• Horticultural plants

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    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    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
    • you incurred the expense after 9 May 1995, or the expense was incurred by a former owner.

    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
    • 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 you claim this deduction for a grapevine, you cannot claim a deduction for the grapevine's decline in value under the provisions specific to grapevines.

    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-Income tax: 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 from the date the plant first generated assessable income. 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).

    Plants with effective life of three or more years

    Effective life

    Annual write-off rate

    Maximum write-off period

    3 to less than 5 years

    40%

    2 years 183 days

    5 to less than 6 2/3 years

    27%

    3 years 257 days

    6 2/3 to less than 10 years

    20%

    5 years

    10 to less than 13 years

    17%

    5 years 323 days

    13 to less than 30 years

    13%

    7 years 253 days

    30 years or more

    7%

    14 years 105 days

    Where ownership of the horticultural plants changes, the new owner is entitled to continue claiming the balance of the capital expenditure incurred on establishing the plants on the same basis.

    Any recoupment of the expenditure is assessable income. Where 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 horticultural plants 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