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Monday, 23 September 2002
Page: 4709


Senator O'Brien asked the Minister representing the Minister for Agriculture, Fisheries and Forestry, upon notice, on 15 August 2002:

(1) Is the Minister aware of the drought investment allowance that encouraged primary producers and lessors of property to primary producers to invest in drought mitigation property between 23 March 1995 and 1 July 2000.

(2) Can the Minister confirm that the drought investment allowance does not provide any benefit for the purchase of drought mitigation property by primary producers and lessors of property to primary producers after 1 July 2000.

(3) How many primary producers and lessors of property to primary producers have taken advantage of the investment allowance.

(4) Has any research been undertaken into the effectiveness of the drought investment allowance in encouraging primary producers and lessors of property to primary producers to invest in drought mitigation property; if so, who conducted the research and what were the results; if not, why not.

(5) Does the Minister recall advising primary producers on 6 December 1999 that the Government is committed to retaining all tax concessions specific to primary producers, including the drought investment allowance.

(6) What are details of any programs that provide taxation or other financial benefits for the purchase of drought mitigation property by primary producers and lessors of property to primary producers after 1 July 2000.


Senator Ian Macdonald (Minister for Forestry and Conservation) —The Minister for Agriculture, Fisheries and Forestry has provided the following answer to the honourable senator's question:

(1) Yes. The Minister is aware of the drought investment allowance that applied to certain drought related expenditure up to 30 June 2000.

(2) Yes. The Minister can confirm that the drought investment allowance does not apply to expenditure incurred after 30 June 2000 in accordance with legislation enacted by the previous Government.

(3) Responsibility for taxation policy vests with Treasury. I have been informed that the Treasurer will specifically address these issues in responding to a similar question taken on notice on 20 August 2002 by the Minister representing the Treasurer in the Senate.

(4) The Government has not undertaken any research into the effectiveness of the drought investment allowance in encouraging primary producers and lessors of property to primary producers to invest in drought mitigation property as the drought investment allowance was simply intended as an interim measure to assist farmers achieve a higher level of drought preparedness.

(5) Yes. That advice was correct at the time and related to tax concessions operative at that time, including the drought investment allowance. The clause restricting this provision to expenditure incurred, or construction commenced, before 1 July 2000 was part of the original legislation that gave effect to the drought investment allowance. This legislation was enacted in 1995 by the previous Government.

(6) Sections 40-515 to 40-575 of the Income Tax Assessment Act 1997 provide for a three-year write-off for expenditure on water facilities. Primary producers may claim a deduction for capital expenditure on water facilities. The deduction applies to expenditures incurred in the construction, manufacture, acquisition or installation of plant or a structural improvement for the purpose of conserving water. The deduction is allowed over three years. One-third of the expenditure is deductible in the income year in which it is incurred, one-third in the next year and one-third in the year after that.

Sections 40-630 to 40-675 of the Income Tax Assessment Act 1997 provide for an outright deduction for expenditure on landcare operations. Capital expenditure incurred on landcare operations qualifies for an outright deduction in the year the expenditure is incurred. The deduction applies to, inter alia,

· preventing or combating land degradation, otherwise than by the erection of fences on that land;

· the construction of levee banks or similar improvements (including alterations, extensions and additions); and

· the construction of drainage works (including alterations, extensions and additions) for the purpose of controlling salinity or assisting in drainage control.

These taxation benefits are mutually exclusive. To qualify for either of these tax benefits, the operation must be carried out primarily and principally for the purpose stated.