RURAL PROPERTIES & MINING
depreciating Assets & Uniform Capital Allowances
RURAL PROPERTIES
The general principles of UCA apply to most depreciating assets used in primary production. However, you work out the decline in value of the following primary production depreciating assets using special rules: water facilities you use to conserve or convey water fencing assets fodder storage assets horticultural plants (including grapevines). For depreciating assets deductible under these special rules, you can't use the general rules for working out decline in value or claim the immediate deduction for depreciating assets costing $300 or less (although some are immediately deductible regardless of cost). Deductions for these assets aren't available to a partnership. Costs which a partnership incurs are allocated to each partner who can then claim the relevant deduction for their share of the expenditure. There are no specific balancing adjustment rules for these depreciating assets. However, the assets may be considered part of the land for CGT purposes.When the land is disposed of, any deductions you claim, or can claim, for the assets may reduce the cost base of the land. For more information, see Guide to capital gains tax 2026. Primary producers may also be able to claim deductions for capital expenditure on landcare operations, and phone lines.
A water facility is either: electricity connections and a plant or a structural improvement that's primarily and principally for the purpose of conserving or conveying water, including a repair of a capital nature, or an alteration, addition or extension to that plant or structural improvement a structural improvement that's reasonably incidental to conserving or conveying water, including a repair of a capital nature, or an alteration, addition or extension to that structural improvement. Examples of water facilities are dams, tanks, tank stands, bores, wells, irrigation channels, pipes, pumps, water towers and windmills. Examples of structural improvements that are reasonably incidental to conserving or conveying water are a bridge over an irrigation channel, a culvert (a length of pipe or multiple pipes that are laid under a road to allow the flow of water in a channel to pass under the road) and a fence preventing livestock entering an irrigation channel. You can fully deduct capital expenditure on a water facility if you incur the expenditure at or after 730 pm AEST on 12 May 2015. You fully deduct the expenditure in the income year in which you incur it. The total deduction can't be more than the amount of the capital expenditure. Unless you're an irrigation water provider, you must incur the expenditure primarily and principally for conserving or conveying water for use in a primary production business that you conduct on land in Australia. You may claim the deduction even if you're only a lessee of the land. Reduce your deduction where you don't wholly use the water facility for either: carrying on a primary production business on land in Australia; or a taxable purpose.An irrigation water provider is an entity whose business is primarily and principally the supply of water to entities for use in primary production businesses on land in Australia. The supply of water by the use of a motor vehicle is excluded. If you're an irrigation water provider, you must incur the expenditure primarily and principally for the purpose of conserving or conveying water for use in primary production businesses conducted by other entities on land in Australia (being entities supplied with water by you). Reduce your deduction if the use of the water facilities isn't wholly for a taxable purpose. If the expenditure you incur arises from a non-arm’s length dealing and is more than the market value of what the expenditure was for, the amount of the expenditure is taken to be that market value instead. No deduction is available for capital expenditure you incur on acquiring a second-hand commercial water facility unless you can show that no one else has deducted or could deduct an amount for earlier capital expenditure on the construction, manufacture or previous acquisition of the water facility. effective life yourself or you can use the effective life determined by the Commissioner, see Effective life of an asset. If the effective life of the plant is less than 3 years, you can claim the establishment expenditure in full generally in the year in which the first commercial season starts. If the effective life of the plant is 3 or more years, you can write off the establishment expenditure over the maximum write-off period, which generally begins at the start of what is expected to be the plant’s first commercial season. If the plant is destroyed before the end of its effective life, you're allowed a deduction in that year for the remaining unclaimed establishment costs less any proceeds, for example, an insurance payout. Table: Plants with an effective life of 3 or more years Effective life Annual writeoff rate % Maximum write-off period 3 to less than 5 years 40 2 years 183 days 5 to less than 6⅔ years 27 3 years 257 days 6⅔ to less than 10 years 20 5 years 10 to less than 13 years 17 5 years 323 days 13 to less than 30 years 13 7 years 253 days 30 years or more 7 14 years 105 days
rural fencing, fodder storage, horticultural plants.
