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Whether stone clearing and initial land clearing expenses are allowable deductions under either subsection 51(1) of the Income Tax Assessment Act 1936 , or the horticultural provisions contained in Part III, Division 10F of the Income Tax Assessment Act 1936 .

The stone clearing expenses are deductible under the horticultural provisions.

During the 1997 financial year the taxpayer began the process of establishing a crop plantation and incurred initial land clearing costs on the property and later (while establishing the plantation) incurred stone removal expenses.

The taxpayer is establishing a commercially viable crop plantation.

The costs of initial land clearing and stone clearing are not deductible under subsection 51(1) of the Income Tax Assessment Act 1936 . The costs of initial land clearing are not deductible under the horticultural provisions contained in Part III, Division 10F of the Income Tax Assessment Act 1936 . However, the cost of stone clearing was determined to be deductible under that Division.

It is well established that preparing the ground for the planting of trees is of a capital nature ( FCT v Osborne 90 ATC 4889; 21 ATR 888). Paragraph 124ZZJ(2)(b) of the Income Tax Assessment Act 1936 specifically excludes the cost of clearing land from what is recognised as 'establishment expenditure' and therefore the cost of initial land clearing is not deductible under the horticultural provisions in Division 10F of the Income Tax Assessment Act 1936 .

The Explanatory Memorandum accompanying the Taxation Laws Amendment Bill (No.4) 1995, which inserted paragraph 124ZZJ(2)(b) of the Income Tax Assessment Act 1936 , includes within the meaning of 'establishment expenditure', any costs incurred in preparing to plant, which includes the costs incurred in stone removal.

Therefore, although stone clearing is of a capital nature and not deductible under subsection 51(1) of the Income Tax Assessment Act 1936 , it is part of establishment expenditure under the horticultural provisions of Division 10F of the Income Tax Assessment Act 1936 . This amount can therefore be claimed as outlined in the horticultural provisions.