DPIE98/79AJ

3 July 1998

TAX REBATE FOR LANDCARE

Farmers undertaking landcare projects will gain substantial tax rebates through new provisions made under the Natural Heritage Trust.

The Treasurer, Peter Costello, and the Minister for Primary Industries and Energy, John Anderson, announced today that legislation to implement the Federal Governments new landcare tax offset (rebate) for expenditure on landcare works and facilities for water conservation and conveyance had been passed into law by both Houses of Parliament.

“The Government announced as an election commitment that a tax rebate for landcare of 34 cents in the dollar would be provided as part of the Natural Heritage Trust, and the legislation fulfills this commitment,” the Ministers said.

“The landcare tax rebate recognises the efforts of those Australians involved in more than 4 000 landcare groups across the country,” they said.

The rebate applies to taxpayers with a taxable income of $20 700 a year or less after notionally claiming deductions in relation to any expenditures for which the rebate is then claimed. The maximum annual expenditure for which the rebate can be claimed is $10 000 – $5 000 for landcare works and the same amount on facilities for conserving or conveying water. Where a partnership runs a farm, each eligible partner can claim the rebate.

“The rebate is therefore available to about 70 per cent of Australias farmers – those most in need of assistance to invest in the crucial works necessary for sustainable land and water management,” the Ministers said.

“These farmers now have a choice between claiming a tax deduction for landcare or the new tax rebate, while others who do not qualify for the rebate will still be able to claim the existing deductions.

“This action by the Government will help reinforce landcare activities as an important and regular part of farm management, even in low-income years, and continue the cultural change to sustainable natural resource management that the landcare movement has worked so hard to achieve.

“The rebate will encourage those who spend nothing on landcare to invest a little, those who spend a little to invest more, and, most importantly, those who spend irregularly to invest in landcare as a normal part of farm business, both in good years and in years when their incomes are low.”

The rebate is available for the same types of expenditures and over the same time frame as the current tax deductions for preventing and treating land degradation and for conserving or conveying water (Subdivisions 387-A and B respectively of the Income Tax Assessment Act 1997).

Primary producers and businesses using rural land can 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 and tree planting to control salinity or drainage, and the eradication of plant or animal pests.

Primary producers can also claim the rebate for investing in facilities such as water storage tanks and dams, tank stands, bores, wells, irrigation channels, pipes and pumps, and water towers and windmills.

The arrangements for claiming the new rebate are not included in the Tax Pack for 1997-98, but the Australian Taxation Office will make special arrangements so the rebate can be claimed by eligible taxpayers for eligible expenditures made from the start of the 1997-98 year of income.

Farmers who do not have sufficient tax liability in a year to use the whole of the rebate will be able to carry forward the unused portion to future years when they may have sufficient tax liabilities.

: Australian Taxation Office: Christopher Hood: 02 6216 1921

: Minister Andersons Office: Robert Haynes: 02 6277 7520/0419 493 511

The Government is providing further assistance to rural landholders to invest in necessary landcare works by providing these landholders with the choice of claiming a landcare tax rebate of 34 cents in the dollar or tax deductions currently provided by subdivisions 387-A and 387-B of the Income Tax Assessment Act 1997 (ITAA). The landcare tax rebate is part of the Natural Heritage Trust package of measures for sustainable agriculture and the environment. Trust Funding of $80 million has been approved for the rebate.

The rebate is designed to assist farmers and rural landholders on low incomes to invest in works for sustainable land and water management on their own land, as part of operating their business. The intention is that landholders will invest in sustainable land and water management as part of a wider property and business management strategy that is integrated with a management plan for the local catchment, if one exists. However, it is not mandatory for landholders to prepare comprehensive property management plans or for these to be approved.

Subdivision 387-A of the ITAA provides primary producers and businesses on rural land with an immediate write off for capital expenditures on preventing and treating land degradation. Subdivision 387-B allows primary producers to write off, over three years, capital expenditures on facilities for conserving and conveying water. Investments claimed as deductions must be part of operating a business.

The landcare tax rebate is available to taxpayers eligible to claim a deduction under subdivision 387-A or 387-B who have a taxable income of no more than $20 700 in that year after notionally claiming deductions in relation to any expenditures for which the rebate is then claimed. Each year the rebate can be claimed for expenditures of up to $5 000 on preventing and treating land degradation and expenditures of up to $5 000 on facilities for conserving and conveying water. The rebate for preventing and treating land degradation can be claimed in one year, while the rebate for conserving and conveying water can be claimed over three years, like the alternative deduction.

Eligible expenditures for preventing and treating land degradation include works such as contour and levee banks and tree planting to control soil erosion, fencing to exclude stock from degraded areas, drainage to control salinity and the eradication of plant and animal pests. Eligible facilities for conserving and conveying water include works such as storage tanks and dams, wells, bores, pumps, and irrigation channels and pipes.

Additional features of the landcare tax rebate are:

• the rebate is provided for eligible expenditures made from the start of the 1997-98 year of income until the end of the 2000-2001 year of income, or until Natural Heritage Trust funding of $80 million has been expended, whichever occurs first;
• the rebate is operated as an integral part of the tax system. Primary producers and eligible rural businesses must make expenditures before claiming the rebate, must submit a claim as part of their tax return, and are subject to Australian Tax Office requirements for providing information, keeping records and ensuring accountability;
• a claim can be made by eligible taxpayers only once in any year, and the choice between claiming the rebate or the deductions can be made only once for any investment;
• the rebate is available to each partner in a partnership and also to companies;
• taxpayers who do not have enough tax liabilities to offset their claims for the rebate can carry forward their claims to future years until they can be offset;
• where the rebate is carried forward by companies operating at a loss, the company must meet current requirements for continuity of ownership and business. Special arrangements apply to the treatment of losses, where the rebate is carried forward.

