Write-off of farmers' and orchardists' improvements

Section DO 11 of the Income Tax Act 2007

The amendment extends to rules concerning the write-off of farmers' and orchardists' (collectively "farmers") improvements to address some of the issues highlighted by Kiwifruit PSAv.

Background

Section DO 11 was originally added to the Tax Act to allow the write-off of subpart DO capitalised improvements when they are made useless by events outside the control of the owner. The Kiwifruit PSAv outbreak caused this section to be re-examined.

It became clear that section DO 11 did not extend to the costs of removal, and there was doubt about the costs of associated structures that were destroyed because the kiwifruit vines had been rendered useless and the orchardist wanted to plant something else.

Key features

Section DO 11 has been amended to allow deductions for both the costs of removal of subpart DO capitalised improvements and their write-off when they are destroyed consequentially to being made redundant because the crop they were supporting had been made useless by an event (that is, the Kiwifruit PSAv). The criterion that the event is beyond the farmers' control still applies, but the event does not have to actually damage the improvement, but rather it consequentially makes the improvement redundant.

Application date

The amendments apply from the commencement of farmers' 2010-11 income year.