1 : Are the items of "Plant and equipment" eligible for the temporary full expensing rules in Subdivision 40-BB of the Income Tax (Transitional Provisions) Act 199 7 (ITTPA 1997) in the income year of purchase (and is the full cost of the items deductible for income tax purposes)?
1 Yes, provided that the expense is not a primary production depreciation asset that can be deducted under 40-F of the Income Tax Assessment Act 1997 (ITAA 1997), or under the former provisions broadly equivalent to Subdivision 40-F. Question 2: Are you entitled to a deduction when the Plant A trees enter their first commercial season with a write-off rate of 7% under subsection 40-530(2) of the ITAA 1997? Answer 2 Yes, provided you are running a horticulture business. Question 3: Are you entitled to a deduction when the Plant B trees enter their first commercial season with a write-off rate of 7% under subsection 40-530(2) of the ITAA 1997? Answer 3 Yes, provided you are running a horticulture business. Question 4: Are you entitled to claim a deduction for the cost of the construction of the dam under section 40-515(1)(a) of the ITAA 1997? Answer 4 No. This ruling applies for the following period : Year ended 30 June 20XX The scheme commenced on: 1 July 20XX
Background Your trustee is Company A, with Person A being the sole director of Company A. Person A is a health professional, who works as both an employee and runs her own health business. You provided details on the number of hours Person A works as an employee and in the health business. Purchase of plantation You purchased a plantation (the Plantation) and provided us with details on the purchase price and date. You purchased the Plantation from Person B and Person C. You commenced the Plantation from this date. The purchase of the Plantation was formalised with a contract on a specified date. You provided us with a copy of the contract. You provided us with details on where the Plantation is located. You have provided details of the items in the purchase price which includes items of plant and equipment. The simplified depreciation rules have not been applied to any of the plant and equipment items. You provided us with details on the dates on when the plant and equipment were acquired.
The purchase of the Plantation did not include the land. The land is owned by Company B, which is controlled by Person B and Person C. You pay rent for the use of the land, which is a nominal amount which was agreed between you and the landowners. Dam You provided us with details on when the dam was first installed. Person B and Person C did not claim the depreciation for the cost of the dam. Plant A tree You provided us with details on when sales from the Plant A commenced and that there were not sales during the ruling period due to unfavourable weather conditions. Plant B tree You provided us with details on when Plant B plantation commenced. You provided us with an estimate on when the first commercial season for Plant B will commence, when they reach their intended maturity. You provided a projection that showed revenue of insignificant amount from Plant B in the income year after the ruling period. These sales are from the young and developing Plant B. History of the plantation prior to purchase Person B and Person C are the parents of Person A, who ran the Plantation since a specified income year. Person B and Person C did not make a profit from the Plantation.
Plant A and plant B experience Person A undertook courses which includes visiting a Plant B farm to learn about Australian Plant B farming and finding Plant B through training and use of other means. Running of the plantation You do not employ any employees or contractors while you are growing the Plantation. When you require any additional assistance, you obtain the assistance of family and friends. You provided us with an estimate on the number of hours Person A spends per month working on the Plantation, and the days of the week Person A works on the Plantation. The activities included watering, planting, trimming, pruning, picking of Plant A, mowing, weed and pest control, fence maintenance and maintenance of equipment. Person A's experience in Plant A and Plant B is derived from helping their parents in setting up the farm since its inception. Prior to purchasing the Plantation, Person A sought available courses on the subject as well as utilising their parents' experience.
Person B and Person C are now of retirement age and desired to transfer the Plantation to younger members of the family so that the activity would continue and reach its full potential in the future. Person B and Person C can support and mentor Person A to continue the Plantation. The business plan for the Plantation is aimed to develop the current olive plantation into a commercial entity. Further development of the farm and a Plant B plantation has been established. A maintenance plan is in place to prune the trees and protect the vermin and weeds, etc. To assist the watering, an irrigation system has been established which includes the development of the dam, a wastewater recycle plant, and a bore and pump system. Your profit and loss projection indicates that the revenue and profit peaking after 10 years from the date of the purchase of the Plantation.
Person A's record keeping process includes maintaining bank records and a file of invoices for financial purposes. Person A also kept notes of work being carried out to ensure the Plantation remains resilient to weather conditions and survives. Notes include watering of plants, pruning and picking of Plant A, weeding and trimming of excess branches. Assumptions We have not made a determination on the following: • if you were running a primary production business in the 2022-23 income year, and • if the value of the assets are considered to be of a fair value.
Income Tax Assessment Act 1936 section 75B Income Tax Assessment Act 1997 Division 40 Income Tax Assessment Act 1997 Subdivision 40-B Income Tax Assessment Act 1997 section 40-25 Income Tax Assessment Act 1997 section 40-45 Income Tax Assessment Act 1997 subsection 40-50(1) Income tax Assessment Act 1997 Subdivision 40-E Income Tax Assessment Act 1997 Subdivision 40-F Income Tax Assessment Act 1997 subsection 40-515 Income Tax Assessment Act 1997 subsection 40-515(1) Income Tax Assessment Act 1997 paragraph 40-515(1)(a) Income Tax Assessment Act 1997 paragraph 40-515(1)(b) Income Tax Assessment Act 1997 paragraph 40-515(1)(d) Income Tax Assessment Act 1997 subsection 40-515(2) Income Tax Assessment Act 1997 paragraph 40-515(3)(b) Income Tax Assessment Act 1997 subsection 40-520(1) Income T