Tax time rolls around and the same question comes up every year. Can you claim a shed?
The honest answer is it depends on what the shed’s for and who’s using it. A hay shed on a working farm gets treated very differently to a backyard shed for the mower. Get the category right and there’s real money in it. Get it wrong and you’ve either missed a deduction or claimed one you weren’t entitled to.
Here’s how the rules work in plain terms, so you know what to expect before you talk to your accountant. And you should talk to your accountant. This is general information, not tax advice, and everyone’s situation is different.
Are Sheds Tax Deductible? The Short Answer
If the shed is used to earn income, usually yes, in some form. If it’s purely for personal use at home, usually no.
The bigger question is how you claim it. There are two very different paths, and which one you’re on makes a huge difference to your cash flow this year.
- An immediate deduction for the full cost, which applies to hay sheds and other fodder storage on a primary production business.
- A capital works deduction spread over 40 years, which applies to most other income-producing sheds like machinery, commercial and industrial buildings.
So it’s worth understanding both before you assume anything.
The Instant Asset Write-Off Won’t Cover Your Shed
This one trips people up, so let’s clear it up early.
The $20,000 instant asset write-off is handy for tools, equipment and vehicles. It is not for sheds. Buildings are specifically excluded from it, and a shed costs well above the $20,000 limit anyway.
So if you were hoping to write the whole shed off in one hit under that scheme, that’s not how it works. The good news is there’s a separate rule that does let some farmers do exactly that. More on that next.
Hay Sheds and Fodder Storage: The Big One for Farmers
This is where it gets interesting if you’re a primary producer.
If you build a shed that’s used to store fodder, you can claim the full cost as an immediate deduction in the year you incur the expense. No 40-year wait. The whole lot, in one year, regardless of what it cost.
Fodder just means feed for livestock. Hay, grain, silage, even liquid feed supplements. So a hay shed, a grain silo or a feed storage bin can all qualify.
A few conditions apply:
- You have to be running a primary production business on land in Australia.
- The shed has to be used primarily and principally for storing fodder.
- You can still claim even if you only lease the land, not own it.
This is one of the most generous deductions going for farmers, and plenty of people don’t know it exists. If you’re weighing up a feed shed, the tax position can change the maths completely.
Does Your Shed Pass the Fodder Storage Test?
The catch is in those words “primarily and principally.” The shed’s main job has to be storing fodder.
The ATO’s own example is a good guide. A shed built to store hay that happens to store a neighbour’s borrowed tractor a couple of times a year still passes. Its main purpose is clearly fodder, and the odd bit of tractor parking doesn’t change that.
Flip it around though and it fails. A farm machinery shed that you occasionally throw some grain into is not a fodder storage asset. Its main job is housing machinery, so it goes down the slower capital works path instead.
The lesson is simple. Build the shed for what you actually need and claim it honestly. Don’t dress a machinery shed up as a hay shed to chase the deduction, because it has to genuinely stack up if the ATO ever asks.
Machinery, Commercial and Other Sheds: The Capital Works Route
Most income-producing sheds that aren’t fodder storage fall under capital works.
That covers machinery sheds, workshops, commercial and industrial sheds, and general rural farm sheds used in a business. You can’t claim the whole cost up front. Instead you claim 2.5% of the build cost each year, over 40 years.
It’s slower, but it’s still a genuine deduction that lowers your taxable income every year the building’s in use. Over the life of the shed it adds up.
If the shed isn’t used to produce income at all, say it’s just a shed at the family home, there’s generally no deduction available. The income-producing use is the key.
Fencing, Water and Other Farm Deductions Worth Knowing
While you’re looking at the shed, a couple of related concessions are worth a mention if you’re a primary producer.
Fencing can be claimed as an immediate deduction in the year you incur the cost. Same with water facilities like tanks, bores, pumps and pipes used to supply water for the business. Both get the full write-off rather than slow depreciation.
It’s the kind of thing that’s easy to overlook when you’re focused on the big build, so flag it with your accountant too.
Get It Sorted Before 30 June
Timing matters more than people realise.
To claim a deduction this financial year, the shed generally needs to be installed and ready for use by 30 June, not just ordered or paid for. A deposit on a shed that turns up in August doesn’t help this year’s return.
Shed kits take time to approve, deliver and build. So if you want the deduction to land this financial year, the clock’s already ticking. Leaving it to mid-June is cutting it fine.
Quick rundown by shed type:
- Hay shed or fodder storage: immediate deduction for the full cost, if you’re a primary producer and it’s primarily for storing feed.
- Machinery, commercial or industrial shed: capital works deduction at 2.5% a year over 40 years, where it’s used to earn income.
- Shed at the family home: generally no deduction, since there’s no income use.
If you’re planning a shed and want it up before 30 June, the sooner we get started the better. Take a look at our shed kit specials, call us on 1300 887 433, or request a quote and we’ll get your pricing back to you quickly.
One last thing, because it matters. Check the details with your accountant or the ATO before you commit. The rules here are general, your circumstances are your own, and a quick chat with a tax pro makes sure you claim everything you’re entitled to and nothing you’re not.