Case V108

Members:
PM Roach SM

Tribunal:
Administrative Appeals Tribunal

Decision date: 8 July 1988.

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P.M. Roach (Senior Member)

These reasons for decision ought provide a reminder to the applicant's representative (an accountant and tax agent), and serve as a warning to others, as to how not to proceed about the presentation of an application to this Tribunal. At the same time it will give notice that, in some respects, the Tribunal has the procedural flexibility to provide prompt solutions to some problems. It should also serve as a reminder of the willingness of the Commissioner on occasion to overlook many matters in an endeavour to ensure that ultimately the correct assessment is made.

2. The first problem to be encountered was that the applicant's representative did not

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arrange for his client to attend to give evidence. That was not in itself unreasonable having regard to the nature of the issue and the distance at which she resided from Sydney. The difficulty was that the representative sought to establish the relevant evidence by tendering a written statement which had not been previously shown to the Commissioner's representative. Had the parties been able to agree on the statement of agreed facts there would have been no difficulty. By not conferring beforehand with the Commissioner's representative, the applicant's representative ran the risk that he would not have been able to present any evidence in support of his client's claim. Had that eventuated the case might have been dismissed without having been considered on its merits.

3. However, this happened to be a situation in which the Commissioner's representative was content to accept as agreed most of the assertions in the prepared statement, although he did wish to question the applicant as to some matters not dealt with to his satisfaction in the statement. That being so, it was agreed that the evidence of the applicant should be taken by telephone. Once again, the applicant's representative was fortunate in that the lady happened to be available to respond immediately.

4. The applicant is a nursery proprietress, who carries on her business in the country many kilometres from Sydney. She commenced that business during the year of income ended 30 June 1984. In May 1985 she had two ``shade structures'' (her words) constructed on site. The structures consisted of 5 cm galvanised piping enclosing an area measuring 18 m X 9 m X 3 m. The method of construction was to set the pipe uprights (approximately 24 in each instance) in light concrete footings with depths of 45 cm to 60 cm; to set horizontal sections of pipe on the side walls; and, at the top, other horizontal sections of pipe, extending lengthwise and crosswise to join the sides and hold them together. All joins were made by light welds but construction was such that they might have been bolted together. The frame so constructed provides support for shade-cloth which is extended over the building. The roof section may be turned back to allow for increased light. On one side of one building a polythene plastic substitute for shade-cloth has been used to provide greater protection from the wind. The footings were needed in order to make the very light, but wholly cladded, structure capable of resisting the winds which affect the site. The frame is also used to carry a PVC irrigation system attached by wire. The framework is also used from time to time to hang native ferns at various levels within the structure, being either attached to the side walls or suspended from the top. The sheds are used to house and grow potted seedlings and hanging ferns which need protection from frosts which occur regularly during the winter months. In summer, when temperatures exceed on occasion 40 degrees Celsius, the plants are protected from the sun. In addition, throughout the year the structure protects the plants from rain and hail.

5. It was said that the structure was ``not designed to be permanent'' and that (inter alia) that was because, had that been the intention, a concrete floor slab would have been set and possibly a glass roof or fibreglass roofing installed. Instead, it is said that the fixing by concrete footings was no more than was necessary to render the structure stable for such period as it might please the applicant to maintain the sheds in that position. It was said that it might be that, in as short a period as five years, the sheds would be relocated and that this could be readily achieved in that the footings could be very quickly exposed and released from the very light soil in which they are set; and the welds, being very light, could be easily broken and reset. It was also said that it would be possible to lift the entire structure ``as is'' and relocate it. I accept that that is a possibility, provided a sufficient workforce was engaged for the purpose. I think it quite improbable.

6. Having heard evidence to establish the foregoing facts, the matter proceeded to argument as to whether the applicant was entitled to the claimed deduction of $2,650 for investment allowance which had been denied her by the Commissioner. The Commissioner's representative acknowledged that the structures constituted units of eligible property which qualified for investment allowance but for one thing; the circumstance that sec. 82AE provided:

``This Subdivision does not apply in relation to structural improvements...''

The section went on to provide that some:

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``structural improvements... that are on land used for the purpose of carrying on a business of primary production...''

should none the less be eligible for the allowance. The Commissioner's representative acknowledged a possible argument in favour of the applicant that the claim of the applicant might fall within one of those exceptions but, as it was contended for the applicant that nursery operations such as she conducted did not constitute ``primary production'' within the meaning of the phrase in sec. 82AE by reason of its definition in sec. 6, it was not necessary to consider that possibility.

