Tax Rebate for Landcare

The Treasurer, Peter Costello, and the Minister for Primary Industries and

Energy, John Anderson, today announced details of the Federal Government’s

new tax rebate for expenditure on landcare works.

“The Government has set aside $80 million from the Natural Heritage

Trust to fund a tax rebate for landcare works of 34 cents in the dollar, effective

from this financial year, fulfilling yet another election commitment made by

the Government,” they said.

“Legislation to provide for the rebate will be introduced into the Parliament

in the next few weeks, and we expect that it will be supported by all Parties.

This will ensure the rebate is available for the 1997-98 financial year.”

The rebate will be available for the same type of expenditures and over the

same time frame as the current tax deductions for preventing and treating land

degradation (Subdivision 387-A of the Income Tax Assessment Act 1997)

and for conserving or conveying water (Subdivision 387-B). These deductions

were formerly available under section 75D and section 75B of the

Income Tax Assessment Act 1936. Examples are provided

below.

“Primary producers and businesses using rural land will be able to claim

the rebate for works such as fencing to exclude animals from an area affected

by land degradation, levee or contour banks to control soil erosion, drainage

works to control salinity or drainage, and the eradication of plant or animal

pests.”

The arrangements for claiming the new rebate are not included in the Tax Pack

for 1997-98, but the Australian Tax Office will have special arrangements for

this year so that the rebate can be claimed by eligible taxpayers.

Those intending to use the new rebate will have the choice of claiming the

rebate or using the existing tax deductions under subdivisions 387-A and 387-B.

An annual limit of $5 000 will be placed on expenditures that are eligible

for the rebate under each of the subdivisions, allowing annual rebates for

up to a total of $10,000 in eligible landcare expenditure.

The rebate will also be limited to taxpayers with taxable incomes of up to

$20 700 a year from primary production. This represents approximately

70% of farmers who, because of their low incomes, are most in need of assistance

to invest in required landcare works.

“Farmers who have eligible expenditure, but who do not fully use the rebate

because it exceeds their tax bill, will be able to carry forward the rebate

to future years.”

Further Information:

Australian Taxation Office:

Christopher Hood:

02 6216 1921

Media Contact:

Minister Anderson’s Office:

Robert Haynes:

02 6277 7520

0419 493 511

The following example illustrates the benefit of the rebate for a landholder

without income averaging and with only the maximum allowable primary producer

income of $20 700 (therefore with a tax liability of $3 060), who then

invests the maximum amount of $5 000 in landcare works:

• if the landholder chooses to deduct this amount immediately under subdivision

  387-A, then the landholder’s taxable income is reduced to $15 700,

  the landholder’s tax liability is reduced to $2 060, and the landholder

  has an after tax income of $18 640;

• if the landholder chooses to claim the tax rebate of 34 cents in the dollar

  then the landholder’s taxable income remains at $20 700 but the

  tax liability is reduced by $1 700, from $3 060 to $1 360,

  and after tax income is $19 340 (a benefit of $700 compared with claiming

  deductions under subdivision 387-A).

The following example illustrates the benefit of the rebate for a landholder

without income averaging and with only the maximum allowable primary producer

income of $20 700 (therefore with a tax liability of $3 060), who then

invests the maximum amount of $5 000 in conserving or conveying water:

• if the landholder chooses to deduct this over three years (a deduction

  of about $1 700 a year) using subdivision 387-B, then the landholder’s

  taxable income reduces to $19 000, the landholder pays tax of $2 720

  and has an after tax income of $17 980;

• if the rebate of 34 cents in the dollar is claimed then the landholder

  is provided with a tax rebate of about $1 700 over three years (a tax

  rebate of $570 a year) – taxable income remains $20 700 but the tax

  liability reduces by $570, from $3 060 to $2 490, and after tax

  income is $18 210, (a total benefit of $690 over three years compared

  with claiming deductions under subdivision 387-B).

A landholder without income averaging and with only the maximum allowable primary

producer income of $20 700, who invests the maximum amount of $5 000 in each

of landcare works and conserving or conveying water would receive each of the

benefits detailed above.

Note that these examples are provided for illustrative purposes only. Those

seeking to claim the rebate should consult with their accountant or financial

adviser on its application to particular circumstances.