INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART III - LIABILITY TO TAXATION  

Division 3 - Deductions  

Subdivision A - General  

SECTION 75D   DEDUCTION OF EXPENDITURE ON PREVENTION OF LAND DEGRADATION  

75D(1AA)   [No deduction 1997/98 income year onwards]  

A deduction is not allowable under this section for the 1997-98 year of income or a later year of income.

Note:

Subdivision 387-A of the Income Tax Assessment Act 1997 provides for deductions for the 1997-98 year of income and later years of income for capital expenditure on operations of the kind described in subsection (1B).

75D(1)   [Application of section]  

Subject to this section, this section applies to expenditure of a capital nature that meets the requirements set out in subsections (1A) and (1B).

75D(1A)   [Eligible taxpayer]  

The expenditure must be incurred by a taxpayer:

(a) who carries on a business of primary production on any land (in this section called the ``subject land'' ) in Australia; or

(b) who carries on a business, other than one of primary production or of mining or quarrying, for the purpose of gaining or producing assessable income from the use of any rural land (in this section also called the ``subject land'' ) in Australia.

75D(1B)   [Eligible expenditure]  

The expenditure must also be incurred in, or in an extension of, any of the following operations:

(a) an operation primarily and principally for the purpose of the eradication or extermination of animal or vegetable pests from the subject land;

(b) an operation primarily and principally for the purpose of the destruction of weed or plant growth detrimental to the subject land;

(c) an operation primarily and principally for the purpose of preventing or combating land degradation otherwise than by the erection of fences on the subject land;

(d) an operation consisting of the erection of fences (including any extension, alteration or addition to fences) on the subject land primarily and principally for the purpose of excluding live-stock or vermin from areas affected by land degradation in order to prevent or limit any extension or aggravation of land degradation in those areas and to assist in the reclamation of those areas;

(e) an operation consisting of the erection of fences (including any extension, alteration or addition to fences) to separate different land classes on the subject land in accordance with an approved land management plan in respect of the whole or part of the subject land;

(f) an operation consisting of the construction on the subject land of levee banks or similar improvements having like uses;

(g) an operation (not being an operation consisting of the draining of swamp or low-lying land) consisting of the construction on the subject land, primarily and principally for the purpose of controlling salinity or assisting in drainage control, of surface drainage works or sub-surface drainage works.

75D(2)   [Allowable deduction]  

Subject to the succeeding provisions of this section, where a taxpayer incurs expenditure to which this section applies, the amount of that expenditure is an allowable deduction to the taxpayer in respect of the year of income in which that expenditure is incurred.

75D(3)   [Exclusions]  

This section does not apply to expenditure on property that is plant or an article for the purposes of section 54 other than -

(a) fences erected for the purposes mentioned in paragraph (1B)(d) or (e) of this section; and

(b) dams or other structural improvements (not being fences), being dams or structural improvements that are plant for the purposes of section 54 by virtue of the operation of paragraph (2)(b) of that section.

75D(3A)   [Limited application of subsec (4)]  

Subsection (4) does not apply to an amount received in the 1997-98 year of income or a later year of income if the amount is received as recoupment as defined by section 20-25 of the Income Tax Assessment Act 1997 .

Note:

Subdivision 20-A of the Income Tax Assessment Act 1997 applies instead.

75D(4)   [Recoupment of expenditure]  

This section does not apply, and shall be deemed never to have applied, to expenditure incurred by a taxpayer where -

(a) the taxpayer is recouped, or becomes entitled to be recouped, in respect of the expenditure by the Commonwealth, by a State, by a Territory, by an authority constituted by or under a law of the Commonwealth, of a State or of a Territory, or by any other person; and

(b) the amount recouped or to be recouped is not, and will not be, included in the assessable income of the taxpayer of any year of income.

75D(5)   [Determination of amount of recoupment]  

Where a taxpayer receives, or becomes entitled to receive, an amount that constitutes to an unspecified extent a recoupment of expenditure to which this section would, apart from subsection (4), apply, the Commissioner may, for the purposes of subsection (4), determine the extent to which the amount constitutes a recoupment of that expenditure.

