Taxation Laws Amendment Act (No. 4) 1995 (171 of 1995)
SCHEDULE 4 VARIOUS AMENDMENTS OF THE INCOME TAX ASSESSMENT ACT 1936
PART 1 ESTABLISHMENT COSTS OF HORTICULTURAL PLANTS
1. After section 124ZZD
Insert:
"Division 10F-Deduction for capital expenditure incurred in establishing horticultural plants
Subdivision A-Simplified outline
"124ZZE. Simplified outline
The following is a simplified outline of this Division:
- A taxpayer can get a deduction for capital expenditure (establishment expenditure) incurred in establishing a horticultural plant, so long as:
(a) the taxpayer owns the plant; and
(b) the taxpayer uses the plant for the purpose of producing assessable income; and
(c) the taxpayer uses the plant in a business of horticulture; and
(d) the expenditure is not otherwise deductible; and
(e) the expenditure is incurred on or after 10 May 1995.
- A taxpayer can get a deduction for the establishment expenditure even if it was incurred by a previous owner of the plant.
- If the effective life of a plant is less than 3 years, a taxpayer can get a deduction for 100% of the establishment expenditure in the year when the plant is first used:
(a) for the purpose of producing assessable income; and
(b) in a business of horticulture.
- If the effective life of a plant is 3 or more years, a taxpayer can get an annual deduction for the establishment expenditure, worked out on a prime cost basis. The deduction is available only during the plant's maximum write-off period.
- A taxpayer can get a special deduction if a plant with an effective life of 3 or more years is destroyed before the end of the plant's maximum write-off period.
- A taxpayer cannot get a deduction for recouped expenditure.
- If the ownership of a plant is transferred, the transferor may be required to give the transferee information that will help the transferee calculate his or her deduction.
124ZZF. When can a taxpayer get a 100% deduction for
establishment expenditure?
124ZZG. When can a taxpayer get an annual deduction for
establishment expenditure?
124ZZH. How much can be deducted each year?
124ZZI. What is the annual write-off rate and the maximum
write-off period?
124ZZJ. What counts as establishment expenditure for a plant?
124ZZK. What is the effective life of a plant?
124ZZL. Commissioner may make determination specifying effective
lives of plants
124ZZM. Special deduction for destruction of plants
124ZZN. No deduction if expenditure recouped
124ZZO. Transfer of ownership of plants-transferor to give tax
information to transferee
124ZZP. Section 124ZZO obligations-treatment of partnerships
124ZZQ. Owner includes lessee or licensee
124ZZR. Definitions
"Subdivision B-100% deduction where the effective life of a plant is less than 3 years
"124ZZF. When can a taxpayer get a 100% deduction for establishment expenditure?
If:
(a) there is an amount of establishment expenditure for a horticultural plant; and
(b) the number of years in the effective life of the plant is less than 3; and
(c) at a particular time during a year of income, a taxpayer became the first entity to use the plant, or to hold the plant ready for use:
(i) for the purpose of producing assessable income; and
(ii) in a business of horticulture; and
(d) the taxpayer owned the plant at that time;
100% of the establishment expenditure is allowable as a deduction to the taxpayer for the year of income.
Note 1: Establishment expenditure is defined by section 124ZZJ.
Note 2: Effective life is defined by section 124ZZK.
Note 3: Ownership is given an extended meaning in relation to leases and licences by section 124ZZQ.
Note 4: Entity is defined by section 124ZZR.
"Subdivision C-Annual deduction where the effective life of a plant is 3 or more years
"124ZZG. When can a taxpayer get an annual deduction for establishment expenditure?
If:
(a) there is an amount of establishment expenditure for a horticultural plant; and
(b) the number of years in the effective life of the plant is 3 or more; and
(c) at a particular time during a year of income, a taxpayer used the plant, or held the plant ready for use:
(i) for the purpose of producing assessable income; and
(ii) in a business of horticulture; and
(d) the taxpayer owned the plant at that time; and
(e) that time is within the maximum write-off period for the plant; the amount worked out under section 124ZZH is allowable as a deduction to the taxpayer for the year of income.
Note 1: Establishment expenditure is defined by section 124ZZJ.
Note 2: Effective life is defined by section 124ZZK.
Note 3: Ownership is given an extended meaning in relation to leases and licences by section 124ZZQ.
