ATO Interpretative Decision

ATO ID 2002/914 (Withdrawn)

Income Tax

Division 40: Landcare operation - rented property - tenant carrying on a business
FOI status: may be released

This ATO ID is a straight application of the law and does not contain an interpretative decision.

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Status of this decision: Decision Withdrawn 26 August 2005

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

If the owner of land derives income from renting the land to another entity that uses it to carry on a primary production business, can the landowner claim a deduction for capital expenditure they incur on a landcare operation for the land under section 40-630 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

No, because the landowner does not use the land for carrying on a business as required by section 40-630 of the ITAA 1997.

Facts

A taxpayer owns a farming property and rents it on a long term lease to another entity that carries on a business of primary production on the land.

The landowner's rental activity does not amount to carrying on a business.

The landowner incurs capital expenditure on erecting a fence to separate different land classes on the land in accordance with an approved management plan.

Reasons for Decision

A landcare operation includes erecting a fence to separate different land classes on the land in accordance with an approved management plan (section 40-635 of the ITAA 1997). Capital expenditure on a landcare operation is deductible for the income year in which it is incurred under section 40-630 of the ITAA 1997 provided the operation is for:

•: Australian land you use for carrying on a primary production business; or
•: rural Australian land you use for carrying on a business for a taxable purpose from the use of that land.

The landowner does not satisfy either of these conditions because their only use of the land, being the rental activity, does not amount to the carrying on of a business. Therefore, a deduction is not available to the landowner under section 40-630 of the ITAA 1997.

Note: a fence is a depreciating asset as defined in section 40-30 of the ITAA 1997. A deduction for an amount equal to the decline in value of a depreciating asset that is held and used for a taxable purpose may be available under section 40-25 of the ITAA 1997.

Date of decision: 10 July 2002

Year of income: Year ending 30 June 2002

Legislative References:
Income Tax Assessment Act 1997
   section 40-25
   section 40-30
   section 40-630
   subsection 40-630(1)
   section 40-635
   subsection 995-1(1)

Related Public Rulings (including Determinations)
Taxation Ruling IT 2423
Taxation Determination TD 95/62

Keywords
Primary production structural improvement expenses
Uniform capital allowances system

Business Line: Centres of Expertise Capital Allowance

Date of publication: 26 September 2002

ISSN: 1445-2782

history

	Date:	Version:
	10 July 2002	Original statement
You are here →	26 August 2005	Archived

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