Show download pdf controls
  • Fencing and fodder storage assets

    If you are a primary producer, you may be entitled to claim a deduction for capital expenses incurred on your:

    • fencing assets
    • fodder storage assets.

    Your deduction is limited to capital expenses you incur for the construction, manufacture, installation or acquisition of a fencing or fodder storage asset. Your expense must have been incurred primarily and principally for use in a primary production business you conduct on land in Australia – even if you are only a lessee of the land.

    If you are not a primary producer, you can't claim a deduction for fencing and fodder storage assets under these provisions. You can claim deductions when you use fencing and fodder storage assets to produce income. Fences can be claimed as capital works and fodder storage assets as either capital works or depreciating assets.

    See also:

    Find out about:

    Amounts you can deduct

    Fencing assets

    If you incurred an expense on a fencing asset:

    • from 7.30pm AEST, 12 May 2015 (except if the expense relates to a stockyard, pen or portable fence) – deduct the whole amount in the income year in which you incurred the expense.
    • before 7.30pm AEST, 12 May 2015 (or if the expense relates to a stockyard, pen or portable fence) – deduct an amount for its decline in value based on its effective life.

    Fodder storage assets

    You can deduct the full cost of a fodder storage asset, if you:

    • incurred the expense either
      • on or after 19 August 2018
      • before 19 August 2018 and it was first used or installed ready for use on or after 19 August 2018
    • mainly use it to store fodder
    • use it in a primary production business on land in Australia – even if you are only a lessee of the land.

    Claim the deduction through your tax return in the year you incurred the expense.

    Example: full deduction applies

    Hamish is a beef cattle farmer. In July 2018, Hamish spent $30,000 on a new grain shed to store grain to feed his cattle. The grain shed was delivered and installed ready for use in September 2018.

    As the shed was ready for use after 19 August, Hamish will claim the full amount as a deduction in his 2018–19 tax return.

    End of example

    Amending a partial deduction

    You will need to amend your previous year’s tax returns to claim the full cost of the fodder storage asset in the year it was incurred, if:

    • you claimed a deduction for part of the cost (eg one third) in previous year's tax returns
    • the asset was first used or installed ready for use on or after 19 August 2018.

    Example: partial deduction already claimed

    Peter has a sheep farm. In April 2017, he spent $48,000 on a new hay shed to store fodder for his sheep. The shed wasn't installed ready for use until September 2018.

    Peter claimed a $16,000 deduction in his 2017 tax return (one third of the expense). He intended to claim a further $16,000 in his 2018 and 2019 tax returns.

    Since the shed was not installed ready for use until after 19 August 2018, Peter will need to amend his 2017 tax return to claim a deduction for the full cost ($48,000) of the hay shed.

    End of example

    Previous years

    If you incurred an expense on a fodder storage asset:

    • from 7.30pm AEST, 12 May 2015 to 18 August 2018 – deduct one-third of the amount in the income year in which you incurred the expense, and one-third in each of the following two income years
    • before 7.30pm AEST, 12 May 2015 – deduct an amount for its decline in value based on its effective life.

    Partnership expense

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

    You must reduce your deduction if the asset was not wholly used to carry on a primary production business or for a taxable purpose.

    Recouped expense

    Any expense you recoup is included in your assessable income.

    If your expense on fodder storage assets is deducted over three income years, special rules apply to determine the amount of recoupment to include in your assessable income in the year of recoupment, and in later income years.

    Second-hand assets

    Rules apply on second-hand assets for depreciation and claiming under other provisions.

    Depreciating second-hand assets

    You can only claim a deduction under the primary production accelerated depreciation rules if no-one else has deducted, or can deduct, an amount for the asset under these rules.

    This means that you generally can't claim a deduction for a second-hand fencing asset or fodder storage asset. That is unless you can prove that no one else has deducted (or can deduct) an amount for the asset under these rules.

