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Capital expenditure deductible under the UCA

Last updated 30 October 2005

Grapevines

The decline in value of a grapevine is calculated at a rate of 25%, provided:

  • you own the grapevine, or
  • the grapevine is established on Crown land you hold under a lease and is used in a primary production business.

If you are not entitled to calculate your deduction for decline in value under the provisions relating to grapevines because these conditions are not met, a deduction may be available for decline in value under the provisions relating to horticultural plants - see Horticultural plants.

Your deduction for the decline in value of grapevines is based on the capital expenditure incurred on establishing the grapevines. Capital expenditure incurred on establishing grapevines does not include the cost of purchasing or leasing land or expenditure in draining swamps or low-lying land or in clearing land but it does include - for example, the cost of:

  • preparing the land - ploughing and topsoil enhancement
  • planting the vine itself, or
  • the vine.

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.

You start to deduct the decline in value of grapevines from the time you first use the grapevines in a primary production business to produce assessable income. If ownership of the grapevines changes, the remaining deduction is available to the new owner while the grapevines are used in a primary production business.

If a grapevine is destroyed before the end of the write-off period, you are allowed a deduction in that year for the remaining unclaimed establishment expenditure less any proceeds - for example, insurance.

If you are a primary producer and an STS taxpayer, you must use the UCA rules to work out your deductions for grapevines.

For more information about STS taxpayers, see STS taxpayers.

A recoupment of expenditure on grapevines may be assessable income. As the expenditure is 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 grapevine for its market value is not regarded as an assessable recoupment.

The UCA maintains the treatment of some capital expenditure and also introduces new deductions for some capital expenditure that did not previously attract a deduction. Most of these deductions are only available if the expenditure does not form part of the cost of a depreciating asset.

The following types of capital expenditure are deductible under the UCA:

Generally, to work out your deductions you need to reduce the expenditure by the amount of any GST input tax credits you are entitled to claim in relation to the expenditure.

Increasing or decreasing adjustments that relate to the expenditure may be allowed as a deduction or included in assessable income, respectively. Special rules apply to input tax credits on expenditure allocated to a project pool - see Project pools. STS taxpayers (except primary producers) may deduct capital expenditure under these UCA rules only if the expenditure is not part of the cost of a depreciating asset.

Primary producers who are STS taxpayers can choose to deduct certain depreciating assets under the UCA rules - see STS taxpayers.

QC27521