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You can claim a deduction for capital expenditure you incur on a landcare operation for land in Australia in the year it is incurred.
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 rural land - except a business of mining or quarrying.
You may claim the deduction even if you are only a lessee of the land.
A landcare operation is one of the following operations:
- erecting fences to separate different land classes in accordance with an approved land management plan
- erecting fences primarily and principally to keep out animals from areas affected by land degradation in order to prevent or limit further damage and assist in reclaiming the areas
- constructing a levee or similar improvement
- 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
- an extension, alteration or addition to any of the assets described in the first four dot points or an extension to an operation described in the fifth to seventh dot points.
A landcare operation also includes:
- 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 for capital expenditure on plant, except for plant comprising certain fences, dams or other structural improvements. If the decline in value of plant is not deductible under the landcare provisions, you work out the plant's decline in value using the general rules for working out decline in value.
Where a levee is constructed primarily and principally for water conservation, it is 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.
Any recoupment of the expenditure may be included in your assessable income.
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.
Rural land irrigation water providers can claim a deduction for certain expenditure they incur on a landcare operation. 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 on land in Australia or businesses (except mining or quarrying businesses) using rural land in Australia. For more information, see the Guide to depreciating assets 2005-06 (NAT 1996-6.2006).
Last modified: 31 Aug 2010QC 18464