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The specific rules for working out the decline in value of grapevines only apply to grapevines that are planted and first used by you in a primary production business before 1 October 2004. If a grapevine is planted and first used by you in a primary production business on or after 1 October 2004, the decline in value of the grapevine is worked out under the provisions relating to horticultural plants - see Horticultural plants.
The decline in value of a grapevine is worked out at a rate of 25%, provided:
- you own the grapevine, or
- the grapevine is established on Crown land you hold under a lease and is used in a primary production business.
If you are not entitled to work out your deduction for decline in value under the provisions relating to grapevines because these conditions are not met, a deduction may be available for decline in value under the provisions relating to horticultural plants - see Horticultural plants.
Your deduction for the decline in value of grapevines is based on the capital expenditure incurred on establishing the grapevines. Capital expenditure incurred on establishing grapevines does not include the cost of purchasing or leasing land or expenditure in draining swamp or low-lying land or in clearing land but it does include, for example, the cost of:
- preparing the land - ploughing and topsoil enhancement
- planting the vine itself, or
- the vine.
If the expenditure incurred arises from a non-arm's length dealing and is more than the market value of what it was for, the amount of the expenditure is taken to be that market value.
You start to deduct the decline in value of grapevines from the time you first use the grapevines in a primary production business to produce assessable income. If ownership of the grapevines changes, the remaining deduction is available to the new owner while they use the grapevines in a primary production business.
If a grapevine is destroyed before the end of the write-off period, you are allowed a deduction in the year of destruction for the remaining unclaimed establishment expenditure less any proceeds - for example, insurance.
If you are a primary producer and an STS taxpayer, you must use the UCA rules to work out your deductions for grapevines. For more information about STS taxpayers, see STS taxpayers.
A recoupment of expenditure on grapevines may be assessable income. As the expenditure is deductible over more than one income year, special rules apply to determine the amount of any recoupment to be included in assessable income in the year of recoupment and in later income years. An amount received for the sale of a grapevine for its market value is not regarded as an assessable recoupment.
Last modified: 01 Oct 2006QC 27597