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The specific rules for working out the decline in value of grapevines only apply to grapevines that were planted and first used by you in a primary production business before 1 October 2004. Legislation removing this accelerated income tax write-off for grapevines came into effect from 1 October 2004. Any grapevine planted and used in a primary production business before 1 October 2004 will continue to use the specific rules for grapevines. If a grapevine was planted and first used by you in a primary production business on or after 1 October 2004, the decline in value of the grapevine is worked out under the provisions relating to horticultural plants (see Horticultural plants).
The decline in value of grapevines planted and used in a primary production business before 1 October 2004 is worked out at a rate of 25%, provided you own the land to which the grapevines are affixed, or the grapevines are established on Crown land you hold under lease which is used in a primary production business.
If you are not entitled to work out 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, expenditure in draining swamps or low-lying land, or expenditure in clearing land. However, it would include, for example, the cost of:
- preparing the land - ploughing and topsoil enhancement
- planting the vine itself, and
- the vine.
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 they use the grapevines 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 expenses less any proceeds - for example, insurance.
Any recoupment of the expenditure 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.
These deductions are not available to a partnership. Costs incurred by a partnership in establishing grapevines are allocated to each partner, who can then claim the relevant deduction in respect of their share of the expenditure.
Last modified: 31 Aug 2010QC 18464