You are allowed a deduction for the costs of establishing a 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.
The deduction does not include expenditure on the initial clearing of the land. It may include, for example, the costs of acquiring and planting the seeds, part of the cost of ploughing, contouring, fertilising, stone removal and topsoil enhancement relating to the planting. For further information, ring the ATO. You are not allowed this deduction if you claimed the establishment expenses under any other deduction provisions. You must include recoupment of deductible expenditure in your assessable income. You cannot claim this deduction for forestry plants.
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 or you can use the effective life determined by the Commissioner which applies from 1 January 2001 and is shown in Taxation Ruling TR 2000/18-Income tax: depreciation effective life.
If the effective life of the plants is less than 3 years, you can claim the establishment costs in full in the year you first used the plants to produce assessable income.
If the effective life of the plants is 3 or more years, you can write-off the establishment costs over the maximum write-off period from the date the plants were first used for producing assessable income. If the plants are destroyed before the end of their effective life, you are allowed a deduction in that year for the remaining unclaimed expenses less any proceeds-for example, insurance.