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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 decline in value of horticultural plants, provided:
- you owned the plants - lessees and licensees of land are treated as if they own the horticultural plants on that land
- you used 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 the cost of purchasing or leasing land or expenditure in draining swamp or low-lying land or in clearing land. It would include, for example:
- the costs of acquiring and planting 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.
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.
The period over which you can deduct the expenditure 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.
If the effective life of the plant is less than three years, you can claim the establishment expenditure in full generally in the year in which the first commercial season starts.
If the effective life of the plant is three or more years, you can write off the establishment expenditure 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 establishment costs less any proceeds - for example, insurance.
Last modified: 18 Jul 2006QC 27742