure on horticultural plants may be assessable income. As the expenditure may be deductible over more than one income year, special rules apply to determine the amount of any recoupment to be included in assessable income in the year of recoupment and in later income years. An amount received for the sale of a horticultural plant for its market value is not regarded as an assessable recoupment.