Tax Law Improvement Act 1997 (121 of 1997)

Schedule 1 Amendment of the Income Tax Assessment Act 1997

15 At the end of Part 3-45

Add:

Division 385 - Primary production

Table of Subdivisions

Guide to Division 385

385-E Primary producer can elect to spread or defer tax on profit from forced disposal or death of live stock

385-F Insurance for loss of live stock or trees

385-G Double wool clips

385-H Rules that apply to all elections made under Subdivisions 385-E, 385-F and 385-G

Guide to Division 385

385-1 What this Division is about

This Division contains rules that are specific to primary producers.

Table of sections

385-5 Where to find some other rules relevant to primary producers

Rules relevant to primary producers
Item	For rules about this topic:	See:
1	The rules about assessable income arising from disposals of trading stock apply to live stock, because live stock is trading stock.	Subdivision 60-D
2	The rules about assessable income arising from disposals of trading stock apply to: (a) standing or growing crops; and (b) crop-stools; and (c) trees planted and tended for sale.	Subdivision 60-D
3	There are some capital allowances for primary producers and some other land-holders.	Division 387

[The next Subdivision is Subdivision 385-E.]

Subdivision 385-E - Primary producer can elect to spread or defer tax on profit from forced disposal or death of live stock

Guide to Subdivision 385-E

385-90 What this Subdivision is about

You can elect to exclude from your assessable income the profit on a forced disposal or death of live stock that you held as assets of a primary production business you carry on in Australia.

The excluded profit is then brought into your assessable income over a 5 year period in one of 2 ways.

Table of sections

385-95 Basic principles for elections under this Subdivision

Operative provisions

385-100 Cases where you can make an election

385-105 Election to spread tax profit over 5 years

385-110 Alternative election to defer tax profit and reduce cost of replacement live stock

385-115 Your assessable income includes an amount for replacement live stock you breed

385-120 Purchase price of replacement live stock is reduced

385-125 Alternative election because of bovine tuberculosis has effect over 10 years not 5

385-95 Basic principles for elections under this Subdivision

(1) You can elect:

to spread the profit on the disposal or death over the income year of the disposal or death and the next 4 income years ( election to spread ); or

to defer including the profit in your assessable income, if you will use the proceeds of the disposal or death mainly to replace the live stock ( election to defer ).

(2) If you make an election to defer, the profit is “used” over the next 5 income years:

by reducing the price for which you are taken to have bought replacement stock (as a result, your tax profit on the disposal of the replacement stock is increased); and

by including in your assessable income amounts for replacement stock that you breed.

Any unused part of the profit is included in your assessable income for the fifth income year.

Operative provisions

385-100 Cases where you can make an election

(1) You can make an election if:

(a) you dispose of *live stock, or they die, because:

(i) land is compulsorily acquired or resumed under an Act; or

(ii) a State or Territory leases land for a cattle tick eradication campaign; or

(iii) pasture or fodder is destroyed by fire, drought or flood and you will use the *proceeds of the disposal or death mainly to buy replacement stock or to maintain breeding stock for the purpose of replacing the live stock; or

(iv) they are compulsorily destroyed under an *Australian law for the control of a *disease or they die of such a *disease; or

(v) you receive an official notification under an *Australian law dealing with contamination of property; and

(b) you held the live stock as assets of a *primary production business you carry on in Australia; and

(c) apart from this Subdivision, your assessable income for any income year would include the *proceeds of the disposal or death.

(2) The proceeds of the disposal or death are:

(a) if you dispose of the *live stock or their carcases in the ordinary course of *business - the total of:

(i) any amount you receive as payment for the live stock or carcases; and

(ii) any compensation you receive for the death or destruction, or a reduction in market value, of the live stock or their carcases from an *Australian government agency; or

(b) if you dispose of the *live stock or their carcases outside the ordinary course of *business - the total of:

(i) the market value of the live stock or their carcases, at the time of disposal; and

(ii) any compensation you receive for the death or destruction, or a reduction in market value, of the live stock or their carcases from an *Australian government agency; or

(c) if the *live stock die, and you do not dispose of their carcases to someone else - any compensation you receive for their death or destruction from an *Australian government agency.

385-105 Election to spread tax profit over 5 years

(1) You can elect:

(a) to include in your assessable income for the *disposal year the *proceeds of the disposal or death, reduced by the *tax profit on the disposal or death; and

(b) to include 20% of the tax profit on the disposal or death in your assessable income for the disposal year; and

(c) to include 20% of the tax profit on the disposal or death in your assessable income for each of the next 4 income years.

For rules about the making and effect of an election, see Subdivision 385-H.

(2) The disposal year is the income year in which you dispose of the *live stock, or they die, as mentioned in subsection 385-100(1).

(3) The tax profit on the disposal or death is any amount remaining after subtracting from the *proceeds of the disposal or death the sum of:

(a) the purchase price of as many of the *live stock as you purchased during the income year; and

(b) the *value of the rest of the live stock as *trading stock on hand at the start of the income year.

385-110 Alternative election to defer tax profit and reduce cost of replacement live stock

(1) Alternatively, you can elect:

(a) to include in your assessable income for the *disposal year the *proceeds of the disposal or death, reduced by the *tax profit on the disposal or death; and

(b) to reduce the cost of replacement *live stock you buy in the disposal year (or any of the next 5 income years) by amounts totalling not more than the tax profit on the disposal or death; and

(c) to include in your assessable income for the last of the 5 income years following the disposal year any *unused tax profit on the disposal or death on the last day of that year.

Note: If the election is made because of bovine tuberculosis, it has effect over 10 income years instead of 5: see section 385-125.

For rules about the making and effect of an election, see Subdivision 385-H

(2) However, you can only make this election if you will use the *proceeds of the disposal or death mainly to buy replacement *live stock, or to maintain breeding stock for the purpose of replacing the live stock that were disposed of or died.

(3) The unused tax profit on the disposal or death is the *tax profit on the disposal or death less the total of:

(a) the amounts included in your assessable income under section 385-115 for replacement animals you breed; and

(b) the amounts by which the purchase price of replacement animals is reduced under section 385-120.