    See also:

    Claiming under other provisions

    Primary producers who are considered a small business entity may choose to use the small business simplified depreciation rules to claim a deduction for a second-hand fencing asset or fodder storage asset.

    If you are not a small business entity and believe you are eligible to claim for second-hand items (including components in otherwise new items), you should apply for a private ruling.

    If you aren't eligible to claim a deduction for the second-hand asset under the primary production or small business rules, you can't claim a deduction for the asset at all.

    See also:

    When you sell an asset

    If you sell an asset for which you can claim a deduction under the primary production accelerated depreciation rules, you can continue to claim the deduction if the buyer uses the asset wholly to produce assessable income. This includes any deduction you would be entitled to claim in subsequent years.

    You must apportion your deduction if the buyer does not use the asset to produce assessable income. For example, if it is used in a hobby farm or for domestic purposes or if you sell it to a dealer.

    When the proceeds are assessable

    If you sell an asset for which you have deducted (or can deduct) an amount under the primary production accelerated depreciation rules, the proceeds of the sale are assessable as a capital gain.

    The cost base of the asset for capital gains tax purposes does not include any amount that you deducted (or can deduct) under those rules.

    Definitions

    Fencing asset

    The term 'fence' takes its ordinary meaning and includes an enclosure or barrier, usually made of metal or wood, as around or along a field or paddock. A fencing asset includes a structural improvement, a repair of a capital nature, or an alteration, addition or extension, to a fence.

    A fencing asset extends to parts or components of a fence including:

    • posts
    • rails
    • wire
    • droppers
    • gates
    • fittings
    • anchor assemblies.

    Fodder storage asset

    A fodder storage asset is an asset that is primarily and principally for the purpose of storing fodder.

    A fodder storage asset is also a structural improvement, a repair of a capital nature, or an alteration, addition or extension, to an asset or structural improvement, that is primarily and principally for the purpose of storing fodder.

    Fodder

    Fodder refers to food for livestock, such as grain, hay or silage. It can include liquid feed and supplements, or any feed that could fit into the ordinary meaning of fodder.

    'Primarily and principally' test

    For a fodder storage asset to satisfy the 'primarily and principally' test, its main purpose must be to store fodder for the farmer's own livestock.

    For example, a shed that is originally built for the purpose of storing hay but is occasionally used to store a neighbour's tractor that is borrowed twice a year may still meet the 'primarily and principally' test. This is because its main purpose is to store fodder. Occasionally storing the neighbour's tractor is insufficient to displace the shed's purpose as primarily and principally to store fodder.

    However, if a cotton farmer purchases a silo which is used to store seed not intended for animal consumption, the silo does not meet the 'primarily and principally' test. This is because the main purpose of the silo is not to store fodder.

    Similarly, if a grain farmer purchases a silo to store seed for sale to other farmers as fodder, the silo does not meet the 'primarily and principally' test. This is because the main purpose of the silo is to store seed for sale and not to store fodder for the grain farmer’s own livestock.

    Where an expense is incurred for several purposes, the 'primarily and principally' test requires an examination of the primary and principal function of what is produced by incurring the expense.

    For example, a shed that is originally built for the purpose of storing a tractor but is, in practice, mainly used to store hay may still meet the 'primarily and principally' test. This is because its main purpose is to store fodder.

    For dual purpose assets with integrated but separate functions, the primary and principal purpose of the asset must be to store fodder. For example, if an asset is used for both storing fodder and feeding animals, the animal-feeding component must be merely incidental to the asset's primary and principal purpose of storing fodder. It will not meet the requirements of a fodder storage asset if its primary and principal purpose is for feeding animals.

    Typical fodder storage assets

    Typical examples of fodder storage assets include:

    • silos
    • liquid feed supplement storage tanks
    • bins for storing dried grain
    • hay sheds
    • grain storage sheds
    • above-ground bunkers.
      Last modified: 19 Oct 2018QC 47131