ATO Interpretative Decision

ATO ID 2002/1015 (Withdrawn)

Income Tax

• 'This ATO ID is withdrawn from the database because it contains a view in respect of a provision of the Income Tax Assessment Act 1997 that was repealed with effect from 1 July 2001. Despite its withdrawal from the database, this ATO ID continues to be a precedential view in respect of decisions relating to the former provision.
  The current ATO view on this issue is contained in Rental Properties (NAT 1729).'
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is a deduction for depreciation of the items listed below, which are affixed to a rental property, available under section 42-15 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

No. A depreciation deduction is not available under section 42-15 of the ITAA 1997 because none of the items are considered to be 'plant'.

Facts

The taxpayer owns a rental property within a unit complex which is rented or available for rent on a commercial basis at all times. The taxpayer wants to claim depreciation deductions in respect of certain items affixed to the property on the basis that the items are 'plant' for depreciation purposes. The items are:

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Distribution and switch gear (various electrical components to distribute, meter and control the usage of power)

•

Aluminium letterbox (mounted to the front wall of the property and within a bank of letter boxes)

•

Cable tray (mounted to the building as a support system for cabling)

•

Fire hydrant and booster valves (water inlet and distribution entry point)

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Fire hose reel (plumbed in and mounted to the building)

•

Fire separation doors

•

Light fittings and shades (mounted to the building surface including dome lights, cast aluminium bunk lights and flush mounted tungsten halogen downlights)

•

Emergency lighting (battery operated emergency)

•

Signage (various including noticeboards, location of fire safety equipment, exit areas and common facilities fixed to the building)

•

Bollards (steel posts set in concrete)

Reasons For Decision

Section 42-15 of the ITAA 1997 allows a deduction for depreciation of a unit of plant that is owned and used for the purpose of producing assessable income.

Plant is defined in section 42-18 of the ITAA 1997 to include articles and machinery. A fundamental factor to consider in determining whether a particular item is a unit of plant is the function it performs. To be plant, the item must be more than mere setting for the taxpayer's operation (Macquarie Worsteds Pty Ltd v. F C of T 74 ATC 4121; 4 ATR 334).

All the items form part of the 'fabric of the building' and are an integral part of the structure of the building. Their nature and degree of affixation to the building supports the view that none of the items are articles. On a functional analysis, it could not be said that any of the items' operation is sufficiently mechanical in nature for them to be viewed as machinery. They are no more than setting.

On this basis, the items are not plant and, therefore, not depreciable under section 42-15 of the ITAA 1997. However, a capital works deduction in respect of the items is available under Division 43 of the ITAA 1997.

Year of income:  Year ended 30 June 2001

Legislative References:
Income Tax Assessment Act 1997
   section 42-15
   section 42-18
   Division 43

Case References:
Macquarie Worsteds Pty Ltd v. FC of T
   74 ATC 4121
   4 ATR 334

Keywords
Building depreciation
Depreciation
Depreciable plant & articles
Depreciation deduction
Plant installed ready for use
Plant attached to land
Depreciable plant

Business Line:  Office of Chief Tax Counsel

Date of publication:  30 October 2002

ISSN: 1445-2782