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Tax Laws Amendment (2004 Measures No. 5) Bill 2004
Schedule 2 Irrigation water providers

   

Income Tax Assessment Act 1997

1  After section 40-50

Insert:

40-53   Alterations etc. to certain depreciating assets

             (1)  These things are not the same * depreciating asset for the purposes of section 40-50 and Subdivision 40-F:

                     (a)  a depreciating asset; and

                     (b)  a repair of a capital nature, or an alteration, addition or extension, to that asset that would, if it were a separate depreciating asset, be a * water facility.

             (2)  These things are not the same * depreciating asset for the purposes of section 40-50 and Subdivision 40-G:

                     (a)  a depreciating asset; and

                     (b)  a repair of a capital nature, or an alteration, addition or extension, to that asset that would, if it were a separate depreciating asset, be a * landcare operation.

2  At the end of section 40-515

Add:

             (5)  Paragraph (4)(a) does not apply to a * water facility if the expenditure incurred on the construction, manufacture, installation or acquisition of the water facility was incurred by an * irrigation water provider.

Meaning of irrigation water provider

             (6)  An irrigation water provider is an entity whose * business is primarily and principally the supply (otherwise than by using a * motor vehicle) of water to entities for use in * primary production businesses on land in Australia.

3  Subsection 40-520(1)

Repeal the subsection, substitute:

             (1)  A water facility is:

                     (a)  * plant or a structural improvement, or a repair of a capital nature, or an alteration, addition or extension, to plant or a structural improvement, that is primarily and principally for the purpose of conserving or conveying water; or

                     (b)  a structural improvement, or a repair of a capital nature, or an alteration, addition or extension, to a structural improvement, that is reasonably incidental to conserving or conveying water.

Example:    Examples of a water facility include a dam, tank, tank stand, bore, well, irrigation channel, pipe, pump, water tower and windmill. Examples of things 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.

4  Subsection 40-525(1)

Repeal the subsection, substitute:

Water facilities

             (1)  The capital expenditure you incurred on the construction, manufacture, installation or acquisition of the * water facility must have been incurred:

                     (a)  primarily and principally for the purpose of conserving or conveying water for use in a * primary production business that you conduct on land in Australia; or

                     (b)  for expenditure incurred by an * irrigation water provider—primarily and principally for the purpose of conserving or conveying water for use in primary production businesses conducted by other entities on land in Australia, being entities supplied with water by the irrigation water provider.

5  At the end of subsection 40-555(1)

Add:

Note:          A depreciating asset and a repair of a capital nature or an alteration, addition or extension to that asset that is a water facility are not the same depreciating asset for the purposes of section 40-50 and this Subdivision: see section 40-53.

6  Subsection 40-555(2)

Repeal the subsection.

7  After subsection 40-630(1)

Insert:

          (1A)  A * rural land irrigation water provider can deduct capital expenditure it incurs at a time in an income year on a * landcare operation for:

                     (a)  land in Australia that other entities use at the time for carrying on * primary production businesses; or

                     (b)  rural land in Australia that other entities use at the time for carrying on * businesses for a * taxable purpose from the use of that land (except a business of * mining operations);

being entities supplied with water by the rural land irrigation water provider.

          (1B)  A rural land irrigation water provider is:

                     (a)  an * irrigation water provider; or

                     (b)  an entity whose * business is primarily and principally the supply (otherwise than by using a * motor vehicle) of water to entities for use in carrying on * businesses (except businesses of * mining operations) using rural land in Australia.

8  After subsection 40-630(2)

Insert:

          (2A)  In applying paragraph (2)(b) to capital expenditure incurred by a * rural land irrigation water provider on a dam or structural improvement, the requirement in paragraph 45-40(1)(c) that the land on which the dam or structural improvement is situated be used for agricultural or pastoral operations is to be disregarded.

Exception: deduction available under Subdivision 40-F

          (2B)  A * rural land irrigation water provider cannot deduct an amount under this Subdivision for capital expenditure if the entity can deduct an amount for that expenditure under Subdivision 40-F.

9  At the end of section 40-630

Add:

             (4)  Subsection (3) does not apply to expenditure incurred by a * rural land irrigation water provider. Instead, a rural land irrigation water provider must reduce its deduction in relation to particular land by a reasonable amount to reflect an entity’s use of the land in the income year after the rural land irrigation water provider incurred the expenditure for a purpose other than a * taxable purpose.

10  Paragraph 40-635(1)(f)

Omit “an extension, alteration or addition”, substitute “a repair of a capital nature, or an alteration, addition or extension,”.

11  At the end of subsection 40-635(1)

Add:

               ; or (g)  constructing a structural improvement, or a repair of a capital nature, or an alteration, addition or extension, to a structural improvement, that is reasonably incidental to an asset described in paragraph (c) or (d).

Note:          A depreciating asset and a repair of a capital nature or an alteration, addition or extension to that asset are not the same asset for the purposes of section 40-50 and this Subdivision: see section 40-53.

12  Subsection 995-1(1)

Insert:

irrigation water provider has the meaning given by section 40-515.

13  Subsection 995-1(1)

Insert:

rural land irrigation water provider has the meaning given by section 40-630.

14  Application

The amendments made by this Schedule apply to expenditure incurred on or after 1 July 2004.