385-115 Your assessable income includes an amount for replacement live stock you breed

If you make the election in section 385-110, then for the *disposal year and each of the next 5 income years, your assessable income includes any amount you choose for each replacement animal you breed during that income year. (However, you can choose not to include an amount.)

385-120 Purchase price of replacement live stock is reduced

(1) If you make the election in section 385-110, then the purchase price of each replacement animal you buy in the *disposal year, or in the next 5 income years, is treated as if it were reduced by the *reduction amount.

Meaning of reduction amount

(2) The reduction amount is:

so much of the *tax profit on the disposal or death as is attributable to live stock of the species you are replacing;

divided by:

the number of animals of that species that you disposed of or that died.

(3) However, if:

(a) you purchase a replacement animal of a different species from the *live stock it replaces; and

(b) you pay substantially more for it than you could have paid for a replacement animal of the same species;

the reduction amount for the animal is any reasonable amount at least equal to the amount worked out under subsection (2).

Exception to avoid reducing unused tax profit to less than nil

(4) However, if applying subsection (1) to a particular purchase would reduce the *unused tax profit on the disposal or death to less than nil, instead reduce the purchase price of each replacement animal in that purchase by:

the *unused tax profit on the disposal or death;

divided by:

the number of animals in the purchase.

385-125 Alternative election because of bovine tuberculosis has effect over 10 years not 5

If you can make an election under this Subdivision because:

(a) *live stock are compulsorily destroyed under an *Australian law for the control of bovine tuberculosis; or

(b) *live stock die of that *disease;

sections 385-110 to 385-120 apply as if they referred to 10 income years instead of 5 years.

Subdivision 385-F - Insurance for loss of live stock or trees

Table of sections

385-130 Insurance for loss of live stock or trees

If your assessable income for an income year would otherwise include an insurance recovery for a loss of *live stock, or for a loss by fire of trees, that you hold as assets of a *primary production business you carry on in Australia, you can elect:

(a) to include only 20% of the insurance recovery in your assessable income for that income year; and

(b) to include 20% of the insurance recovery in your assessable income for each of the next 4 income years.

For rules about the making and effect of an election, see Subdivision 385-H.

Subdivision 385-G - Double wool clips

Table of sections

385-135 Election to defer including profit on second wool clip

(1) If your assessable income for an income year would otherwise include the *proceeds of the sale of 2 wool clips because fire, drought or flood causes you to shear your sheep earlier than normal, you can elect to include in your assessable income for the next income year the *profit on the sale of the earlier than normal wool clip.

For rules about the making and effect of an election, see Subdivision 385-H.

(2) However, at the time the wool was shorn, the sheep must have been assets of a *primary production business you carried on in Australia. Also, the fire, drought or flood must have been in an area of Australia where you carried on that business at that time.

(3) The proceeds of the sale of 2 wool clips are:

(a) the proceeds of the sale of the earlier than normal wool clip; and

(b) an amount covered by one or more of the following:

(i) proceeds of the sale of another wool clip in the income year;

(ii) proceeds of the sale of wool shorn in the previous income year that you hold at the start of the income year and that you took into account at cost in working out the *value of your trading stock under Division 60 at the end of the previous income year;

(iii) an amount for wool shorn in the previous income year that is included in your assessable income of the income year because of a previous election under this section.

(4) The profit on the sale of the earlier than normal wool clip is the proceeds of the sale of the wool clip that would otherwise be included in your assessable income for the income year, less the expenses you incur in the income year that are directly attributable to the earlier shearing and sale.

Subdivision 385-H - Rules that apply to all elections made under Subdivisions 385-E, 385-F and 385-G

Table of sections

385-145 Partnerships and trusts

385-150 Time for making election

385-155 Amounts are assessable income from carrying on the primary production business

385-160 Effect of certain events on election

385-163 Disentitling events

385-165 New partnership can elect to be treated as same entity as old partnership

385-170 New partnership can elect to take advantage of election made by former owner of the business

385-145 Partnerships and trusts

If a partnership or trustee carries on a *primary production business, only the partnership or trustee can make an election under Subdivision 385-E, 385-F or 385-G.

385-150 Time for making election

You can only make an election under Subdivision 385-E, 385-F or 385-G before you lodge your *income tax return for the last income year for which your assessable income would (apart from the election) include any of:

(a) the *proceeds of the disposal or death of *live stock; or

(b) the insurance recovery for the loss of *live stock or trees; or

The Commissioner may allow you further time to make the election.

385-155 Amounts are assessable income from carrying on the primary production business

The following are taken to be assessable income from carrying on a *primary production business in Australia:

(a) an amount included in your assessable income because of an election under Subdivision 385-E, 385-F or 385-G; or

(b) an amount included in your assessable income because of section 385-160 (Effect of certain events on election).

385-160 Effect of certain events on election

(1) You cannot make an election under Subdivision 385-E, 385-F or 385-G after a *disentitling event happens.

(2) If a *disentitling event happens after you make an election under Subdivision 385-E, 385-F or 385-G, your assessable income for the income year in which the event happens includes:

(a) the *proceeds of the disposal or death of *live stock; or

(b) the insurance recovery for the loss of *live stock or trees; or

reduced by each amount that, because of the election, is included in your assessable income for that or an earlier income year.

(3) However, if a *disentitling event happens after you make an election under section 385-110 (Alternative election to defer tax profit and reduce cost of replacement live stock), your assessable income for the income year in which the event happens includes any *unused tax profit on the disposal or death on the last day of that income year.

385-163 Disentitling events

(1) A disentitling event happens when:

(a) you die; or

(b) you become bankrupt, insolvent, commence to be wound up, apply to take the benefit of a law for the relief of bankrupt or insolvent debtors, compound with creditors, or make an assignment of any property for the benefit of creditors; or

(d) you cease to carry on the *primary production business to which the election relates.

(2) In the case of a partnership, a disentitling event happens when:

(a) a partner in the partnership becomes bankrupt, insolvent, commences to be wound up, applies to take the benefit of a law for the relief of bankrupt or insolvent debtors, compounds with creditors, or makes an assignment of any property for the benefit of creditors; or

(b) a partner leaves Australia permanently, or it appears to the Commissioner that a partner is about to do so; or

(d) there is a variation in the constitution of the partnership or the interests of the partners.

