You can claim a deduction in the year you incur capital expenditure on a landcare operation for land in Australia.
The deduction is available to the extent the land is used for either:
- a primary production business, or
- carrying on a business for a taxable purpose from the use of rural land - except a business of mining or quarrying.
You may claim the deduction even if you are only a lessee of the land.
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 erecting fences
- erecting fences to keep animals out of areas affected by land degradation to prevent or limit further degradation and to help reclaim the areas
- erecting fences to separate different land classes in accordance with an approved land management plan
- constructing a levee or similar improvement, or
- 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 for landcare operations 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.
In each of the above cases, apart from the construction of a levee or a similar improvement and erecting a fence in accordance with an approved land management plan, 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 water facility and no deduction would be allowable under these rules. Its decline in value would need to be worked out under the rules for water facilities.
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.
A recoupment of the expenditure may be included in your assessable income.