Fencing assets A fencing asset is an asset or structural improvement that's a fence, or a repair of a capital nature, or an alteration, addition or extension, to a fence. You must incur the capital expenditure on the construction, manufacture, installation or acquisition of the fencing asset primarily and principally for use in a primary production business that youconduct on land in Australia. You may claim the deduction even if you're only a lessee of the land. 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. You can fully deduct capital expenditure on a fencing asset in the income year in which you incur it. The total deduction can't be more than the amount of the capital expenditure. If you incur expenditure before 730 pm AEST on 12 May 2015, the previous UCA that allows you to deduct the capital expenditure on a fencing asset over the effective life of the asset continues to apply. In addition, you can't deduct an amount for capital expenditure on a fencing asset if the fencing asset is a stockyard, pen or portable fence, or is a repair, alteration, addition or extension to a stockyard, pen or portable fence. Reduce your deduction where the fencing asset isn't wholly in use: for carrying on a primary production business on land in Australia for a taxable purpose – for example, for the purpose of producing assessable income. This prevents primary producers from deducting expenditure on a fencing asset to the extent that the asset is used other than in carrying on their primary production business or for a taxable purpose. If the expenditure incurred arises from a non-arm’s length dealing and is more than the market value of what the expenditure was for, the amount of the expenditure is taken to be that market value instead. If you're a primary producer and a small business entity, you can choose to work out your deductions for fencing assets under either the simplified depreciation rules or these UCA rules.
Fodder storage assets A fodder storage asset is an asset that's primarily and principally for the purpose of storing fodder. It's also a structural improvement, or a repair of a capital nature, or an alteration, addition or extension, to an asset or a structural improvement, that's primarily and principally for the purpose of storing fodder. The capital expenditure you incur on the construction, manufacture, installation or acquisition of the fodder storage asset must have been incurred primarily and principally for use in a primary production business that you conduct on land in Australia. You may claim the deduction even if you're only a lessee of the land. For a fodder storage asset to satisfy the 'primarily and principally' test, its main purpose (other than some incidental or other minor purpose, but not necessarily the sole purpose) must be to store fodder. For example, if a shed was built for the purpose of storing hay but occasionally you use it to store a neighbour's tractor when you borrow it twice a year, the shed will be an asset that's primarily and principally for the purpose of storing fodder. The term 'fodder' takes its ordinary meaning and refers to food for livestock. It's usually dried like grain, hay or silage but can include liquid feed supplements. Examples of typical fodder storage assets include: silos liquid feed supplement storage tanks bins for storing dried grain hay sheds grain storage sheds above-ground bunkers for silage. If you incur a capital expense on a fodder storage asset, you can immediately deduct the cost in the income year you incur it, if you incur the expense either:on or after 19 August 2018 before 19 August 2018, but you use or first install the asset ready for use on or after 19 August 2018. You can deduct one-third of capital expenditure you incur in an income year if: you incur the capital expenditure after 730 pm AEST on 12 May 2015 but before 19 August 2018 you use or first install the asset ready for use before 19 August 2018. You can deduct this same amount in each of the following 2 income years. The total deduction over the 3 income years can't be more than the amount of the capital expenditure. If you incur the expenditure before this time, the previous UCA that allows you to deduct the capital expenditure on a fodder storage asset over the effective life of the asset continues to apply. Reduce your deduction in any income year where the fodder storage asset isn't wholly in use: for carrying on a primary production business on land in Australia for a taxable purpose – for example, for the purpose of producing assessable income. This prevents primary producers from deducting expenditure on a fodder storage asset to the extent that the use is for other than in carrying on their primary production business or for a taxable purpose. No deduction is available for capital expenditure you incur to acquire a second-hand fodder storage asset unless you can show that no one else has or will claim a deduction amount for earlier capital expenditure on the construction, manufacture or previous acquisition of the fodder storage asset.