75D(6)   [Commencement of operation]  

This section does not apply, in relation to a taxpayer, to -

(a) expenditure incurred in pursuance of a contract entered into by the taxpayer before 1 October 1980; or

(b) expenditure incurred by the taxpayer in respect of an operation or extension referred to in subsection (1B) where that operation or that extension, as the case may be, was commenced before 1 October 1980.

75D(7)   [Subsequent use of land]  

Where -

(a) apart from this subsection, a deduction would be allowable to a taxpayer under this section in relation to a year of income in respect of expenditure incurred in respect of land in respect of an operation or extension of a kind referred to in subsection (1B); and

(b) the land in respect of which the expenditure was incurred was, at any time during the year of income after the expenditure was incurred, used by the taxpayer otherwise than for the purpose of carrying on a business of a kind referred to in paragraph (1A)(a) or (b),

the amount of that deduction shall be reduced by such amount as, in the opinion of the Commissioner, is fair and reasonable.

75D(8)   [Partners and partnerships]  

This section does not apply in relation to the calculation of the net income of a partnership, or a partnership loss, in accordance with section 90 , but, where a partnership has incurred expenditure to which this section would apply if the partnership were a taxpayer, then, for the purposes of the application of subsection (2) in respect of a partner in the partnership, that partner shall be deemed to have incurred -

(a) so much of the amount of that expenditure as the partners have agreed is to be borne by that partner; or

(b) if the partners have not agreed as to the part of that amount that is to be borne by that partner - so much of that amount as bears to that amount the same proportion as the individual interest of the partner in the net income of the partnership of the year of income in which the relevant expenditure was incurred bears to that net income or, as the case requires, as the individual interest of the partner in the partnership loss for that year of income bears to that partnership loss.

75D(9)   [Non-arm's length transactions]  

Where -

(a) a taxpayer has incurred expenditure to which this section applies (in this subsection referred to as the ``relevant expenditure'' ) in respect of an operation of a kind referred to in subsection (1B);

(b) the relevant expenditure is attributable, in whole or in part, to a transaction to which the taxpayer was a party;

(c) the Commissioner is satisfied that, having regard to any connection between any 2 or more of the parties to the transaction and to any other relevant circumstances, those parties were not dealing with each other at arm's length in relation to the transaction; and

(d) the Commissioner is satisfied that the amount of the relevant expenditure is greater than the amount (in this subsection referred to as the ``arm's length amount'' ) that would have been the amount of expenditure incurred by the taxpayer in respect of that operation if the parties to the transaction had dealt with each other at arm's length in relation to the transaction,

the arm's length amount shall, for the purposes of this section, be deemed to be the amount of expenditure incurred by the taxpayer in respect of that operation.

75D(10)   [Rearrangement of pre-1 October 1980 contracts, etc]  

Where the Commissioner is satisfied that -

(a) a contract or arrangement was entered into by a taxpayer before 1 October 1980 for the carrying out of an operation of a kind mentioned in subsection (1B) (in this subsection referred to as the ``original operation'' );

(b) on or after that date -

(i) the taxpayer entered into a contract or arrangement (whether with the same or another person) for the carrying out of the original operation (whether or not the contract or arrangement also relates to other matters) or of another operation (in this subsection referred to as the ``substituted operation'' ) identical with, or having a purpose similar to that of, the original operation and intended by the taxpayer to be in lieu of the original operation; or

(ii) the taxpayer commenced the carrying out of an operation (in this subsection also referred to as the ``substituted operation'' ) identical with, or having a purpose similar to that of, the original operation and intended by the taxpayer to be in lieu of the original operation; and

(c) the taxpayer entered into the contract or arrangement for the carrying out of the original operation or substituted operation, or commenced the carrying out of the substituted operation, for the purpose, or for purposes that included the purpose, of obtaining a deduction under this section,

the Commissioner may refuse to allow a deduction under this section -

(d) in a case to which subparagraph (b)(i) applies - in relation to the original operation or the substituted operation, as the case may be; or

(e) in a case to which subparagraph (b)(ii) applies - in relation to the substituted operation.

