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The Government will introduce depreciation for the costs of establishing a qualifying carbon sink forest under the horticultural plant provisions, with effect from 1 July 2007. This will enable costs to be depreciated over a period of 14 years, which is considerably less than the effective life of such a forest.

As an additional enhancement to encourage the early establishment of carbon sink forests, the Government will introduce immediate deductibility for costs incurred in establishing a qualifying carbon sink forest during a five year period commencing on 1 July 2007. The immediate deduction will take precedence over the general horticultural provisions during this 5 year period. Deductions under this measure will not be available to carbon sink forests established through managed investment schemes.

Currently, the costs of establishing a carbon sink forest are regarded as capital in nature and are treated under the CGT provisions of the tax law.

For a copy of the Treasurer's press release, No 2007/39, 8 May 2007, go here

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