mining landcare for rural
Landcare operations You can claim a deduction in the year you incur capital expenditure on a landcare operation for land in Australia. Unless you're a rural land irrigation water provider, the deduction is available to the extent you use the land for either: a primary production business; or in the case of rural land, carrying on a business for a taxable purpose from the use of that land, except a business of mining or quarrying. You may claim the deduction even if you're only a lessee of the land. A rural land irrigation water provider is an entity whose business is primarily and principally supplying water to entities for use in primary production businesses on land in Australia or businesses (exceptmining or quarrying businesses) using rural land in Australia. The supply of water by the use of a motor vehicle is excluded. If you're a rural land irrigation water provider, you can claim a deduction for capital expenditure you incur on a landcare operation for either: land in Australia that other entities (entities that you supply with water) use at the time for carrying on primary production businesses rural land in Australia that other entities (entities that you supply with water) use at the time for carrying on businesses for a taxable purpose from the use of that land (except a business of mining or quarrying). A rural land irrigation water provider’s deduction is reduced by a reasonable amount to reflect an entity’s use of the land for a nontaxable purpose after the water provider incurs the expenditure. A landcare operation is one of the following: Erecting fences to separate different land classes in accordance with an approved land management plan. Erecting fences primarily and principally to keep animals out of areas affected by land degradation to prevent or limit further degradation and to help reclaim the areas. Constructing a levee or similar improvement. Constructing drainage works (other than the draining of swamp or low-lying land) primarily and principally to control salinity or assist in drainage control. An operation primarily and principally for eradicating or exterminating animal pests from the land. An operation primarily and principally for eradicating, exterminating or destroying plant growth detrimental to the land. An operation primarily and principally for preventing or combating land degradation other than by erecting fences. An extension, alteration or addition to any of the assets described in 1, 2, 3 or 4 above or an extension of an operation described in 5, 6 or 7 above. A repair of a capital nature, to an asset that's deductible under a landcare operation. Constructing a structural improvement that's reasonably incidental to levees or drainage works deductible under a landcare operation. A repair of a capital nature, or an alteration, addition or extension, to a structural improvement that's reasonably incidental to levees (or similar improvements) or drainage works deductible under a landcare operation. An example of a structural improvement that may be reasonably incidental to drainage works is a fence you construct to prevent livestock from entering a drain built to control salinity. You can't claim a deduction for landcare operations if the capital expenditure is on plant unless it's on certain fences, dams or other structural improvements. You work out the decline in value of plant not deductible under the landcare provisions using the general rules for working out decline in value, see Methods of working out decline in value. There are no specific balancing adjustment rules for a depreciating asset on which you incur capital expenditure that's deductible under the landcare provisions. That asset may, however, be considered part of the land for CGT purposes. Electricity connections and phone lines You may be able to claim a deduction over 10 years for capital expenditure you incur on either: connecting mains electricity to land on which a business is carried on for a taxable purpose or upgrading an existing connection to that land; or a telephone line on, or extending to, land on which you carry on a primary production business. If you incur expenditure from a non-arm’s length dealing that exceeds the market value of what the expenditure was for, the expenditure amount is taken to be that market value instead. A recoupment of the expenditure may be included in your assessable income. These deductions aren't available to a partnership. Costs incurred by a partnership are allocated to each partner who can claim a deduction for their share of the relevant capital expenditure. Immediate deduction for depreciating assets used in exploration or prospecting The decline in value of certain depreciating assets you first use for exploration or prospecting for minerals (including petroleum), or quarry materials, obtainable by activities carried on for the purpose ofproducing assessable income, can be its cost. This means you can deduct the cost of the asset in the year in which you start to use it for such activities to the extent that you use the asset for a taxable purpose. Where the depreciating asset is a mining, quarrying or prospecting right, you first use for exploration or prospecting for minerals (including petroleum) or quarry materials, an immediate deduction is only available for the asset if you acquire it from an Australian government agency or a government entity. Where the depreciating asset is mining, quarrying or prospecting information and you first use it for exploration or prospecting for minerals (including petroleum) or quarry materials, an immediate deduction is only available for the asset if one of the following tests are met: You acquire the mining, quarrying or prospecting right or mining, quarrying or prospecting information from an Australian government agency or a government entity.
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