ATO Interpretative Decision

ATO ID 2002/626 (Withdrawn)

Income Tax

Renovations to a building on a farming property
FOI status: may be released

This ATO ID is withdrawn. Guidance on this issue can be found in Taxation Ruling TR 97/25

This document has changed over time. View its history.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.

Issue

Can capital expenditure on structural improvements to a building on a farming property provided to employees qualify for a deduction for capital works under Division 43 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

No, the expenditure on structural improvements for a building on a farming property provided to an employee would be capital expenditure on plant as defined in section 45-40 of the ITAA 1997 and would, therefore, be excluded from a deduction under Division 43 of the ITAA 1997.

Facts

The taxpayer owns a farming property which has a disused old house that is being renovated for use as accommodation for employees engaged in the farming activities.

Reasons for Decision

Section 43-10 of the ITAA 1997 provides a deduction for certain 'construction expenditure' incurred in respect of the construction of capital works such as buildings or structural improvements, including any extensions, alterations, or improvements to buildings or structural improvements.

Subsection 43-70(1) of the ITAA 1997 defines 'construction expenditure' as capital expenditure incurred in respect of the construction of capital works. However, paragraph 43-70(2)(e) of the ITAA 1997 specifically excludes expenditure on 'plant' from being construction expenditure. As a result no deduction is allowed for such expenditure under Division 43.

Paragraph 45-40(1)(c) of the ITAA 1997 extends the meaning of plant to include structural improvements on land used for agricultural or pastoral operations other than those used for domestic or residential purposes. However Paragraph 45-40(1)(f) of the ITAA 1997 specifically includes those structural improvements as plant even though they are used for domestic or residential purposes if they are provided for employees engaged in or in connection with the agricultural or pastoral activities.

As the structural improvements, including the building, are for use as accommodation for employees engaged in the agricultural or pastoral operations they are plant within the definition. The expenditure on the renovations is, therefore, expenditure on plant and is excluded from deduction under Division 43 of the ITAA 1997.

Amendment History

Date of Amendment	Part	Comment
27 February 2015	Related ATO Inerpretative Decisions	Included related ATO ID.

Date of decision: 5 April 2002

Legislative References:
Income Tax Assessment Act 1997
   section 43-10
   subsection 43-70
   paragraph 43-70(2)(e)
   paragraph 45-40(1)(c)
   paragraph 45-40(1)(f)

Related Public Rulings (including Determinations)
Taxation Ruling TR 97/25

Related ATO Interpretative Decisions
ATO ID 2010/41

Keywords
Building alteration & renovation expenses
Construction expenditure area
Depreciable plant
Provided for accommodation of employees

Business Line: Small Business/Individual Taxpayers

Date of publication: 31 May 2002

ISSN: 1445-2782

history

	Date:	Version:
	5 April 2002	Original statement
	27 February 2015	Updated statement
You are here	5 July 2017	Archived

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