You may be entitled to claim a deduction for capital expenditure incurred on a water facility if you are:
- a primary producer
- an irrigation water provider – for expenditure incurred on or after 1 July 2004.
- If you are an irrigation water provider, your expenditure must have been incurred primarily and principally for the purpose of conserving or conveying water for use in primary production businesses. The deduction must be reduced to reflect any time when the facility was not wholly used for a taxable purpose.
You can’t claim a deduction for a swimming pool even though the water is available for emergency use, such as for fire-fighting or irrigation.
You may also be able to claim under the Simplified Depreciation Rules for Primary Producers, however, the Water Facilities Tax Deduction has no capped amount for purchases, whereas depreciation for Primary Producing Small Business under the Simplified Depreciation Rule, has an upper limit of $20,000 per purchase.
How does it work?
Basically if your Primary Production business (ABN holder) buys an asset (financed or purchased outright), that purchase can be 100% claimed as a tax deduction in this year that the expenditure was incurred. Usually the tax deductions for assets are claimed over its life, which for asset purchases of motor vehicles, it can be deducted over 7 years or for a computer over 4 years.
If you incurred capital expenditure on a water facility from 7.30pm (AEST), 12 May 2015 – you deduct the whole amount in the income year in which you incurred the expenditure.
If you incurred capital expenditure on a water facility before 7.30pm (AEST), 12 May 2015 – you deduct one-third of the amount in the income year in which you incurred the expenditure. You deduct one-third in each of the following two years.
You must reduce your deduction if the water facility was not wholly intended to be used for a taxable purpose.
Costs incurred by a partnership are allocated to each partner, who can then claim the relevant deduction in respect of their share of the expenditure.
Find out more about the Water Facilities Tax Deduction HERE or contact one of our Sales Advisors for more information on 1800 155 552.
We strongly advise that you to contact the ATO to obtain Taxation advice and to determine how the tax deductions mentioned might apply to your individual circumstances. Please be aware, some information is provided by third-party providers and may not be accurate, complete or up to date. As a result, Heritage Water Tanks accepts no responsibility for the accuracy, currency and completeness of information or for any error or omission.
An irrigation water provider primarily and principally supply (other than by using a motor vehicle) water to primary producers.
A water facility is plant or a structural improvement, or an alteration, addition or extension to plant or a structural improvement that is primarily and principally for the purpose of conserving or conveying water.
For expenditure incurred on or after 1 July 2004, a water facility also includes:
capital repairs to plant or structural improvements that are primarily for the purpose of conserving or conveying water
a structural improvement, or an alteration, addition, extension or capital repair to a structural improvement that is reasonably incidental to conserving or conveying water.
Water facilities include:
- earth tanks
- underground tanks
- concrete, plastic or metal tanks
- tank stands
- irrigation channels or similar improvements
- pumps (including those used for fire-fighting)
- water towers
- extensions or improvements to any of these items.
Things that are reasonably incidental to conserving or conveying water include:
- a culvert
- a fence to prevent livestock entering an irrigation channel
- a bridge over an irrigation channel.