(3) In the case of a trust, a disentitling event happens when:

(a) a beneficiary dies; or

(b) an order for the administration of the trust estate is made under a law relating to bankruptcy; or

(c) a beneficiary becomes bankrupt, insolvent, commences to be wound up, applies to take the benefit of a law for the relief of bankrupt or insolvent debtors, compounds with creditors, or makes an assignment of any property for the benefit of creditors; or

(d) the trustee or a beneficiary leaves Australia permanently, or it appears to the Commissioner that the trustee or a beneficiary is about to do so; or

(e) the trustee ceases to carry on the *primary production business to which the election relates.

385-165 New partnership can elect to be treated as same entity as old partnership

(1) Under Subdivision 385-E, 385-F or 385-G a new partnership can elect to be treated as a continuation of an old partnership that would otherwise cease to exist if:

(a) it immediately takes over the relevant *primary production business of the old partnership; and

(b) partners, together entitled to at least 25% of the income of the new partnership, were also partners in the old partnership.

(2) The new partnership must make this election before it lodges its *income tax return for the income year in which it takes over the *business.

385-170 New partnership can elect to take advantage of election made by former owner of the business

(1) If an entity (except a partnership):

(a) has made an election under Subdivision 385-E, 385-F or 385-G; and

(b) transfers the relevant *primary production business to a partnership; and

the partnership may elect to apply the Subdivision under which the entity made the election to all future events as if it were that entity.

(2) The partnership must make this election before it lodges its *income tax return for the income year in which the *business is transferred to it.

[The next Division is Division 387.]

Division 387 - Capital allowances for primary producers and some land-holders

Table of Subdivisions

Guide to Division 387

387-A Landcare operations

387-B Facilities to conserve or convey water

387-D Establishing grapevines

387-E Mains electricity supply

387-F Telephone lines

387-G Forestry roads and timber mill buildings

Guide to Division 387

387-1 What this Division is about

Primary producers, and some land-holders whose land is used for business, can deduct capital expenditure on some infrastructure, operations and plants under this Division. The period over which the expenditure can be deducted varies.

Subdivision 387-A - Landcare operations

Guide to Subdivision 387-A

387-50 What this Subdivision is about

You can deduct your capital expenditure on landcare operations for:

land that you use for a primary production business; or

rural land that you use for business.

You deduct the expenditure for the income year in which you incur it.

Table of sections

Deductions

387-55 Deductions for expenditure on landcare operations

387-60 Meaning of landcare operation for land

Limits on deductions

387-65 Limits on expenditure for which you can deduct

387-70 Reduced deduction if your use of the land changes

Partnerships

387-75 How this Subdivision applies to partners and partnerships

Approved management plans and farm consultants

387-80 Meaning of approved management plan

387-85 Approval of persons as farm consultants

387-90 Review of decisions relating to approvals

Deductions

387-55 Deduction for expenditure on landcare operations

(1) You can deduct capital expenditure you incur at a particular time on a *landcare operation for:

(a) land in Australia you use at the time for carrying on a *primary production business; or

(b) rural land in Australia you use at the time for carrying on a *business for the *purpose of producing assessable income from the use of that land (except a *business of mining or quarrying).

(2) You deduct the expenditure for the income year in which you incur it.

Note 1: Various provisions of this Act may reduce the amount you can deduct or stop you deducting. For example, see:

· Division 26 (limiting deductions generally);

· sections 387-65 and 387-70 (limiting your deductions under this Subdivision).

Note 2: If you recoup an amount of the expenditure, the amount will be included in your assessable income. See Subdivision 20-A.

387-60 Meaning of landcare operation for land

(1) Landcare operation for land means:

(a) erecting a fence (including an extension, alteration or addition to a fence) to separate different land classes on the land in accordance with an *approved management plan for the land; or

(b) erecting a fence (including an extension, alteration or addition to a fence) on the land primarily and principally for the purpose of excluding animals from an area affected by land degradation:

(i) to prevent or limit extension or worsening of land degradation in the area; and

(ii) to help reclaim the area; or

(d) constructing surface or subsurface drainage works on the land, if the construction is primarily and principally for the purpose of controlling salinity or assisting in drainage control; or

(e) an operation primarily and principally for the purpose of:

(i) eradicating or exterminating from the land animals that are pests; or

(ii) eradicating, exterminating or destroying plant growth detrimental to the land; or

(iii) preventing or fighting land degradation (except by erecting fences on the land); or

(f) an extension of an operation described in paragraph (a), (b), (c), (d) or (e).

(2) Paragraph (1)(d) does not apply to an operation draining swamp or low-lying land.

Limits on deductions

387-65 Limits on expenditure for which you can deduct

No deductions for expenditure on most plant

(1) You cannot deduct an amount under this Subdivision for your capital expenditure on *plant, except:

(a) a fence erected for a purpose described in paragraph 387-60(1)(a) or (b); or

(b) a dam or structural improvement (except a fence) covered by paragraph (c), (d), (e) or (f) of the definition of plant in subsection 42-18(1).

Application of Common rule 2

(2) Subdivision 41-B (which sets out Common rule 2 dealing with non-arm’s length transactions) applies to expenditure on *landcare operations for land. However, subsection 41-65(2) (about disposal of property) does not apply.

387-70 Reduced deduction if your use of the land changes

Despite section 387-55, you can deduct only a reasonable amount under this Subdivision for your capital expenditure in an income year on *landcare operations for land if, at some time after you incurred the expenditure but during the income year, you used the land for a purpose other than the purpose of carrying on:

(a) a *primary production business; or

(b) a *business for the *purpose of producing assessable income from the use of rural land (except a *business of mining or quarrying).

Partnerships

387-75 How this Subdivision applies to partners and partnerships

Application

(1) This section applies to allocate expenditure to you for the purposes of this Subdivision if you were a partner in a partnership when it incurred capital expenditure during an income year.

Allocation of partnership expenditure to partners

(2) For the purposes of this Subdivision, you are taken to have incurred during that income year:

(a) the amount of the expenditure that the partners agreed you should bear; or

(b) if there was no such agreement - the proportion of the expenditure equal to the proportion of your individual interest in the net income or partnership loss of the partnership for that income year.

