Deductions for Primary Producers

Posted 7 Feb

Deductions for Primary Producers

If you're a primary producer in Australia, you probably know that most capital expenses—like farm buildings, equipment, and infrastructure—are depreciated over multiple years. But did you know that the ATO provides special rules for fencing, fodder storage, water facilities, and landcare operations?

Fodder Storage Assets

For fodder storage structures, you can claim the entire cost, so long as the asset is primarily used to store fodder for livestock.

Eligible fodder storage assets:

• Silos
• Liquid feed supplement storage tanks
• Hay and grain storage sheds
• Bins for dried grain
• Above-ground bunkers

Not eligible:

• Storage assets not originally and primarily for storage of fodder for livestock (even if the contents are eventually used as fodder after the fact)
• Dual purpose assets where fodder storage is a secondary function (such as primarily animal-feeding assets with fodder storage capabilities)
• Second-hand assets (unless no prior owner has claimed or was eligible to claim it)

Fencing Assets

If you install or replace fencing, you can claim the full cost in the same income year.
This:

• Includes permanent fencing (e.g., posts, rails, wires, droppers, gates, fittings, and anchor assemblies)
• Excludes stockyards, pens, portable fencing, and temporary enclosures

Water Facilities

If you incur costs to install or upgrade water facilities such as piping, dams, tanks, or bore pumps, you can claim an immediate deduction. This applies to facilities used for livestock, irrigation, or other farming needs.

Eligible water facilities:

• Dams
• Water storage tanks
• Irrigation systems
• Pipes, pumps, and tanks
• Bore water infrastructure

 Landcare Operations

You can claim an immediate deduction for costs incurred in landcare operations

Eligible landcare activities:

• Animal pest and weed management to control species detrimental to the land and other landcare activities.
• Preventative and restorative activities that improve land quality and combat land degradation
• Erection of fencing to minimise animal exposure of land effected by land degradation.
• Erection of fencing to separate different land classes in accordance with an approved land management plan.
• Drainage works, levee construction, or similar improvements to minimise water related land degradation related to salinity management and flooding
• Structural works reasonably incidental to drainage works, levee construction, or similar improvements.

 In Contrast to Normal Depreciation Rules

Typically, capital assets are depreciated over their effective life, meaning deductions are gradual.

For example,

• Capital Works assets such as building improvements may need to be written off over 40 years.
• Plant and Equipment assets (including improvements to structures on agricultural or pastoral land) may need to be depreciated from anywhere between 3 to 20 years.

For businesses with an aggregated turnover of less than $10m the following simplified depreciation rules may apply for Plant and Equipment assets purchased from 1 July 2024:

• Assets costing less than $20,000 are eligible for Instant Asset Write-Off of 100%, pending the passage of legislation. 
• Assets costing more than $20,000 are added to a General Pool, with 15% of cost written off in first year, and 30% in subsequent years.

But with these primary producer concessions, fencing, fodder storage, water facilities, and landcare operations fall under special rules that entitle you to an immediate deduction regardless of cost.

Timing of Deduction

Understanding when you can claim these deductions is important for effective tax planning.

Generally, you can only claim a deduction for when an asset is installed and ready for use. More specifically:

• Progress payments – If an asset is built or installed in stages you can only claim the portion that is finished and operational within that financial year. If part of the work extends and finished in following financial years, the remaining cost is deducted in those years.

• Prepaid expenses – If you prepay for fencing materials, a water tank, or landcare work, you cannot claim the deduction until the asset is installed or the work is performed. The deduction is based on when the asset becomes functional, not when payment is made.

• Delayed installation – Ordering materials or making deposits does not qualify for an immediate deduction. If a fodder storage structure is purchased but not yet built, the deduction is deferred until it is fully installed and in use for primary production.

Record Keeping Requirements

To ensure you comply with the ATO rules, make sure:

• Your asset is used mainly for primary production
• You meet the definition of a primary producer
• You ensure the asset meets the specific eligibility criteria
• You keep records to substantiate the deduction, including invoices, receipts, and proof of purpose

For more information and other requirements for specific circumstances, see the ATO website for more guidance, otherwise please contact your WDF Staff member today. 

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