Private ruling: Deduction of fixed irrigation charges
Date of advice: 15 September 2021
Published: November 2021
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are the irrigation fixed charges an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 in your income tax return? | A1: No, you are not allowable a deduction under section 8-1 of the Income Tax Assessment Act 1997 for the cost of the irrigation charges as the payments are of a capital nature. In return for the payments you receive access to water therefore the payments secure for you an enduring benefit making them capital. | Q2: Are the irrigation fixed charges an allowable deduction under subdivision 40-F of the Income Tax Assessment Act 1997 in your income tax return? | A2: Yes, as long as you satisfy the criteria of being a primary producer the irrigation charges will be deductible under subdivision 40-F of the Income Tax Assessment Act 1997 . The decline in value is calculated in accordance with section 40-540 of the Income Tax Assessment Act 1997.




Relevant facts and circumstances: You own a XXX acre farm in XXXX which operates a business of XXXXX. | You pay irrigation fees to Business A for access to the irrigation service. | The fees are payable to Business A irrespective of if you use water or not. | The irrigation system is used as a contingency plan to irrigate the land when water shortages are faced. | The water infrastructure is owned by Business A. | Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 subdivision 40-F