This Subdivision does not apply to net income or partnership loss

(3) Disregard this Subdivision when working out the net income or partnership loss of the partnership under section 90 of the Income Tax Assessment Act 1936.

Approved management plans and farm consultants

387-80 Meaning of approved management plan

An approved management plan for land is a plan that:

(a) shows:

(i) the different land classes within the land; and

(ii) the location of any fencing needed to separate any of the land classes primarily and principally to prevent land degradation; and

(b) describes the kind of fencing and how it will prevent land degradation; and

(i) an officer of a State or Territory Government department or authority responsible for land conservation who has authority to do so; or

(ii) a person who was at the time approved in writing as a farm consultant under this Subdivision.

387-85 Approval of persons as farm consultants

(1) A person may be approved in writing as a farm consultant by:

(a) the Secretary to the Department of Primary Industries and Energy; or

(b) an officer of that Department who has been authorised in writing by that Secretary to approve persons as farm consultants.

Note: This subsection also allows the approval of a person as a farm consultant to be revoked. See subsection 33(3) of the Acts Interpretation Act 1901.

(2) The following matters must be taken into account when deciding whether to approve a person as a farm consultant:

(a) the person’s qualifications, experience and knowledge relating to land conservation and farm management;

(b) the person’s standing in the professional community;

387-90 Review of decisions relating to approvals

A person may apply to the *AAT for review of a decision (as defined in the Administrative Appeals Tribunal Act 1975):

(a) to refuse to approve the person as a farm consultant; or

(b) to revoke the approval of the person as a farm consultant.

Subdivision 387-B - Facilities to conserve or convey water

Guide to Subdivision 387-B

387-120 What this Subdivision is about

You can deduct over 3 years capital expenditure on a facility, if you incur the expenditure to conserve or convey water for a primary production business you conduct on land in Australia.

Table of sections

Deductions

387-125 Deduction for expenditure on water facilities

387-130 Meaning of water facility

Limits on deductions

387-135 Reduced deduction for certain uses of water facility

387-140 No deduction for acquisition of water facility if anyone can deduct certain earlier expenditure on the facility

387-145 Application of Common rule 2

Partnerships

387-150 How this Subdivision applies to partners and partnerships

Deductions

387-125 Deduction for expenditure on water facilities

(1) You can deduct an amount under subsection (2) for capital expenditure that you incur on the construction, manufacture, installation or acquisition of a *water facility, if you incur it primarily and principally for the purpose of conserving or conveying water for use in a *primary production business that you conduct on land in Australia.

(2) You can deduct one third of your capital expenditure:

(a) for the income year in which you incur the expenditure; and

(b) for each of the next 2 income years.

Note 1: Various provisions may reduce the amount you can deduct or stop you deducting. For example, see:

· Division 26 of this Act (limiting deductions generally);

· sections 387-135, 387-140 and 387-145 of this Act (limiting your deductions under this Subdivision);

· Division 245 of Schedule 2C to the Income Tax Assessment Act 1936 (which may affect your entitlement to a deduction if your debts are forgiven).

Note 2: If you recoup an amount of the expenditure, the amount will be included in your assessable income. See Subdivision 20-A.

387-130 Meaning of water facility

(1) A water facility is:

(a) an item of *plant; or

(b) a structural improvement; or

(2) Examples of a *water facility include a dam, earth tank, underground tank, concrete tank, metal tank, tank stand, bore, well, irrigation channel (or similar improvement), pipe, pump, water tower or windmill.

Limits on deductions

387-135 Reduced deduction for certain uses of water facility

Your deduction for expenditure relating to a *water facility is reduced to a reasonable amount if the facility:

(a) was not wholly for use in carrying on a *primary production business on land in Australia; or

(b) was not wholly for use for the *purpose of producing assessable income.

387-140 No deduction for acquisition of water facility if anyone can deduct certain earlier expenditure on the facility

(1) You cannot deduct an amount for any income year for capital expenditure on the acquisition of a *water facility if any person has deducted or can deduct an amount under this Subdivision for any income year for earlier capital expenditure on:

(a) the construction or manufacture of the facility; or

(b) a previous acquisition of the facility.

Note: Treat expenditure covered by section 75A or 75B of the Income Tax Assessment Act 1936 as if it had been deducted under this Subdivision. See section 387-140 of the Income Tax (Transitional Provisions) Act 1997.

(2) A *water facility and an alteration, addition or extension to that facility are not the same water facility for the purposes of subsection (1).

387-145 Application of Common rule 2

Subdivision 41-B (which sets out Common rule 2 dealing with non-arm’s length transactions) applies to expenditure for which you can deduct an amount under this Subdivision. However, subsection 41-65(2) (about disposal of property) does not apply.

Partnerships

387-150 How this Subdivision applies to partners and partnerships

Application

(1) This section applies to allocate expenditure to you for the purposes of this Subdivision if you were a partner in a partnership when it incurred capital expenditure during an income year.

Allocation of partnership expenditure to partners

(2) For the purposes of this Subdivision, you are taken to have incurred during that income year:

(a) the amount of the expenditure that the partners agreed you should bear; or

This Subdivision does not apply to net income or partnership loss

(3) Disregard this Subdivision when working out the net income or partnership loss of the partnership under section 90 of the Income Tax Assessment Act 1936.

[The next Subdivision is Subdivision 387-D.]

Subdivision 387-D - Establishing grapevines

387-300 What this Subdivision is about

You can deduct expenditure on establishing a grapevine that you own and use in a primary production business. You can usually deduct it over 5 income years.

Table of sections

Deductions

387-305 Deduction for establishment of grapevine

387-310 Expenditure on draining swamps and clearing land not counted

387-315 Additional deduction if grapevine is destroyed

387-320 Deductions for quasi-owners of land with grapevines

Deductions

387-305 Deduction for establishment of grapevine

(1) You can deduct an amount for an income year if:

(a) an entity has incurred capital expenditure relating to the establishment of a grapevine in Australia for use in a *primary production business; and

(b) you owned the grapevine, and used it in a *primary production business for the *purpose of producing assessable income, on at least one day during the income year.

