Did you have landcare operations and/or water conservation/conveying expenses?
No, Go to Income and expense reconciliation adjustments.
Yes, Read on.
You need to know
Landcare operations expenses
You can claim a deduction for capital expenditure you incur on a landcare operation for land in Australia in the year it is incurred.
Unless you are a rural land irrigation water provider, the deduction is available to the extent you use the land for either:
- a primary production business, or
- in the case of rural land, a business for the purpose of producing assessable income from the use of that land - except a business of mining or quarrying.
You may claim the deduction even if you are only a lessee of the land.
Rural land irrigation water providers can claim a deduction for certain expenditure they incur. A rural land irrigation water provider is an entity whose business is primarily and principally supplying water to entities for use in primary production businesses on land in Australia or businesses (except mining or quarrying businesses) using rural land in Australia. The supply of water by using a motor vehicle is excluded.
If you are a rural land irrigation water provider, you can claim a deduction for capital expenditure you incurred supplying water to a landcare operation on:
- land in Australia being used for primary production businesses, or
- rural land in Australia being used for a taxable purpose (except a business of mining or quarrying)
Your deduction is reduced by a reasonable amount to reflect an entity's use of the land for other than a taxable purpose after you incurred the expenditure.
A landcare operation is one of the following:
- erecting fences to separate different land classes in accordance with an approved land management plan
- erecting fences primarily and principally to keep animals out of areas affected by land degradation in order to prevent or limit further damage and assist in reclaiming the areas
- constructing a levee or similar improvements
- constructing drainage works - other than the draining of swamps or low-lying land - primarily and principally to control salinity or assist in drainage control
- an operation primarily and principally for eradicating or exterminating animal pests from the land
- an operation primarily and principally for eradicating, exterminating or destroying plant growth detrimental to the land
- an operation primarily and principally for preventing or combating land degradation other than by the use of fences, or
- an extension, alteration or addition to any of the assets described in the first four dot points or an extension of an operation described in the fifth to seventh dot points.
A landcare operation also includes expenditure for:
- a repair of a capital nature to an asset which is deductible under a landcare operation
- constructing a structural improvement that is reasonably incidental to levees or drainage works deductible under a landcare operation
- a repair of a capital nature, or an alteration, addition or extension to a structural improvement that is reasonably incidental to levees (or similar improvements) or drainage works deductible under a landcare operation.
An example of a structural improvement that may be reasonably incidental to drainage works is a fence constructed to prevent livestock entering a drain that was constructed to control salinity.
No deduction is available if the capital expenditure is on plant unless it is on certain fences, dams or other structural improvements. Where a levee is constructed primarily and principally for water conservation, it would be a water facility and no deduction would be allowable under these rules. Its decline in value would need to be worked out under the rules for water facilities. See Water conservation and conveyance facilities.
You may need to show any recoupment of the expenditure as assessable income either at Other business income in the Income section of item P8 on your schedule or as part of your Income reconciliation adjustments in the Reconciliation items section of item P8. For more information phone the Business Infoline on 13 28 66.
These deductions are not available to a partnership. Expenses for landcare operations incurred by a partnership are allocated to each partner who can then claim the relevant deduction in respect of their share of the expenditure.
Water conservation and conveyance facilities
You can claim a deduction for the decline in value of a water facility. A water facility includes plant or a structural improvement, or an alteration, addition or extension to plant or a structural improvement, that is primarily or principally for the purpose of conserving or conveying water. The expenditure must be incurred primarily and principally for conserving or conveying water for use in a primary production business on land in Australia.
'Water facility' includes dams, tank stands, bores, wells, irrigation channels pipes, pumps, water towers and windmills. Water facility also includes certain other expenditure incurred on or after 1 July 2004 for a:
- repair of a capital nature to plant or a structural improvement that is primarily or principally for the purpose of conserving or conveying water - for example, if you purchase a pump that needs substantial work done to it before it can be used in your business, the cost of repairing the pump may be treated as a water facility
- structural improvement, or an alteration, addition or extension to a structural improvement, that is reasonably incidental to conserving or conveying water
- repair of a capital nature to a structural improvement that is reasonably incidental to conserving or conveying water.
Examples of structural improvements that are reasonably incidental to conserving or conveying water include a bridge over an irrigation channel, a culvert (a length of pipe or multiple pipes that are laid under a road to allow the flow of water in a channel to pass under the road), or a fence preventing livestock entering an irrigation channel.
A deduction for the decline in value of a water facility can be claimed in equal instalments over three years.
Unless you are an irrigation water provider, the expenditure must be incurred primarily and principally for conserving or conveying water for use in a primary production business you conduct on land in Australia. You may claim the deduction even when you do not own the land. Therefore, if you are a lessee carrying on a business of primary production on the land, you can still claim the deduction. Your deduction is reduced where the facility is not wholly used for either:
- carrying on a primary production business on land in Australia, or
- a taxable purpose - for example, producing assessable income.
Irrigation water providers are entitled to a deduction for water facilities expenditure incurred on or after 1 July 2004. An irrigation water provider is an entity whose business is primarily and principally the supply of water to entities for use in primary production businesses on land in Australia. The supply of water by using a motor vehicle is excluded.
If you are an irrigation water provider, you must incur the expenditure primarily and principally for the purpose of conserving or conveying water for use in primary production businesses conducted by other entities on land in Australia - being entities supplied with water by you. The deduction is reduced if the facility is not used wholly for a taxable purpose. Any recoupment of the expenditure may be assessable income. For more information phone the Business Infoline on 13 28 66.
These deductions are not available to a partnership. Costs incurred by a partnership for facilities to conserve or convey water are allocated to each partner who can then claim the relevant deduction in respect of their share of the expenditure.
STS taxpayers
The amount you show at W must not include any amount relating to a depreciating asset used in your primary production business if you have chosen to claim a deduction for it under the STS capital allowances (depreciation) rules.
Completing this item
Step 1, Write your total deductions for primary production landcare operations expenses and for water facilities at Landcare operations and business deduction for decline in value of water facility in the Primary production column, item P8 on page 3 of your schedule. Do not show cents.
Step 2, Write your total deduction for non-primary production landcare operations expenses and water facilities at Landcare operations and business deduction for decline in value of water facility in the Non-primary production column. Do not show cents.
Step 3, Add up your primary production and non-primary production deductions for landcare operations and water facilities and write the total at W.