| No Depreciation for Rental Property Items |
| The Administrative Appeals Tribunal (AAT) recently disallowed a taxpayer deductions for depreciation claimed on various items of property connected with the taxpayer?s rental property because the items did not qualify as ?plant?. |
In particular, depreciation was denied on electrical cables, gas and telephone lines, kitchen fittings, the bathroom mirror and glass shower screen, built-in wardrobe shelving, the security system, the common swimming pool and spa, and vehicle control equipment.
In reaching its decision, the AAT considered whether the premises would be incomplete and unable to be rented if the relevant item of property was not there.
The AAT held that each item of property, except for the common pool and spa, formed part of the structure or setting of the premises and without it, the property would be incomplete and unable to be rented.
With respect to the common pool and spa, the AAT held that it served a passive role in the process of earning income from the premises and accordingly, was held not to be ?plant?.
This decision is contrary to common views and will be hotly debated by quantity surveyors who have been regarded as the experts. When any doubt exists, the report of a quantity surveyor is most valuable.
This decision is likely to affect many of our clients and future tax strategies, so expect a lot more news.
TIP: Whether or not an item of property is plant is a question of fact. It is necessary to consider each item on a case-by-case basis as different circumstances can result in different outcomes.
8th-September-2003 |
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