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Edited version of private advice
Authorisation Number: 1051898699029
Date of advice: 15 September 2021
Ruling
Subject: Deduction of fixed irrigation charges
Question 1
Are the irrigation fixed charges an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 in your income tax return?
Answer
No, you are not allowable a deduction under section 8-1 of the Income Tax Assessment Act 1997 for the cost of the irrigation charges as the payments are of a capital nature. In return for the payments you receive access to water therefore the payments secure for you an enduring benefit making them capital.
Question 2
Are the irrigation fixed charges an allowable deduction under subdivision 40-F of the Income Tax Assessment Act 1997 in your income tax return?
Answer
Yes, as long as you satisfy the criteria of being a primary producer the irrigation charges will be deductible under subdivision 40-F of the Income Tax Assessment Act 1997. The decline in value is calculated in accordance with section 40-540 of the Income Tax Assessment Act 1997.
This ruling applies for the following periods:
Year ended 30 June 20XX
Year ended 30 June 20XX
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevantfactsand circumstances
You own a XXX acre farm in XXXX which operates a business of XXXXX.
You pay irrigation fees to Business A for access to the irrigation service.
The fees are payable to Business A irrespective of if you use water or not.
The irrigation system is used as a contingency plan to irrigate the land when water shortages are faced.
The water infrastructure is owned by Business A.
Relevantlegislativeprovisions
Income Tax Assessment Act 1997 section 8-1
Income Tax Assessment Act 1997 subdivision 40-F