If a grapevine is planted and first used by you in a primary production business, the decline in value of the grapevine is worked out under the provisions relating to horticultural plants.
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See also:
- TR 97/11 – Income tax: am I carrying on a business of primary production?
- Calculating the decline in value of horticultural plants
Decline in value
Deductions for the decline in value of a grapevine can only be claimed from the income year in which the grapevine's first commercial season starts, not when it is first planted.
The decline in value of a grapevine is based on the effective life of the grapevine.
The Commissioner has determined effective lives for grapevines as follows:
- dried grapes – 15 years
- table grapes – 15 years
- wine grapes – 20 years.
There are two ways to work out the annual write off rate:
- You can use an annual write-off rate for a horticultural plant with an effective life of 13 to fewer than 30 years of 13% for a maximum write-off period of seven years and 253 days, or
- You can estimate your own effective life for your grapevines.
Provisions for grapevines
There are common provisions relating to the establishment of horticultural plants(which include grapevines). Your deduction for the decline in value of grapevines is based on the capital expenditure incurred in establishing the grapevines.
You can't claim a deduction for the cost of:
- purchasing or leasing land
- draining swamps or low-lying land
- clearing land.
You can claim the cost of:
- preparing the land – ploughing, contouring, fertilising, stone removal and topsoil enhancement
- planting the vines
- the vines.
If a grapevine is destroyed before the end of its effective life you are allowed a deduction in that year for the remaining unclaimed expenses less any proceeds (for example, insurance).
Any recoupment of the expenditure is assessable income. Where the expenditure is deductible over more than one income year, special rules apply to determine the amount of any recoupment to be included in your assessable income in the year of recoupment and later income years.
These deductions are not available to a partnership. Costs incurred by a partnership in establishing grapevines are allocated to each partner who can then claim the relevant deduction in respect of their share of the expenditure.
When ownership of the grapevines changes, the new owner is entitled to continue claiming the balance of the capital expenditure incurred in establishing the grapevines on the same basis, while they use the grapevines in a primary production business.
If a grapevine is planted and first used by you in a primary production business the decline in value of the grapevine is worked out under the provisions relating to horticultural plants.