75D(11)   [Commissioner may refuse deduction]  

Where the Commissioner is satisfied that -

(a) a taxpayer commenced the carrying out of an operation of a kind referred to in subsection (1B) (in this subsection referred to as the ``original operation'' ) before 1 October 1980;

(b) on or after that date -

(i) the taxpayer commenced the carrying out of another operation (in this subsection referred to as the ``substituted operation'' ) identical with, or having a purpose similar to that of, the original operation and intended by the taxpayer to be in lieu of the original operation; or

(ii) the taxpayer entered into a contract or arrangement (whether or not the contract or arrangement also relates to other matters) for the carrying out of the original operation or of another operation (in this subsection also referred to as the ``substituted operation'' ) identical with, or having a purpose similar to that of, the original operation and intended by the taxpayer to be in lieu of the original operation; and

(c) the taxpayer commenced the carrying out of the substituted operation, or entered into the contract or arrangement for the carrying out of the original operation or of the substituted operation, for the purpose, or for purposes that included the purpose, of obtaining a deduction under this section,

the Commissioner may refuse to allow a deduction under this section -

(d) in a case to which subparagraph (b)(i) applies - in relation to the substituted operation; or

(e) in a case to which subparagraph (b)(ii) applies - in relation to the original operation or the substituted operation, as the case may be.

75D(12)   [Interpretation]  

In subsections (10) and (11) -

(a) a reference to the carrying out by the taxpayer of an operation shall be read as including a reference to the carrying out of the operation for the taxpayer by another person or other persons; and

(b) a reference to a contract or arrangement entered into by a taxpayer for the carrying out of an operation shall be read as including a reference to a contract or arrangement for the supply of goods or the provision of services in connection with such an operation.

75D(13)   [References to an operation]  

A reference in subsections (10), (11) and (12) to an operation shall be read as including a reference to -

(a) a part of an operation; and

(b) an extension of an operation.

75D(14)   [Approved land management plan]  

In this section, a reference to an approved land management plan, in relation to land, is a reference to a land management plan in relation to the land that:

(a) has been prepared by:

(i) an officer of a land conservation agency having authority for the preparation of such plans; or

(ii) an approved farm consultant; or

(b) has been approved in writing by:

(i) an officer of a land conservation agency with authority to do so; or

(ii) an approved farm consultant;

as being a suitable land management plan for the land.

75D(15)   [Approved farm consultant]  

For the purposes of subsection (14), a person is an approved farm consultant only if an approval under this section of the person as a farm consultant is in force.

75D(16)   [Approval as farm consultants]  

The following persons may, in writing, approve a person as a farm consultant for the purposes of this section:

(a) the Secretary to the Department of Primary Industries and Energy;

(b) an officer of that Department authorised in writing by its Secretary for the purpose of giving such approvals.

75D(17)   [Matters to consider re approval]  

In deciding whether to approve a person as a farm consultant, the following matters are to be taken into account:

(a) the qualifications, experience and knowledge of the person in relation to land conservation and farm management;

(b) the standing of the person in the professional community;

(c) any other relevant matters.

75D(18)   [Review where approval refused or revoked]  

Subject to the Administrative Appeals Tribunal Act 1975 , applications may be made to the Tribunal by a person for review of a decision under subsection (16):

(a) to refuse approval of the person as a farm consultant; or

(b) to revoke the approval of the person as a farm consultant.

75D(19)   [Definitions]  

In this section:

"decision"
has the same meaning as in the Administrative Appeals Tribunal Act 1975 ;

"land conservation agency"
means a State or Territory Government department, or authority, that has responsibility for land conservation;

"land management plan"
means a plan for an area of land indicating:

(a) different land classes comprising the land; and

(b) the location of any fencing that would be required to separate any of the land classes primarily and principally in order to prevent land degradation;

together with, or including, a description of the kind of fencing and how it would prevent land degradation.