Expenditure on establishing shelterbelts
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This publication was current as at November 2016.
Establishing shelterbelts on land used in a primary production business
Payments you receive - what you need to know
This fact sheet explains your entitlement to claim an income tax deduction for the cost of establishing shelterbelts on land you use to carry on a primary production business.
A shelterbelt is a line of trees or shrubs planted to protect an area from fierce weather. They are often created on a farm to protect crops and livestock, reduce soil erosion, control salinity and improve biodiversity.
Whether you can claim a deduction will depend on the type of expense and the purpose of the shelterbelt.
You cannot claim a deduction for a shelterbelt created for a private purpose, such as to protect a home.
What kind of expenses can I claim?
If you create a shelterbelt for a primary production purpose, you can claim an immediate deduction for any new fencing and reticulation costs related to the shelterbelt.
You can only claim for expenses such as site preparation, chemicals and trees if the shelterbelt is established primarily and principally for the purpose of preventing or fighting land degradation.
If you recoup any of the expenditure that you can claim as a deduction (for example, under a government assistance program), that amount is included in your assessable income.
What is land degradation?
Land degradation is the process by which land deteriorates through the action of natural agents (such as water, wind and temperature), or as a result of land use or management practices.
Soil erosion and salination are examples of land degradation, as are harmful changes in soil structure such as acidity and compaction. Degradation of vegetation is also a component of land degradation.
What if I can't claim a deduction?
If the shelterbelt is not established primarily and principally for the purposes of preventing or fighting land degradation, you cannot claim a deduction for capital costs associated with site preparation or the planting of trees. Also, you cannot treat the trees as depreciating assets.
These expenses will form part of the cost base of the land for capital gains tax purposes.
This fact sheet draws on material from a range of ATO view documents.
For more information call the ATO on 13 28 66.
For a callback from an ATO officer, email TaxAdvice@ato.gov.au
You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).Siebel/TDMS Reference Number: 1-9GQFXI0 Date of publication: 4 October 2017