Note 1: Various provisions may reduce the amount you can deduct or stop you deducting. For example, see:

· Division 26 of this Act (limiting deductions generally);

· section 387-310 of this Act (preventing you deducting expenditure on draining swamps or low-lying land);

· Division 245 of Schedule 2C to the Income Tax Assessment Act 1936 (which may affect your entitlement to a deduction if your debts are forgiven).

Note 2: If you recoup an amount of the expenditure, the amount will be included in your assessable income. See Subdivision 20-A.

Amount of deduction

(2) The amount you can deduct for the income year is worked out using the formula:

Write-off days

Establishment in income year

expenditure x --------------- x 25%

365

where:

establishment expenditure is the amount of the capital expenditure that is attributable to the establishment of the grapevine.

write-off days in income year is the number of days in the income year on which you owned the grapevine and used it in a *primary production business for the *purpose of producing assessable income.

No deduction for period more than 4 years after grapevine established

(3) Disregard your use of the grapevine on a day that is more than 4 years after the grapevine was established.

Note: That 4-year period will be spread over 5 income years, unless the grapevine is established on the first day of an income year.

387-310 Expenditure on draining swamps and clearing land not counted

When working out the amount of a deduction under this Subdivision, do not count expenditure incurred in draining swamp or low-lying land or in clearing land.

387-315 Additional deduction if grapevine is destroyed

(1) If a grapevine in Australia that you own and use in a *primary production business for the *purpose of producing assessable income is destroyed at any time up to 4 years after the day it was established, you can deduct an amount for the income year during which the grapevine is destroyed.

(2) Work out the amount you can deduct as follows:

Method statement

Step 1. Work out the total of the amounts you could have deducted under section 387-305 for that expenditure if you had owned the grapevine and used it in a *primary production business for the *purpose of producing assessable income for the whole of the period:

(a) starting when the grapevine was established; and

(b) ending when the grapevine was destroyed.

Step 2. Subtract from the establishment expenditure worked out under subsection 387-305(2):

(a) the result from Step 1; and

(b) any amount you received (under an insurance policy or otherwise) for the destruction of the grapevine.

The remaining amount (if any) is the amount you can deduct under subsection (1).

Note: In Step 1 you must take into account any amounts you could have deducted if section 387-305 had applied to assessments for income years before the 1997-98 income year. See section 387-315 of the Income Tax (Transitional Provisions) Act 1997.

(3) This deduction is in addition to a deduction under section 387-305 for expenditure on establishing the grapevine.

387-320 Deductions for quasi-owners of land with grapevines

(1) You are treated for the purposes of this Subdivision as if you own a grapevine so long as:

(a) the grapevine is attached to land you hold under a
*quasi-ownership right granted by an *exempt Australian government agency or an *exempt foreign government agency; and

(b) the grapevine was planted by you or a previous holder of the land under the quasi-ownership right; and

(2) So long as you are treated under this section as owning the grapevine, no other entity is taken to own it for the purposes of this Subdivision.

Subdivision 387-E - Mains electricity supply

Guide to Subdivision 387-E

387-350 What this Subdivision is about

You can deduct over 10 years your capital expenditure on connecting or upgrading the supply of mains electricity to land for use in a business if you have an interest in the land.

Table of sections

Deductions

387-355 Deducting expenditure on connecting power to land or upgrading the connection

387-360 Meaning of connecting power to land or upgrading the connection

Limits on deductions

387-365 Deduction denied if electricity not used as intended

387-370 Expenditure relating to mining cannot be deducted

387-375 Deductions under this Subdivision prevent other deductions for same expenditure

Partnerships

387-380 How this Subdivision applies to partners and partnerships

Other deductible expenditure

387-390 Contributions to cost of connecting power to land or upgrading the connection

Deductions

387-355 Deducting expenditure on connecting power to land or upgrading the connection

(1) You can deduct an amount under subsection (2) if:

(a) you incur capital expenditure on *connecting power to land or upgrading the connection; and

(b) when you incur the expenditure:

(i) you have an interest in the land or are a share-farmer carrying on a *business on the land; and

(ii) you or another person intends to use some or all of the electricity to be supplied as a result of the expenditure in carrying on a *business on the land for the *purpose of producing assessable income at a time when you have an interest in the land or are a share-farmer carrying on a *business on the land.

Note 1: You can also deduct your contribution to the cost of connecting power to land or upgrading the connection. See section 387-390.

Note 2: You will be denied the deduction if the electricity is not used as intended within 12 months after it is first supplied as a result of the expenditure. See section 387-365.

(2) You can deduct 10% of the expenditure:

(a) for the income year in which you incur it; and

(b) for each of the next 9 income years.

Note 1: Various provisions may reduce the amount you can deduct or stop you deducting. For example, see:

· Division 26 of this Act (limiting deductions generally);

· sections 387-370 of this Act (specifying expenditure you cannot deduct under this Subdivision);

· Division 245 of Schedule 2C to the Income Tax Assessment Act 1936 (which may affect your entitlement to a deduction if your debts are forgiven).

Note 2: If you recoup an amount of the expenditure, the amount will be included in your assessable income. See Subdivision 20-A.

387-360 Meaning of connecting power to land or upgrading the connection

(1) Each of the following operations is connecting power to land or upgrading the connection :

(a) connecting a mains electricity cable to a *metering point on the land (whether or not the point from which the cable is connected is on the land);

(b) providing or installing equipment designed to measure the amount of electricity supplied through a mains electricity cable to a *metering point on the land;

(c) providing or installing equipment for use directly in connection with the supply of electricity through a mains electricity cable to a *metering point on the land;

(d) work to increase the amount of electricity that can be supplied through a mains electricity cable to a *metering point on the land;

(e) work to modify or replace equipment designed to measure the amount of electricity supplied through a mains electricity cable to a *metering point on the land, if the modification or replacement results from increasing the amount of electricity supplied to the land;

(f) work to modify or replace equipment for use directly in connection with the supply of electricity through a mains electricity cable to the land, if the modification or replacement results from increasing the amount of electricity supplied to the land.

(2) However, an operation described in subsection (1) done in the course of replacing or relocating mains electricity cable or equipment is connecting power to land or upgrading the connection only if done to increase the amount of electricity that can be supplied to a *metering point on the land.

