Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Government in the Senate) Share this | Hansard source

In answer to the question Senator Milne asked and, I think, the question that Senator Joyce was asking, I draw their attention to the Income Tax Assessment Act 1997, chapter 2, ‘Liability rules of general application’, part 2-10, ‘Capital allowances: rules about deductibility of capital expenditure’, division 40—‘Capital allowances’. Section 40.30 says:

What a depreciating asset is

(1)

A depreciating asset is an asset that has a limited * effective life and can reasonably be expected to decline in value over the time it is used, except:

(a)

land …

I am not quite sure how much plainer I can be. It is stated there in black and white: ‘except land’.

In the same way that the carbon sink legislation does not cover exclusions, the horticultural plant provisions use a general meaning for establishment costs. The ATO has made a tax determination in relation to carbon sink forests, which states:

The cost of purchasing land to be used for growing a horticultural plant is not establishment expenditure, as the cost is attributable to the land rather than to the establishment of the plant.

Given that this interpretation applies elsewhere in division 40 of the Income Tax Assessment Act 1997, there is no reason for it not to apply in the same way for carbon sinks. The explanatory memorandum for the carbon sinks legislation makes clear that assets separate from the trees are not considered to be an establishment expenditure. I am quoting here from the Income Tax Assessment Act 1997, chapter 2, part 2-10, division 40, ‘What a depreciating asset is’. Quite clearly, land is written there and excluded.