ATO Interpretative Decision

ATO ID 2001/93 (Withdrawn)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• 'This ATO ID is withdrawn from the database because it contains a view in respect of a provision of the Income Tax Assessment Act 1997 that was repealed with effect from 1 July 2001.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

Whether depreciation on a shower screen in the taxpayer's rental property is an allowable deduction under section 42-15 (Income Tax Assessment Act 1997 (ITAA 1997)).

Decision

No. Depreciation is not allowable in respect of the shower screen under section 42-15 (ITAA 1997).

Facts

The taxpayer purchases a home unit as a rental property. The bathroom has a floor to ceiling glass shower screen with an outward opening door. The screen is fixed permanently to the floor and ceiling and cannot be removed easily without damage to it or the floor or ceiling.

Reasons For Decision

Section 42-15 (ITAA 1997) allows depreciation for plant owned and used, or installed for use, in the production of assessable income.

The question of whether depreciation can be claimed for a shower screen is dependant on whether the item can be categorised as 'plant'.

Whether an item is 'plant' is not primarily a question of law, though it involves an understanding of the law, but the question is primarily one of fact and degree (Carpentaria Transport Pty Ltd v FCT (1990) 21 ATR 513; 90 ATC 4590).

Generally, when determining whether or not an item can be categorised as 'plant', consideration is given to the nature and function of the item in question ('functional test').

The concept of 'setting' is a crucial aspect of the 'functional test' in that those items which are an 'integral part' of the property as a residential unit, or which form part of the 'fabric' of such property are not 'plant' (Case 101 (1964) 11 CTBR (NS); Case 11/97 97 ATC 173; (1997) 35 ATR 1022).

In considering whether an item is 'plant' or 'setting' for letting purposes, the questions that need to be answered are:

(i)

whether the item forms part of the 'fabric' of the property (is an integral part of the structure of the premises), and whether it is able to perform a function independent of, and isolated from, the general function of the building to which it is attached; and

(ii)

whether the function performed by the thing is so related to the taxpayer's operations or special that it warrants it being held to be plant. That is, does the item perform a function sufficiently related to the leased residence?

Also relevant, is the extent to which an item is an 'integral' or 'essential' part of the 'complete' setting.

In this case, the shower screen is fixed permanently to the floor and ceiling and cannot be easily removed without damage to it or the floor or ceiling. It can therefore be considered to form part of the infrastructure of the bathroom which in turn is seen as part of the infrastructure of the unit as a complete lettable entity.

On this basis, the shower screen is not plant but is considered part of the 'setting; of the income earning activity and as such would not be depreciable in terms of 42-15 (ITAA 1997).

Legislative References:
Income Tax Assessment Act 1997
   Section 42-15

Case References:
Carpentaria Transport Pty Ltd v FCT
   (1990) 21 ATR 513
   90 ATC 4590

Keywords
Deductions and expenses
Depreciation
Depreciable plant and articles
Rental property
Building write-off

Business Line:  Small Business/Individual Taxpayers

Date of publication:  3 July 2001

ISSN: 1445-2782