(3) A metering point on land is a point where consumption of electricity supplied to the land through a mains electricity cable is measured.

(4) Operations described in subsection (1) are the only kinds of operations that can be connecting power to land or upgrading the connection .

Limits on deductions

387-365 Deduction denied if electricity not used as intended

(1) You cannot deduct an amount under this Subdivision if, during the 12 months after electricity is first supplied to the land as a result of the expenditure, no electricity supplied as a result of the expenditure is used in carrying on a *business on the land for the *purpose of producing assessable income.

(2) If you deducted an amount for any income year under this Subdivision for the expenditure, your assessment for that income year may be amended under section 170 of the Income Tax Assessment Act 1936 to disallow the deduction.

387-370 Expenditure relating to mining cannot be deducted

You cannot deduct an amount under this Subdivision for:

(a) expenditure in providing water, light or power for use on, access to or communication with the site of *eligible mining operations; or

(b) a contribution to the cost of providing water, light or power for one of those purposes.

Note: You may be able to deduct amounts for such expenditure under Subdivision 330-C: see section 330-80 and paragraph 330-85(d).

387-375 Deductions under this Subdivision prevent other deductions for same expenditure

(1) If you can deduct, or have deducted, an amount for any income year under this Subdivision for your expenditure:

(a) an entity cannot deduct an amount for any income year under a provision of this Act (except this Subdivision) for the expenditure; and

(b) the expenditure cannot be taken into account to work out the amount of an entity’s deduction for any income year under a provision of this Act (except this Subdivision).

(2) Subsection (1) also applies in working out the net income, or partnership loss, of a partnership under section 90 of the Income Tax Assessment Act 1936.

Partnerships

387-380 How this Subdivision applies to partners and partnerships

Application

(1) This section applies to allocate expenditure to you for the purposes of this Subdivision if you were a partner in a partnership when it incurred capital expenditure during an income year.

Allocating partnership expenditure to partners

(2) For the purposes of this Subdivision, you are taken to have incurred during that income year:

(a) the amount of the expenditure that the partners agreed you should bear; or

This Subdivision does not apply to net income or partnership loss

(3) Disregard this Subdivision when working out the net income or partnership loss of the partnership under section 90 of the Income Tax Assessment Act 1936.

[The next section is section 387-390.]

Other deductible expenditure

387-390 Contributions to cost of connecting power to land or upgrading the connection

For the purposes of this Subdivision, a contribution to the cost of *connecting power to land or upgrading the connection is treated in the same way as capital expenditure on *connecting power to land or upgrading the connection.

Subdivision 387-F - Telephone lines

Guide to Subdivision 387-F

387-400 What this Subdivision is about

You can deduct over 10 years your capital expenditure:

on a telephone line on land; or

on a telephone line extending to land;

if you have an interest in the land and the land is used for a primary production business.

Table of sections

Deductions

387-405 Deduction for expenditure on a telephone line

Limits on deductions

387-410 Expenditure that you cannot deduct

387-415 Relationship with other deductions

Partnerships

387-420 How this Subdivision applies to partners and partnerships

Deductions

387-405 Deduction for expenditure on a telephone line

(1) You can deduct an amount under subsection (2) for your capital expenditure on a telephone line on or extending to land if, when you incurred the expenditure:

(a) a *primary production business was carried on on the land; and

(b) you had an interest in the land or you were a share-farmer carrying on a *primary production business on the land.

Note: Special rules apply to partners and partnerships. See section 387-420.

(2) You can deduct 10% of the expenditure:

(a) for the income year in which you incurred the expenditure; and

(b) for each of the next 9 income years.

Note: Various provisions may reduce the amount you can deduct or stop you deducting. For example, see:

· Division 26 of this Act (limiting deductions generally);

· sections 387-410 of this Act (specifying expenditure you cannot deduct under this Subdivision);

· Division 245 of Schedule 2C to the Income Tax Assessment Act 1936 (which may affect your entitlement to a deduction if your debts are forgiven).

Limits on deductions

387-410 Expenditure that you cannot deduct

(1) Despite section 387-405, you cannot deduct an amount under this Subdivision for any income year for your capital expenditure on a part of a telephone line if:

(a) any entity has deducted, or can deduct, an amount for any income year for the cost of that part under a provision of this Act (except this Subdivision); or

(b) the cost of that part has been, or must be, taken into account in working out:

(i) the amount of any entity’s deduction (including a deduction for depreciation) for any income year under a provision of this Act (except this Subdivision); or

(ii) the net income, or partnership loss, of a partnership under section 90 of the Income Tax Assessment Act 1936.

Note: The fact that you have deducted, or can deduct, an amount under section 70 of the Income Tax Assessment Act 1936 for your expenditure on part of a telephone line does not prevent you from deducting an amount under this Subdivision for your expenditure on that part of a telephone line. See section 387-410 of the Income Tax (Transitional Provisions) Act 1997.

(2) However, you can deduct an amount under this Subdivision for your expenditure on a part of a telephone line even if:

(a) an entity that worked on installing that part has deducted, or can deduct, an amount relating to that part for any income year under this Act (except this Subdivision); or

(b) the cost of that part has been, or must be, taken into account:

(i) in working out the amount of such an entity’s deduction (including a deduction for depreciation) for any income year under a provision of this Act (except this Subdivision); or

(ii) under section 90 of the Income Tax Assessment Act 1936 in working out the net income, or partnership loss, of a partnership that worked on installing that part.

(3) Subsection (2) has effect whether the entity did the work itself or through one or more employees or agents.

387-415 Relationship with other deductions

(1) If you can deduct or have deducted an amount under this Subdivision for any income year for expenditure on all or part of a telephone line:

(a) an entity cannot deduct an amount for any income year under a provision of this Act (except this Subdivision) for capital expenditure relating to that line or part of the line; and

(b) an amount of capital expenditure relating to that line or part of the line cannot be taken into account in working out the amount of an entity’s deduction for any income year under a provision of this Act (except this Subdivision).

(2) Subsection (1) also applies in working out the net income, or partnership loss, of a partnership under section 90 of the Income Tax Assessment Act 1936.

