ATO Interpretative Decision
ATO ID 2002/626 (Withdrawn)
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||This ATO ID is withdrawn.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.
Status of this decision: Decision withdrawn 5 July 2017.
|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.|
This ATOID provides you with the following level of protection:
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.
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)?
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.
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.
|Date of Amendment
|27 February 2015
||Related ATO Inerpretative Decisions
||Included related ATO ID.
Date of decision: 5 April 2002
Income Tax Assessment Act 1997
Related Public Rulings (including Determinations)
Taxation Ruling TR 97/25
Related ATO Interpretative Decisions
ATO ID 2010/41
Building alteration & renovation expenses
Construction expenditure area
Provided for accommodation of employees
Siebel/TDMS Reference Number: DW397447; 1-6ATS42Z; 1-BR3RLQW
Business Line: Small Business/Individual Taxpayers
Date of publication: 31 May 2002
|ATO Interpretative Decisions history