The arrangements for claiming the rebate are not included in the Tax Pack for 1997-98, but the Australian Taxation Office will make special arrangements so that the rebate can be claimed by eligible taxpayers for that year.

Further information will be able to be obtained from your local branch of the Australian Taxation Office. Those intending claiming the rebate who are receiving social welfare benefit payments should seek advice as to the possible impact of the rebate on these payments.

Inquiries:

Department of Primary Industries and Energy (02)62723933

Australian Taxation Office 132861

3rd July 1998

The rebate of 34 cents in the dollar is designed to assist farmers and rural landholders with low incomes to invest in works required for sustainable land and water management on their own property, as part of operating their business. Taxpayers can choose to claim either the rebate or a tax deduction. The intention is that landholders will invest in sustainable land and water management as part of a wider property and business management strategy that is integrated with a management plan for the local catchment, if one exists.

The rebate provides assistance to invest in preventing and treating land degradation and for facilities required to conserve and convey water. Landcare activities that could be assisted include constructing fences to protect degraded land and land being rehabilitated, drainage works and tree planting to control salinity and drainage, contour and levee banks for erosion control and activities to control plant and animal pests.

By claiming the rebate for facilities for conserving and conveying water, primary producers will have assistance for activities such as constructing water storages, watering points and reticulation systems that manage the concentration of stock and reduce land degradation and that reduce the loss and wastage of water.

Primary producers and businesses on rural land with a taxable income of no more than $20 700 from all sources in that year (after notionally claiming deductions in relation to any expenditures for which the rebate is then claimed) can claim the rebate of 34 cents in the dollar for capital expenditures for preventing and treating land degradation where this is a part of the landholders business on their land. The rebate can be claimed in relation to the same year as these expenditures.

Primary producers with a taxable income of no more than $20 700 in that year can claim the rebate of 34 cents in the dollar for capital expenditures on conserving and conveying water where this is a part of their business on their land. The rebate can be claimed over three years for these expenditures.

The rebate can be claimed by individual taxpayers, by each of the partners in a partnership and by companies. Unused rebates can be carried forward for use in later years.

(Note: these deductions provide an immediate write-off against taxable income of expenditures on preventing or treating land degradation, and a write-off over three years of expenditures on facilities for conserving or conveying water. The deductions are available under subdivisions 387-A and 387-B of the Income Tax Assessment Act 1997.)

Yes. Eligible taxpayers can choose between the rebate or the deduction, but the choice can be made only one way for any particular amount of expenditure. If the rebate or deduction is claimed for an investment for conserving and conveying water, the tax concession is claimed over three years for that investment, and it is not possible to change the choice during this time.

It is not possible to claim both the deduction and the rebate for the same expenditures. Either the deduction or the rebate can be chosen, but not both. It is also not possible to claim depreciation expenses for any expenditures that have been claimed for the rebate or deductions.

Expenditures that are claimed for the rebate or the deduction must be on the landholders own land in Australia and must be part of operating their business on that land.

Further information on the types of eligible expenditures is as follows.

The following types of expenditures on preventing and treating land degradation are eligible for the rebate or the deduction:

• erecting a fence (including an extension, alteration or addition to a fence) to separate different land classes in accordance with an approved land management plan;
• erecting a fence (including an extension, alteration or addition to a fence) primarily and principally to exclude animals from an area affected by land degradation;

• to prevent or limit the land degradation extending or becoming worse;

• and to help reclaim the area;

• constructing a levee or a similar structure;
• constructing surface or subsurface drainage works that are primarily and principally to control salinity or assist in drainage control;
• expenditures primarily and principally for:

• eradicating or exterminating pest animals from the land;

• eradicating, exterminating or destroying plant growth that is detrimental to the land;
• preventing or fighting land degradation (except by erecting fences);

Capital expenditures on the construction, manufacture, installation or acquisition of facilities for conserving and conveying water for use in your primary production business can be claimed as a rebate or a deduction over three years. Only primary producers can claim this rebate or deduction.

A facility for conserving or conveying water is an item of plant, a structural improvement, or an alteration, addition or extension to an item of plant or a structural improvement.

Examples of facilities include dams, tanks (of earth, metal or concrete), underground tanks, tank stands, bores, wells, irrigation channels, pipes, pumps, water towers and windmills.

Yes, claims for the rebate are subject to limits on the amount that can be claimed, and expenditures must have been made from the start of the 1997-98 year of income and before the end of the 2000-2001 year of income.

These limits and the taxable income limit of $20,700 do not apply to claims for the tax deductions.

Each taxpayer, company or partner in a partnership within the income ceiling can claim the rebate in a year for expenditures to a maximum of $5 000 on preventing and treating land degradation and $5 000 for facilities on conserving and conveying water (a total of $10 000 of rebatable expenditure in a year).

An approved land management plan is required to claim a rebate or deduction for fencing to prevent or treat land degradation by separating different land classes. An approved plan is not required to claim the rebate or deduction in other circumstances.

However, investments that are made as part of a business and property management plan and that are integrated with a catchment management plan, if one exists, are likely to provide the most benefit to landholders. Property management planning is voluntary and is the Governments preferred method for integrating natural resource management information with the nature conservation and production aspects of a property.

Further information on requirements for approving land management plans is available from the Commonwealth Department of Primary Industries and Energy, Canberra or from the relevant State Government department responsible for land management.

Taxpayers can carry forward their claims for the rebate or the deduction until these are written off against the amount of tax they would pay (if claiming the rebate) or their taxable income (if claiming a deduction).

Further information:

Department of Primary Industries and Energy (02)62723933

Australian Taxation Office 132861