Draft Taxation Determination

TD 94/D77

Income tax: are the costs of establishing fruit and nut trees to be used in a business of primary production deductible, where the costs are incurred to plant initially or extend an orchard or plantation?

• Please note that the PDF version is the authorised version of this draft ruling.
  This document has been Withdrawn.
  View the Withdrawal notice for this document.

FOI status:

draft only - for comment

Preamble

1. No. Establishment costs of fruit and nut trees in the initial planting or extension of an orchard or plantation are non-deductible capital outgoings (see FC of T v. Osborne (1990) 21 ATR 888; 90 ATC 4889).

2. These costs include the following outlays:

•

the cost of clearing, contouring, stone removal and draining of the land, etc.;

•

the cost of preparing the land to plant the trees, such as, ploughing, top soil enhancement, etc.;

•

the cost of buying the tree; and

•

the cost of planting the tree in the land.

3. Further, the cost of establishing fruit and nut trees as replacements for existing trees in an orchard or plantation is only deductible where the expenditure can be properly described as maintenance of the orchard or plantation. Where, for example, a tree is replaced because of premature death or disease, the cost of replacement represents ordinary maintenance expenditure.

Example

Farmer Paula, a primary producer, purchases vacant land. Soon after purchase she plants orange trees on 75% of the land to establish an orchard. The cost of purchase of the orange trees and the cost of establishing them in the ground is non-deductible capital expenditure.

Several years later farmer Paula extends the orchard by planting orange trees to take up the remaining vacant land. Again, the cost of purchase of the orange trees and the cost of establishing them in the ground is non-deductible capital expenditure.

Commissioner of Taxation
7 July 1994

References

ATO references:
NO
BO ALB DUNN

Related Rulings/Determinations:

TD 94/D77W

Subject References:
primary production
fruit and nut trees
initial plantings
extensions
replacements
expenses
allowable deductions

Legislative References:
ITAA 51(1)

Case References:
FC of T v. Osborne
(1990) 21 ATR 888
90 ATC 4889