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Edited version of your written advice
Authorisation Number: 1012898344337
Ruling
Subject: Calculation of decline in value for your netting assets.
Question
Can you apply section 40-551 of the Income Tax Assessment Act 1997 (ITAA 1997) to work out the decline in value for a netting asset?
Answer
No.
This ruling applies for the following period:
1 July 2015 to 30 June 2016
The scheme commences on:
1 July 2015
Relevant facts and circumstances
You operate a crop growing business with a turnover of $X,XXX,XXX per annum. You have to replace worn out nets which cover the crops.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 40-515
Income Tax Assessment Act 1997 subsection 40-520(4)
Income Tax Assessment Act 1997 section 40-551
Reasons for decision
Section 40-515 of the ITAA 1997 states that you can deduct an amount equal to the decline in value for an income year of certain depreciating assets that are used in a primary production business. A fencing asset is a depreciating asset.
Section 40-551 of the ITAA 1997 provides that the decline in value of a fencing asset for the year in which you incurred the expenditure is the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the fencing asset.
Section 40-551 of the ITAA 1997 is applicable to a fencing asset that an entity starts to hold, or to expenditure an entity incurs, at or after 7.30 pm (AEST) on 12 May 2015.
A fencing asset is defined in subsection 40-520(4) of the ITAA 1997 as:
(a) an asset or a structural improvement that is a fence, or
(b) a repair of a capital nature, or an alternation, addition or extension, to a fence.
The Explanatory Memorandum to the Tax Laws Amendment (Small Business Measures No 2) Bill 2015 provides that the term 'fence' takes its ordinary meaning and includes an enclosure or barrier, usually of metal or wood, as around or along a field, or paddock. The term 'fence' extends to parts or components of a fence including, but not limited to, posts, rails, wire, droppers, gates, fittings and anchor assemblies.
A net which covers the crops does not satisfy the definition of fencing assets under subsection
40-520(4) of the ITAA 1997. As such, you cannot apply section 40-551 of the ITAA 1997 to work out the decline in value for a netting asset.