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The decline in value of grapevines is calculated at a rate of 25%, provided you own the land to which the grapevines are affixed, or the grapevines are established on Crown land you hold under lease. If you are not entitled to calculate 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.
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 expenditure in draining swamps or low-lying land or in clearing land but it would include-for example, the cost of:
- preparing the land-ploughing and topsoil enhancement
- planting the vine itself
- the vine.
You deduct the decline in value of grapevines pro rata over a period of four years from the time the grapevines are used 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 the grapevines are used in a primary production business. If a grapevine is destroyed before the end of the write-off period, you are allowed a deduction in that year for the remaining unclaimed expenses less any proceeds-for example, insurance.
Any recoupment of the expenditure is 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.
These deductions are not available to a partnership. Costs incurred by a partnership in establishing grapevines are allocated to each partner who can then claim the relevant deduction in respect of their share of the expenditure.
Last modified: 09 Feb 2006QC 27451