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General Determination DEP92: Depreciation Rate for wool/shearing sheds

Note to Determination DEP92

The Commissioner sets a specific general depreciation rate for wool/shearing sheds by adding new asset class to the "Agricultural, horticulture and aquaculture" industry category and the "Buildings and structures" asset category.

The introduction of a specific asset class is to clarify the treatment of wool/shearing sheds for depreciation purposes.  There is concern that since the changes to the depreciation rules announced in the May 2010 Budget, that there is no specific asset class for wool/shearing sheds has seen taxpayers treating these assets inconsistently for depreciation purposes.  Some taxpayers have categorised wool/shearing shed buildings as "barns" and continued to claim depreciation on the basis these buildings are "barns" with an estimated useful life of 20 years.

Prior to the May 2010 Budget, the generally accepted view has been (although not published) that wool/shearing sheds are buildings with timber and/or steel framing, with an estimated useful life of 50 years.

Wool/shearing shed design is specialised, usually incorporating covered holding pens (sheep must be dry and have evacuated bowels for shearing), filling and catching pens, a raised shearing board (where shearing takes place), release pens and counting out pens.  Wool rooms (where the wool is sorted and baled) are also included.  Pens have grated floors so that the sheep droppings fall through and do not contaminate the wool.  Wool/shearing sheds experience only seasonal use (the main shearing period) although they may be used for crutching (shearing the crutch area to prevent fly-strike) several times during the warmer months.

It is suggested that taxpayers who have incorrectly claimed depreciation for wool/shearing sheds on the basis of those purpose-built buildings are "barns" was never a legitimate option, and they may like to make a voluntary disclosure to correct their tax position.

The application date for the specific asset class for "wool/shearing sheds", will be from the 2015 and subsequent income years. Prior to the 2015 income year, affected taxpayers should have been using the "buildings with steel or steel and timber framing" asset default class for wool/shearing sheds, with an estimated useful life of 50 years.

Determination DEP92: Tax Depreciation Rates General Determination Number 92

1. Application

This determination applies to taxpayers who own depreciable property of the kind listed in the table below.

This determination applies from the 2015 and subsequent income years.

2. Determination

Pursuant to section 91AAG of the Tax Administration Act 1994 the general determination will apply to the kind of items of depreciable property listed in the table below by:

  • Adding into the "Agricultural, horticulture and aquaculture" industry category and the "Buildings and structures" asset category, a new asset class, estimated useful life, and diminishing value and straight line depreciation rates as listed below:
Asset class Estimated useful life
DV rate (%) SL rate (%)
Wool/shearing shed 50 0 0

3. Interpretation

In this determination, unless the context otherwise requires, words and terms have the same meaning as in the Income Tax Act 2007 and the Tax Administration Act 1994.

This determination is signed on the 19th day of March 2015.

Rob Wells
LTS Manager, Technical Standards