ATO Interpretative Decision

ATO ID 2002/752

Income Tax

Plant - photovoltaic solar system
FOI status: may be released
Status of this decision: Decision Current
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If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.


Is a photovoltaic solar system (the system) plant within the meaning of that term in section 45-40 of the Income Tax Assessment Act 1997 (ITAA 1997) with the result that capital expenditure on the system is excluded, by paragraph 43-70(2)(e) of the ITAA 1997, from the meaning of construction expenditure for the purposes of Division 43 of the ITAA 1997?


Yes. A photovoltaic solar system is plant within the meaning of that term in section 45-40 of the ITAA 1997 and is, therefore, excluded from construction expenditure by paragraph 43-70(2)(e) of the ITAA 1997.


A photovoltaic solar system comprises modules of photovoltaic cells, a roof mounting frame, various fixings, electrical wiring and conduits and inverters.

The photovoltaic cells absorb solar energy and convert it to 'direct current' (DC) which is then conveyed to the inverters to change the DC power into useable 'alternating current' (AC) power.

The photovoltaic cell modules are generally affixed to the roof of a property with a mounting frame, while the inverters may be installed at some other points within the property. All of the components are connected and interface by means of electrical wiring.

Reasons for Decision

Division 43 of the ITAA 1997 allows a deduction for certain capital expenditure on capital works that are buildings, structural improvements or improvements to a building or structural improvements that are owned and used by the taxpayer for the purpose of producing assessable income (section 43-140 of the ITAA 1997). Expenditure on plant, however, is specifically excluded from construction expenditure that might otherwise qualify for deduction (paragraph 43-70(2)(e) of the ITAA 1997).

The meaning of plant is contained in section 45-40 of the ITAA 1997 and includes machinery. Extending the ordinary meaning of plant to include machinery essentially means that machinery will always be plant for income tax purposes, irrespective of whether or not it is annexed or affixed to land or buildings (see Carpentaria Transport Pty Ltd v. FC of T 20 ALD 769; 90 ATC 4590; 21 ATR 513).

A photovoltaic solar system is considered to be machinery because of the multiple mechanical functions it performs, including receiving, conveying and converting the solar energy into useable power. It is also considered that the integrated and interdependent components and functions of the system collectively form the machine which is, therefore, plant.

Date of decision:  24 April 2002

Year of income:  Year ending 30 June 2002

Legislative References:
Income Tax Assessment Act 1997
   Division 43
   section 43-10
   paragraph 43-70(2)(e)
   section 45-40

Case References:
Carpentaria Transport Pty Ltd v. Federal Commissioner of Taxation
    (1990) 20 ALD 769
   (1990) 21 ATR 513
   90 ATC 4590

Related ATO Interpretative Decisions
ATO ID 2002/751

Depreciable Plant
Plant attached to land
Unit of depreciable plant

Siebel/TDMS Reference Number:  DW363285, 1-E1MRJSO

Business Line:  Private Groups and High Wealth Individuals

Date of publication:  31 July 2002
Date reviewed:  27 March 2018

ISSN: 1445-2782