Primary producers who have constructed a new shed recently, or who plan to do so, might in certain circumstances be able to claim a tax deduction for the full cost of the shed. Division 40-F of the Income Tax Assessment Act 1997 legislates that, inter alia, you can deduct amounts for capital expenditure on
· Water facilities immediately; or
· Fodder storage assets immediately.
There is no limit to the cost of the water facilities or the fodder storage assets, but the detail makes it clear that if you claim a deduction for the cost of a new fodder shed and the tax auditor comes calling, you will need to have the shed stocked with fodder and very little else. If you want to deduct the full cost, the shed must be a fodder shed. Otherwise, you cannot use Division 40-F.
However, Division 40-F is not the only section of the Act dealing with agricultural sheds. There is also Section 45.40.
Section 45.40 “Meaning of plant” states that plant includes fences, dams and other structural improvements on lands used for agricultural or pastoral purposes. A shed is clearly a structural improvement and therefore is defined as plant if it is constructed on agricultural land. In most circumstances this does not provide a huge tax benefit because agricultural sheds are deemed to have an effective life of 40 years. This means that, using the diminishing value method, you can claim depreciation at the rate of 5% per year, which is better than nothing, but not earth-shattering.
However, there is a little twist in the tale. The Income Tax (Transitional Provisions) Act 1997, which is a tax plan for Covid recovery, provides for temporary full expensing of depreciating assets. For a primary producer, a shed is an item of plant and thus a depreciating asset. There are no disqualifying provisions for sheds in Subdivision 40-BB – Temporary full expensing of depreciating assets so, providing other qualifying conditions are met, you should be able to claim a deduction for the cost of the shed and its construction. However, temporary full expensing ends on 30 June 2023 so you will need to move quickly. You will not be able to claim an outright deduction for any part of the shed’s cost after 30 June 2023.
This is general advice only. Do not rely on it. Seek advice appropriate to your circumstances.
Office Location
68 Ash Street, Barcaldine QLD 4725
Postal Address
PO Box 104, Barcaldine, QLD, 4725
Phone: 07 4651 1341
Email: admin@walshaccounting.com.au
ABN:
59 330 650 357
Clubs and Associations
Grant Applications