Fence and fencing asset
The term 'fence' has the ordinary meaning. It includes an enclosure or barrier, usually made of metal or wood, around or along a field or paddock.
A fencing asset extends to parts or components of a fence including:
- posts
- rails
- wire
- droppers
- gates
- fittings
- anchor assemblies.
A fencing asset includes a structural improvement, a repair of a capital nature, or an alteration, addition or extension, to a fence.
Fodder and 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 includes a structural improvement, a repair of a capital nature, or an alteration, addition or extension, to an asset or structural improvement, that is a fodder storage asset.
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 for the purpose of' test, its main purpose must be to store fodder.
Example: 'primarily and principally for the purpose of' test
John built a shed for the purpose of storing hay but occasionally uses it to store his neighbour's tractor. This would still meet the 'primarily and principally' test because its main purpose is to store fodder.
Donna, who is a cotton farmer, buys a silo to store seed. The seed is for sowing, not for animal consumption. This silo does not meet the 'primarily and principally' test. This is because the main purpose of the silo is not to store fodder.
Greg is a grain farmer. He buys a silo to store a harvest that is designed for human consumption. This silo does not meet the 'primarily and principally' test. This is because the main purpose of the silo is not to store fodder. This is the case even if Greg ended up using the whole harvest to feed his livestock.
However, if Greg were a grain farmer who grew feed grain and stored it in a silo for sale to livestock producers, the silo would meet the 'primarily and principally' test because the main purpose of the silo is to store fodder.
End of exampleIf you incur an expense for several purposes, you need to examine the primary and principal function of what is produced by incurring the expense.
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 you use an asset 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.
Find out about:
- Deduction limits
- Who can't claim under these provisions
- Amounts you can deduct
- Recouped expense
- Second-hand assets
- If you sell an asset
Deduction limits
Your deduction is limited to the capital expenses you incur for:
- construction
- manufacture
- installation
- acquisition.
The expense must have been incurred primarily and principally for use in a primary production business conducted on land in Australia.
Who can't claim under these provisions
You can't claim a deduction for fencing and fodder storage assets under these provisions unless you're a primary producer. However, you can still claim deductions when you use fencing and fodder storage assets to produce income. You can claim a fence as capital works and fodder storage assets as either a capital work or depreciating asset.
Amounts you can deduct
These deductions are not available to a partnership. If the costs were incurred by a partnership, each partner can only claim the deduction for their respective share of the expenditure.
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.
Second-hand assets
If the asset is a second-hand asset, the following rules apply for:
Depreciation
You can't claim a deduction for the depreciation of a second-hand fencing or fodder storage asset under the primary production accelerated depreciation rules, unless you can prove that no one else has deducted (or can deduct) an amount for the asset under these rules.
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 aren't 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 either the primary production or small business rules, you can't claim a deduction for the asset at all.
If you sell an asset in the same year you purchased it
If you sell an asset in the same year you bought and claimed a deduction for it and the buyer uses the asset wholly to produce assessable income, you can continue to claim that deduction in the year it was incurred.
However, if the buyer does not use the asset to produce assessable income you must apportion your deduction. Examples would include where the buyer uses the asset on a hobby farm or for domestic purposes or if you sell it to a dealer.
Proceeds of the sale
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.