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Who can claim the water facilities tax concession?
The water facilities tax concession can be claimed by primary producers and irrigation water providers (for expenditure incurred on or after 1 July 2004). An irrigation water provider is an entity whose business is primarily the supply (other than by using a motor vehicle) of water to primary producers.
What is a water facility?
A water facility is plant or a structural improvement, or an alteration, addition or extension to plant or a structural improvement, that is primarily 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; and
- a structural improvement, or an alteration, addition, extension or capital repair to a structural improvement, that is reasonably incidental to conserving or conveying water.
Examples of a water facility are dams, earth tanks, underground tanks, concrete or metal tanks, tank stands, bores, wells, irrigation channels or similar improvements, pipes, pumps, water towers, windmills and 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 and a bridge over an irrigation channel.
What can be claimed?
You can deduct one-third of the capital expenditure you incurred on a water facility in the income year in which you incurred the expenditure and one-third in each of the following two years.
You must reduce your deduction if the facility was not wholly used to carry on a primary production business or for a taxable purpose.
If you are an irrigation water provider, the expenditure must have been incurred primarily 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.
Can I claim a deduction for capital repairs or a bridge over an irrigation channel if the expenditure was incurred before 1 July 2004?
No. Such an expenditure cannot be deducted under this concession if it was incurred before 1 July 2004. This would include repairs of a capital nature, such as 'initial repairs' and expenditure on a bridge or a fence that was only reasonably incidental to conserving or conveying water. Non-capital repairs would normally be immediately deductible under the usual repairs section (25-10), even if they were incurred before 1 July 2004.
What happens where expenditure is recouped?
Any recoupment of the expenditure is included in your assessable income. As the expenditure on water facilities is deductible over three income years, special rules apply to determine the amount of any recoupment to be included in assessable income in the year of recoupment and in later income years.
How does a partnership claim the deduction?
These deductions are not available to a partnership. 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.
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