Tax relating to depreciation of vineyards – a layperson’s summary

Accelerated depreciation provisions applied to grapevines planted prior to October 2004.  These provisions were removed for vineyards planted after October 2004 and there have been no further changes relating to later plantings.

The provisions relate to the rate at which grapevines are considered to decline or depreciate.  There are two main differences between the “privileged” legislation that applied prior to October 2004, and that which has applied since:

1. Since 2004, the depreciation rate has been set at 13% and the maximum time over which a grapevine is fully depreciated is therefore just under 8 years. This contrasts with the special provisions that applied to grapevines planted before October 2004, where capital expenditure on establishment could be fully written off over a period of 4 years – ie 25% per annum. (Note that the effective life of a grapevine is estimated by the Tax Office to be between 15 and 20 years, hence depreciation is still “accelerated” compared with their estimated lifespan, but they are now treated the same as other horticultural plants.)

2. For grapevines planted prior to October 2004, deductions could be claimed from the time the vines were first used in a primary production business to produce assessable income . For vines planted since 2004, deductions for depreciation can only be claimed from the income year in which the grapevine’s first commercial season starts.  (“First use” means the time the vines are planted – whereas “first commercial season” means the first harvest.)

 

Summary

   Grapevines planted prior to October 2004  Grapevines planted after October  2004
 Rate of depreciation  25% per annum  13% per annum
 Time period for write-off of establishment costs  4 years  8 years
 Income year of first claim  Year when vines first used in the business  Year of first commercial season
 Tax provision  Special provision for grapevines  Grapevines treated same as all horticultural plants