Income tax: are the costs of establishing fruit and nut trees to be used in a business of primary production deductible, where the costs are incurred to plant initially or extend an orchard or plantation?

No. Establishment costs of fruit and nut trees in the initial planting or extension of an orchard or plantation are non-deductible capital outgoings (see FC of T v. Osborne (1990) 21 ATR 888; 90 ATC 4889).

These costs include the following outlays: • the cost of clearing, contouring, stone removal and draining of the land, etc.; • the cost of preparing the land to plant the trees, such as, ploughing, top soil enhancement, etc.; • the cost of buying the tree; and • the cost of planting the tree in the land.

Further, the cost of establishing fruit and nut trees as replacements for existing trees in an orchard or plantation is only deductible where the expenditure can be properly described as maintenance of the orchard or plantation. Where, for example, a tree is replaced because of premature death or disease, the cost of replacement represents ordinary maintenance expenditure.