Note 4: Maximum write-off period is defined by section 124ZZI.
"124ZZH. How much can be deducted each year?
The amount of the section 124ZZG deduction is worked out using the following formula:
Annual write-off rate x Write-off days in year x Establishment
Days in year expenditure
where:
Annual write-off rate is worked out under section 124ZZI.
Write-off days in year means the number of whole days in the year of income, where all of the following conditions are satisfied:
(a) throughout that day, the taxpayer used the plant, or held the plant ready for use:
(i) for the purpose of producing assessable income; and
(ii) in a business of horticulture;
(b) the taxpayer owned the plant throughout that day;
(c) that day is within the maximum write-off period for the plant (worked out under section 124ZZI).
Days in year means the number of days in the year of income.
Establishment expenditure means the amount of establishment
expenditure for the plant (worked out under section 124ZZJ).
"124ZZI. What is the annual write-off rate and the maximum write-off period?
Use the following table to work out the annual write-off rate and the maximum write-off period for a plant. The maximum write-off period for a plant begins at the time when the plant first became capable of being used:
(a) for the purpose of producing assessable income; and
(b) in a business of horticulture.
Years in effective Annual write-off rate Maximum write-off period life of plant
3 to fewer than 5 0.40 2 years and 183 days
5 to fewer than 6-2/3 0.27 3 years and 257 days
6-2/3 to fewer than 10 0.20 5 years
10 to fewer than 13 0.17 5 years and 323 days
13 to fewer than 30 0.13 7 years and 253 days
30 or more 0.07 14 years and 105 days
Note: Effective life is defined by section 124ZZK.
"Subdivision D-Establishment expenditure for a plant
What counts as establishment expenditure for a plant?
"124ZZJ. Basic definition
(1) For the purposes of this Division, if:
(a) an entity has incurred expenditure of a capital nature wholly or partly in respect of the establishment of a horticultural plant in Australia for use in a business of horticulture; and
(b) the expenditure was incurred on or after 10 May 1995; so much of the amount of the expenditure as is attributable to the establishment of the plant is taken to be an amount of establishment expenditure for the plant.
Note: Entity is defined by section 124ZZR.
Exclusion of drainage and land-clearance costs
"(2) A reference in this section to capital expenditure in respect of the establishment of a horticultural plant does not include a reference to expenditure incurred in:
(a) draining swamp or low-lying land; or
(b) clearing land.
Exclusion of otherwise deductible costs
"(3) Expenditure is taken not to be establishment expenditure in respect of the establishment of a horticultural plant to the extent to which a deduction is allowable in respect of that expenditure under a provision of this Act other than section 124ZZF or 124ZZG.
Exclusion of depreciable costs
"(4) Expenditure is taken not to be establishment expenditure in respect of the establishment of a horticultural plant to the extent to which the expenditure is taken into account in calculating an amount of depreciation that is allowable as a deduction.
Exclusion of qualifying expenditure with the meaning of Division 10D
"(5) Expenditure is taken not to be establishment expenditure in respect of the establishment of a horticultural plant to the extent to which the expenditure is qualifying expenditure within the meaning of Division 10D (which deals with buildings and structural improvements).
"Subdivision E-Effective lives of plants
"124ZZK. What is the effective life of a plant?
(1) For the purposes of this Division, the effective life of a plant depends on whether the original taxpayer elects to adopt the period specified in the Commissioner's determination under section 124ZZL. For this purpose, an entity is the original taxpayer in relation to a plant if the entity owned the plant at the time when the plant first became capable of being used:
(a) for the purpose of producing assessable income; and
(b) in a business of horticulture.
Note: Under section 124ZZL, the Commissioner may make a determination specifying periods that taxpayers may elect to adopt as the effective lives of horticultural plants owned by them.
Original taxpayer may elect to adopt the period specified in the Commissioner's determination
"(2) If:
(a) there is in force a determination by the Commissioner under section 124ZZL which specifies a period that a taxpayer may elect to adopt as the effective life of the plant; and
(b) the original taxpayer makes a written election to adopt that period;
the effective life of the plant is that period.
Effective life if original taxpayer does not elect to adopt the period specified in the Commissioner's determination
"(3) If the original taxpayer does not elect to adopt the period specified in the Commissioner's determination, the effective life of the plant is the period, worked out as at the time when the plant first became capable of being used:
(a) for the purpose of producing assessable income; and
(b) in a business of horticulture;
during which it would be reasonable to expect that the plant would be capable of being used:
(c) for the purpose of producing assessable income; and
(d) in a business of horticulture.
