ato logo
Search Suggestion:

Depreciating assets

There are special rules to work out the decline in value of certain depreciating assets.

Last updated 18 October 2018

A depreciating asset is an asset that has a limited effective life and can reasonably be expected to decline in value (depreciate) over the time it is used. Some assets, such as land and trading stock, are not depreciating assets.

The general depreciation principles apply to most depreciating assets used in primary production. However, the deduction for the following primary production depreciating assets is worked out using special rules for:

See also:

Water facilities

From 7.30pm AEST, 12 May 2015, as a primary producer or irrigation water provider, you can claim an immediate deduction (previously the deduction was spread over three years) for certain expenses you incur primarily and principally for conserving or conveying water for use in a primary production business on land in Australia. You can claim the deduction even if you are only a lessee of the land.

A water facility includes plant or a structural improvement, or an alteration, addition or extension to plant or a structural improvement, that is primarily and principally for the purpose of conserving or conveying water.

Water facilities include:

  • dams
  • tanks
  • bores
  • irrigation channels
  • pumps
  • water towers
  • windmills.

No deduction is available for expenses incurred on acquiring a second-hand commercial water facility unless you can show that no-one else has deducted or could deduct an amount of the earlier expense on the construction or previous acquisition of the water facility.

See also:

Fencing

From 7.30pm AEST, 12 May 2015, as a primary producer you can claim an immediate deduction for the cost of fencing you incur primarily and principally for use in a primary production business on land in Australia. You can claim the deduction even if you are only a lessee of the land.

See also:

Fodder storage assets

You can claim a deduction for 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.

Fodder storage assets include:

  • silos
  • liquid feed supplement storage tanks
  • bins for storing dried grain
  • hay sheds
  • grain storage sheds
  • above-ground bunkers.

See also:

Horticultural plants

A horticultural plant is a live plant or fungus that is cultivated or propagated for any of its products or parts.

You can claim a deduction for the depreciation of 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 the plants in a business of horticulture to produce assessable income
  • the expense was incurred after 9 May 1995.

Your deduction for the depreciation of horticultural plants is based on the expense incurred in establishing the plants. This does not include the cost of purchasing or leasing land, or expenses on draining swamp or low-lying land or on clearing the land. It would 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 cannot claim this deduction for trees used in carbon sink forests.

See also:

Grapevines

If you planted and first used grapevines in your primary production business on or after 1 October 2004, the depreciation of the grapevines is worked out under the general rules relating to horticultural plants.

The specific rules for working out the depreciation of grapevines only applied to grapevines planted and first used in your primary production business before 1 October 2004.

See also:

QC42312