Partnerships

387-420 How this Subdivision applies to partners and partnerships

Application

(1) This section applies to allocate expenditure to you for the purposes of this Subdivision if you were a partner in a partnership when it incurred capital expenditure during an income year.

Allocation of partnership expenditure to partners

(2) For the purposes of this Subdivision, you are taken to have incurred during that income year:

(a) the amount of the expenditure that the partners agreed you should bear; or

This Subdivision does not apply to net income or partnership loss

(3) Disregard this Subdivision when working out the net income or partnership loss of the partnership under section 90 of the Income Tax Assessment Act 1936.

Subdivision 387-G - Forestry roads and timber mill buildings

Guide to Subdivision 387-G

387-450 What this Subdivision is about

You can deduct your capital expenditure on constructing or acquiring a forestry road or a timber mill building.

The period over which you can deduct depends on how long you estimate the road or building can be used for the main purpose for which you constructed or acquired it.

Table of sections

387-455 How this Subdivision applies to pre-1997-98 expenditure

Deductions

387-460 What expenditure you can deduct

387-465 Meaning of forestry road , timber operation and timber mill building

387-470 How much you can deduct for the current year

Limits on deductions

387-475 Limits on expenditure on acquiring a road or building

387-480 When you cannot deduct

Balancing adjustments

387-485 Making a balancing adjustment when an event stops you deducting

387-490 Meaning of termination value

387-495 Meaning of written down value

Resuming deductions

387-500 Resuming deductions after you stop using a road or building

Application of Common rules

387-505 Application of Common rules 1, 2 and 3

387-455 How this Subdivision applies to pre-1997-98 expenditure

(1) This Subdivision applies to your capital expenditure on a forestry road or a timber mill building, even if you incurred it before the 1997-98 income year.

Note: Sections 387-450 to 387-507 of the Income Tax (Transitional Provisions) Act 1997 explain how this Subdivision applies if you incurred expenditure before that income year.

(2) In that case, you may have taken the expenditure into account in working out your deductions under Division 10A of Part III of the Income Tax Assessment Act 1936 (which provided for deductions for expenditure on access roads and timber mill buildings for the 1996-97 income year and earlier income years).

(3) If so, you treat any deductions that you made, or could make, under that Division for the 1996-97 income year and earlier income years as if you had made them in those years under this Subdivision.

Deductions

387-460 What expenditure you can deduct

You can deduct an amount for capital expenditure you have incurred:

(a) on a *forestry road, in connection with carrying on a *timber operation for the *purpose of producing assessable income; or

(b) for the construction or acquisition of a *timber mill building.

To work out how much you can deduct, see section 387-470.

Note: Various provisions may reduce the amount you can deduct or stop you deducting. For example, see:

· Division 26 of this Act (limiting deductions generally);

· sections 387-475 and 387-480 of this Act (limiting expenditure you can deduct and specifying when you cannot deduct under this Subdivision);

· Division 245 of Schedule 2C to the Income Tax Assessment Act 1936 (which may affect your entitlement to a deduction if your debts are forgiven).

387-465 Meaning of forestry road , timber operation and timber mill building

(1) A forestry road is a road constructed primarily and principally for the purpose of providing access to an area to enable:

(a) trees to be planted or tended in the area; or

(b) timber felled in the area to be removed.

For this purpose, a road includes any bridge, culvert or similar work forming part of the road.

(2) A timber operation is:

(a) planting or tending trees for felling; or

(b) felling standing timber; or

(d) milling felled timber or processing it in another way.

(3) A timber mill building is a building:

(a) for use primarily and principally:

(i) in carrying on your *business of milling timber for the *purpose of producing assessable income; or

(ii) as residential accommodation for your employees engaged in connection with the *business, or for their dependants; and

(b) located in a forest, and in or adjacent to the area where timber milled in the business is, or is to be, felled.

387-470 How much you can deduct for the current year

Work out the amount you can deduct for the *current year using the formula:

Capital expenditure - Previous deductions

-----------------------------------------

Remaining life

where:

capital expenditure is the amount of your capital expenditure.

previous deductions is the sum of the amounts that you have deducted or can deduct for income years before the *current year under this Subdivision for your capital expenditure.

remaining life is the number of whole years for which you estimate that the road or building will be used after the *current year for the purpose for which it was primarily and principally constructed or acquired. However, if that number is more than 25, remaining life is 25.

Note 1: Section 387-475 may limit the amount of expenditure on acquiring a forestry road or timber building that you can count for this purpose.

Note 2: When working out previous deductions, take account of amounts deducted or deductible under section 124F or 124JA of the Income Tax Assessment Act 1936 for the road or building. See section 387-472 of the Income Tax (Transitional Provisions) Act 1997.

Limits on deductions

387-475 Limits on expenditure on acquiring a road or building

(1) If you acquired the road or building from another entity, the Commissioner may limit your capital expenditure for the purposes of section 387-470.

(2) Your capital expenditure may be limited to the sum of:

(a) the amount that, if the entity had not disposed of the road or building to you, would have been the difference between the entity’s capital expenditure and previous deductions (as those terms are defined in section 387-470) at the end of the income year during which the disposal took place; and

(b) any amount included in the entity’s assessable income under subsection 387-485(3) as a result of a balancing adjustment required by the disposal.

(3) If you incurred capital expenditure acquiring a building that is *plant for which an amount has been deducted or can be deducted for depreciation by any earlier owner or *quasi-owner, your capital expenditure may be limited to the sum of:

(a) the *written down value (as defined in section 42-200, which relates to deductions for depreciation) of the building immediately before it was disposed of by the last entity who had deducted or can deduct an amount for depreciation of it; and

(b) any balancing adjustment included in that entity’s assessable income for the building under Subdivision 42-F (which explains how to make a balancing adjustment for depreciated *plant); and

(c) any balancing adjustment that would have been included in that entity’s assessable income if balancing adjustment relief had not applied under section 42-285 or 42-290 (both of which let you exclude from your assessable income amounts that would be included in that income under the balancing adjustment).

(4) The matters the Commissioner must take into account in deciding whether to limit your capital expenditure include:

(a) whether you acquired the road or building from an *associate; and

(b) the market value of the road or building; and

(d) how your acquisition of the road or building was financed.

