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  • Establishment costs of horticultural plants

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    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    You are allowed a deduction for capital expenditure on establishing 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
    • 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. You are not allowed this deduction if you claimed the establishment expenses under any other deduction provisions. 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.

    Plants with effective life of 3 or more years

    Effective life

    Annual write-off rate

    Maximum write-off period

    3 to less than 5 years

    40%

    2 years 183 days

    5 to less than 6 2/3 years

    27%

    3 years 257 days

    6 2/3 to less than 10 years

    20%

    5 years

    10 to less than 13 years

    17%

    5 years 323 days

    13 to less than 30 years

    13%

    7 years 253 days

    30 years or more

    7%

    14 years 105 days

    Where ownership of the horticultural plants changes, the new owner is entitled to continue claiming the balance of these expenses on the same basis.

    Any recoupment of the expenditure would be assessable income. Where 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.

    These deductions are not available to a partnership. Costs incurred by a partnership in establishing horticultural plants are allocated to each partner who can then claim the relevant deduction in respect of their share of the expenditure.

    Last modified: 28 Oct 2003QC 27421