Election is irrevocable
"(4) An election under this section is irrevocable.
Commissioner may make determination specifying effective lives of plants
"124ZZL. Commissioner's determination
(1) The Commissioner may, by writing:
(a) make a determination specifying periods that taxpayers may elect to adopt as the effective lives of horticultural plants owned by them; and
(b) revoke or vary such a determination.
Period may be specified unconditionally
"(2) A period may be specified unconditionally.
Specification of period may be conditional
"(3) A period, or 2 or more different periods, may be specified in relation to particular kinds of plants subject to one or more specified conditions being satisfied as at the time when the plant first became capable of being used:
(a) for the purpose of producing assessable income; and
(b) in a business of horticulture.
Determination to be available for sale to the public
"(4) A determination, or a variation or a revocation of a determination, must be made available for sale to the public.
When determination may be retrospective
"(5) A determination, or a variation or a revocation of a determination, may be expressed to apply in relation to a plant that first became capable of being used:
(a) for the purpose of producing assessable income; and
(b) in a business of horticulture;
before the determination, variation or revocation, as the case may be, was made if, and only if:
(c) in the case of a determination or a variation of a determination-the specified period is the first period applicable to plants of that kind; or
(d) in any case-the retrospectivity works to the advantage of taxpayers in calculating the effective lives of plants of that kind.
"Subdivision F-Special deduction for destruction of plants
"124ZZM. Special deduction for destruction of plants
(1) This section applies if:
(a) there is an amount of establishment expenditure for a horticultural plant; and
(b) during a year of income, the plant is destroyed; and
(c) immediately before the destruction, a taxpayer owned the plant and used it in a business of horticulture for the purpose of producing assessable income; and
(d) the number of years in the effective life of the plant is 3 or more.
Note: Effective life is defined by section 124ZZK.
Deduction if taxpayer receives an amount in respect of the destruction
"(2) If:
(a) an amount (the recoverable amount) was or is received or receivable by the taxpayer (under a policy of insurance or otherwise) in respect of the destruction; and
(b) the amount worked out using the formula set out in subsection (4) exceeds the recoverable amount;
the excess is allowable as a deduction to the taxpayer for the year of income.
Deduction if taxpayer does not receive an amount in respect of the destruction
"(3) If no amount was or is received or receivable by the taxpayer (under a policy of insurance or otherwise) in respect of the destruction, the amount worked out using the formula set out in subsection (4) is allowable as a deduction to the taxpayer for the year of income.
Formula
"(4) The formula mentioned in subsections (2) and (3) is:
Establishment expenditure - Notional deductions
where:
Establishment expenditure means the amount of the establishment expenditure for the plant.
Notional deductions means the deduction, or the total of the deductions, that would have been allowable to the taxpayer under section 124ZZG for the establishment expenditure if it were assumed that, at all times during the period:
(a) beginning when the plant first became capable of being used:
(i) for the purpose of producing assessable income; and
(ii) in a business of horticulture; and
(b) ending when the plant was destroyed;
the taxpayer had owned the plant and had used it:
(c) for the purpose of producing assessable income; and
(d) in a business of horticulture.
"Subdivision G-No deduction if expenditure recouped
"124ZZN. No deduction if expenditure recouped
(1) This Division does not apply, and is taken never to have applied, to expenditure incurred by an entity if:
(a) the entity, whether before or after the commencement of this section, receives, or becomes entitled to receive, a recoupment of, or grant in respect of, the expenditure; and
(b) the amount of the recoupment or the grant is not, and will not be, included in the entity's assessable income of any year of income.
Dissection of amounts
"(2) For the purposes of subsection (1), if a person receives, or becomes entitled to receive, an amount that constitutes to an unspecified extent a recoupment of, or a grant in respect of, expenditure, then so much of that amount as is reasonable is taken to be a recoupment of, or grant in respect of, that expenditure, as the case requires.
Amendment of assessments
"(3) Section 170 does not prevent the amendment of an assessment at any time for the purpose of giving effect to this section.