387-480 When you cannot deduct

When your deductions equal your whole expenditure

(1) You cannot deduct an amount under this Subdivision for the *current year for your expenditure on a *forestry road or a *timber mill building if the sum of the amounts that you have deducted or can deduct under this Subdivision for that expenditure for earlier income years equals that expenditure.

Note: Take account of amounts deducted or deductible under section 124F or 124JA of the Income Tax Assessment Act 1936 for the road or building. See section 387-472 of the Income Tax (Transitional Provisions) Act 1997.

When you have deducted or can deduct amounts otherwise

(2) You cannot deduct an amount under this Subdivision for the *current year for your expenditure on a *forestry road or a *timber mill building if:

(a) you can deduct, or have deducted, an amount for the expenditure under a provision of this Act (other than this Subdivision) for the *current year or an earlier income year; or

(b) the expenditure is being, or was, taken into account in calculating the amount of one of your deductions for the *current year or an earlier income year under a provision of this Act (other than this Subdivision).

Note: Disregard amounts deducted or deductible under section 124F or 124JA of the Income Tax Assessment Act 1936 for the road or building. See section 387-472 of the Income Tax (Transitional Provisions) Act 1997.

When the road or building has been disposed of or destroyed, or is no longer used

(3) You cannot deduct an amount under section 387-460 for the *current year for your expenditure on a *forestry road or a *timber mill building if, during the current year or an earlier income year:

(a) you disposed of the road or building; or

(b) the road or building was destroyed; or

(c) for some other reason, you stopped using it for the purpose for which it was primarily and principally constructed or acquired.

Note: Although you cannot deduct an amount under section 387-460 if you have stopped using, or disposed of, the road or building or it has been destroyed, you may be able to deduct an amount because of the balancing adjustment that you must make in this case. See
section 387-485.

Balancing adjustments

387-485 Making a balancing adjustment when an event stops you deducting

(1) You must make a balancing adjustment for the *current year if:

(a) you have deducted or can deduct an amount for an earlier income year under this Subdivision for your capital expenditure relating to constructing or acquiring a *forestry road or a *timber mill building; and

(b) one or more of the following events happens during the current year:

(i) you dispose of the road or building in circumstances in which Subdivision 41-A (which sets out Common
rule 1 dealing with roll-over relief for related entities) does not apply;

(ii) the road or building is destroyed;

(iii) for some other reason, you stop using it for the purpose for which it was primarily and principally constructed or acquired.

(2) You make the balancing adjustment by comparing the *termination value of the road or building with its *written down value.

Note: If there has been an earlier disposal of the road or building covered by Subdivision 41-A (which sets out Common rule 1 dealing with
roll-over relief for related entities), the balancing adjustment is modified as described in section 41-20.

(3) If the *termination value exceeds the *written down value, the excess is included in your assessable income for the *current year. However, if the excess is more than the total of the amounts you deducted or can deduct under this Subdivision for earlier income years for your capital expenditure relating to the road or building, that total is included in your assessable income instead.

(4) If the *termination value is less than the *written down value, you can deduct the amount of the difference.

387-490 Meaning of termination value

(1) The termination value of a *forestry road or *timber mill building is the value shown in the following table, depending on the circumstances that require you to make a balancing adjustment.

Termination value of a forestry road or timber mill building
Item	For a road or building that ...	the termination value is ...
1	you sell for a specific price	the sale price less the expenses reasonably attributable to the sale
2	you sell with other property without a specific price being allocated to the road or building	the difference between: · the part of the total sale price that is reasonably attributable to selling the road or building; and · the part of the total expenses of the sale that is reasonably attributable to selling the road or building
3	you dispose of (except by sale)	the market value of the road or building immediately before disposal
4	is destroyed	the amount or value received or receivable under an insurance policy or otherwise in respect of the destruction
5	you stop using for the purpose for which it was primarily and principally constructed or acquired (even though it has not been disposed of or destroyed)	the market value of the road or building when you stopped using it

(2) However, the termination value does not include:

(a) an amount that is included, or when received will be included, in your assessable income for any income year as a lease premium under Division 4 (Leases) of Part III of the Income Tax Assessment Act 1936; or

(b) if a net capital gain is or will be included in your assessable income for any income year under Part IIIA (Capital gains and capital losses) of the Income Tax Assessment Act 1936 - the part of the net capital gain that is attributable to a premium on the grant or assignment of a lease.

387-495 Meaning of written down value

The written down value of a road or building is:

your total capital expenditure of a kind that qualifies for a deduction under this Subdivision in respect of the road or building;

less:

the total of the amounts you deducted or can deduct in relation to the road or building under this Subdivision for income years before the *current year.

Resuming deductions

387-500 Resuming deductions after you stop using a road or building

(1) This section explains how this Subdivision applies if:

(a) you incurred capital expenditure relating to a *forestry road or *timber mill building as described in section 387-460 (which allows you to deduct for the expenditure); and

(b) for a reason other than the disposal or destruction of the road or building, you stopped using it for the purpose for which it was primarily and principally constructed or acquired; and

(2) This Subdivision applies as if:

(a) you had incurred a reasonable amount of capital expenditure relating to the road or building when you started to use the road or building again; and

(b) you had not, and could not have, deducted amounts relating to the road or building for income years ending before you started to use it again.

Note: This section allows you to make deductions for the income year during which you started to use the road or building again and for later income years, despite the fact that you stopped using the road or building as described in paragraph (b).

Application of Common rules

387-505 Application of Common rules 1, 2 and 3

(1) Subdivision 41-A (which sets out Common rule 1 dealing with roll-over relief for related entities) applies to a disposal of a *forestry road or *timber mill building in the circumstances set out in section 41-20.

(2) Subdivision 41-B (which sets out Common rule 2 dealing with non-arm’s length transactions) applies to transactions involving expenditure on, or disposal of, a *forestry road or *timber mill building.

(3) Subdivision 41-C (which sets out Common rule 3 dealing with anti-avoidance provisions relating to the ownership of property) applies in relation to a *forestry road or *timber mill building in relation to which you can deduct an amount.

[The next Chapter is Chapter 4.]

Copyright notice

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).