You are allowed a deduction for the decline in value 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 them in a business of horticulture to produce assessable income, and
- the expense was incurred after 9 May 1995.
Your deduction for the decline in value of horticultural plants is based on the capital expenditure incurred on establishing the plants. This does not include expenditure on the initial clearing of the land. It may include, for example:
- the costs of acquiring and planting the seeds, and
- part of the cost of ploughing, contouring, fertilising, stone removal and topsoil enhancement relating to the planting.
You cannot claim this deduction for forestry plants.
The period over which you can deduct the decline in value depends on the effective life of the horticultural plant. You can choose to work out the effective life yourself or you can use the effective life determined by the Commissioner, which is listed in Taxation Ruling TR 2000/18 - Effective life of depreciating assets.
If the effective life of the plant is less than three years you can claim the establishment costs in full in the year in which the products or parts of the plant are first able to be harvested and sold commercially. If the effective life of the plant is three or more years you can write off the establishment costs over the maximum write-off period, which generally commences at the start of what is expected to be the plant's first commercial season. If the plant is destroyed before the end of its effective life you are allowed a deduction in that year for the remaining unclaimed expenses less any proceeds (for example, insurance).