7. That being so, the argument resolved itself into an issue as to whether the greenhouses constituted ``structural improvements''.

8. For the applicant it was argued that, having regard to the temporary nature of the structures; their utilisation; the nature of the structure as only providing a frame for the support of shade-cloth, an irrigation system and plants; the impermanence of its location; the standard of construction; and an assertion, unsupported by evidence, that the structures added nothing to the value of the property, that the structures were not aptly described as ``structural improvements''.

9. For the Commissioner it was argued that the frame did constitute a structure in the ordinary meaning of that word; that it was a fixture to the land on which it stood because it had the requisite degree of annexation sufficient to secure the structure to the land so as to come to be considered part of the land; and that the structure had altered the land and so become an ``improvement'', whether or not it improved the quality of the land or increased its value.

10. He cited two cases in support of his argument. The first was an unreported decision of the No. 2 Taxation Board of Review delivered in 1979. That case concerned a glasshouse used for growing carnations, which measured some 21 metres in depth and 30 metres in length and the height of which varied from 2.2 metres or thereabouts on the sides to 4.2 metres in the centre. It was considered to be a structural improvement.

11. The second case was a decision of this Tribunal Case T98 (
86 ATC 1162). That too involved a glasshouse which ``although the Tribunal did not at any stage obtain any reliable dimensions (seems to have) extended over several acres''. It too was considered to be a ``structural improvement''.

12. In reply, the applicant's representative sought to distinguish those cases, not so much on the basis of the nature, function and size of the structures but, to the surprise of all, by asserting that the applicant was not the owner of the land on which the structures were erected. Furthermore, he contended that she had no security of tenure there, being only a gratuitous licensee at will of her mother. It would not have been surprising if the Commissioner's representative had taken the view that any attempt at that point in time to establish the material newly contended for had come far too late. Nor would it have been unreasonable if the Tribunal had reached the same conclusion and determined not to allow the applicant to reopen her case in order to permit the necessary evidence to be presented. Fortunately for the applicant's representative, the Commissioner's officer took the view that his principal objective was to assist the Tribunal to come to a correct conclusion in the matter. Accordingly, by consent, it was agreed that I should accept as agreed facts the matters newly asserted. Being so taken by surprise, the Commissioner's representative was not in a position to further argue the matter by reference to authorities.

13. Having considered all of the evidence and the arguments, I am satisfied that the phrase ``structural improvements'' is a phrase which relates to the development of land. The phrase is not used to identify things, such as large machines, which are or may be elaborate structures in themselves but which are recognised as having an existence independently of the land on which they stand. As to the word ``improvement'' I am not persuaded that it is to be understood as indicating a qualitative character: something which renders land better in some sense or more valuable than before; but rather as a phrase referring to land which has been altered in its characteristics by some development. As appears from the words of exception in sec. 82AE, ``structural improvements'' may extend to fences; earth tanks; underground tanks; irrigation channels; underground piping and also buildings or other structural improvements used for the storage of grain, hay or fodder. Further, I hold that the shade-houses in question are not the less

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``structural improvements'' because their standard of construction or their size is less than the more elaborate glasshouses previously referred to.

14. Further, it is in those considerations that, in my view, there lies the answer to the surprise argument that the greenhouses could not constitute ``structural improvements'' because the applicant had no estate or interest in the land on which they stood, being merely a licensee at will. In my view, there is no foundation for such a view.

15. Subdivision B of the Act is given over to providing for an entitlement in taxpayers to ``investment allowance'' in relation to whatever satisfies the concept of ``a unit of eligible property''. Section 82AE expressly excludes from eligibility ``structural improvements'' which, in my view, is to be understood as meaning ``structural improvements'' to land and is not to be subject to a further limitation restricting its application to ``structural improvements to land in which the taxpayer has a legal estate or interest''. In reaching that view I have considered whether or not it might have been appropriate to find that the applicant as licensee of the land had an obligation to restore the land to the condition in which she came to it in the event of her licence determining but, as the evidence stands before me, I am not in a position to make any such finding. In all the circumstances, I think the matter should be determined on the evidence as it presently stands without yet a further opportunity being provided to the applicant.

16. The order of the Tribunal will be that the determination of the Commissioner upon the objection under review be affirmed.