"Subdivision H-Transfer of ownership of plants-transferor to give tax information to transferee
"124ZZO. Transfer of ownership of plants-transferor to give tax information to transferee
(1) This section applies if:
(a) the ownership of one or more horticultural plants is or was transferred from an entity (the transferor) to another entity (the transferee); and
(b) there is an amount of establishment expenditure for each of the plants.
Transferee may ask transferor for tax information
"(2) The transferee may, by written notice given to the transferor, require the transferor to give to the transferee, within the period specified in the notice, any or all of the following information:
(a) the amount of the establishment expenditure for each of the plants;
(b) the effective lives of each of the plants;
(c) whether the transferor made an election under section 124ZZK in relation to any of the plants;
(d) the beginning of the maximum write-off periods for each of the plants.
The period specified in the notice must be at least 60 days. The notice must be given within 60 days after the transfer, or within 60 days after the commencement of this section, whichever comes last.
Transferee may only give one notice
"(3) The transferee must not give more than one notice under subsection (2) in relation to a particular transfer.
Offence
"(4) An entity must not, without reasonable excuse, intentionally or recklessly refuse or fail to comply with a notice under subsection (2).
Penalty: 10 penalty units.
Notice to set out the effect of subsection (4)
"(5) A notice under subsection (2) must set out the effect of subsection (4).
Application
"(6) This section applies to a transfer that occurs on or after 10 May 1995.
Section 124ZZO obligations-treatment of partnerships
"124ZZP. Obligations
(1) Section 124ZZO applies to a partnership as if the partnership were a person, but it applies with the following changes:
(a) obligations that would be imposed on the partnership are imposed instead on each partner, but may be discharged by any of the partners;
(b) any offence against that section that would otherwise be committed by the partnership is taken to have been committed by each partner who:
(i) aided, abetted, counselled or procured the relevant act or omission; or
(ii) was in any way knowingly concerned in, or party to, the relevant act or omission (whether directly or indirectly and whether by any act or omission of the partner).
Giving of notices
"(2) For the purposes of section 124ZZO, if a document is given to a partner of a partnership, the document is taken to have been given to the partnership.
"Subdivision I-Interpretation
"124ZZQ. Owner includes lessee or licensee
Crown lease
(1) For the purposes of this Division, if:
(a) a taxpayer is the lessee of land under a Crown lease (within the meaning of section 54AA); and
(b) a plant is affixed to the land; and
(c) the taxpayer or another entity planted the plant; and
(d) apart from this section, the taxpayer is not the owner of the plant; and
(e) the Crown lease enables the taxpayer to carry on a business of horticulture on the land; and
(f) if there is a holder of a lesser interest or licence in relation to the land-the holder does not carry on a business of horticulture on the land;
the taxpayer is taken to be the owner of the plant instead of any other entity.
Ordinary lease
"(2) For the purposes of this Division, if:
(a) a taxpayer is the lessee of land under a lease other than a Crown lease (within the meaning of section 54AA); and
(b) a plant is affixed to the land; and
(c) the taxpayer or another entity planted the plant; and
(d) apart from this section, the taxpayer is not the owner of the plant; and
(e) the lease enables the taxpayer to carry on a business of horticulture on the land; and
(f) if there is a holder of a lesser interest or licence in relation to the land-the holder does not carry on a business of horticulture on the land;
the taxpayer is taken to be the owner of the plant instead of any other entity.
Licence
"(3) For the purposes of this Division, if:
(a) a taxpayer holds a licence in relation to land; and
(b) a plant is affixed to the land; and
(c) the taxpayer or another entity planted the plant; and
(d) apart from this section, the taxpayer is not the owner of the plant; and
(e) the licence enables the taxpayer to carry on a business of horticulture on the land;
the taxpayer is taken to be the owner of the plant instead of any other entity.
Definition
"(4) In this section:
lease includes sublease.
"124ZZR. Definitions
In this Division:
annual write-off rate has the meaning given by section 124ZZI.
effective life has the meaning given by section 124ZZK.
entity means any of the following:
(a) a company;
(b) a partnership;
(c) a person in a capacity of trustee;
(d) any other person.
establishment expenditure has the meaning given by section 124ZZJ.
maximum write-off period has the meaning given by section 124ZZI.
owner has a meaning affected by section 124ZZQ.
plant means any live member of the plant kingdom, and includes fungi.
producing assessable income includes gaining assessable income.".