Can capital works on ‘plant’ be depreciated?
A taxpayer may also claim depreciation deductions (under Division 40 or Subdivision 328-D) for capital works that meet the definition of ‘plant’. Crucially, S.40-45(2) does not deny the use of these provisions as the building write-off rules (in Division 43) do not apply to an item of plant. Refer to S.43-70(2)(e).
An asset constitutes an item of plant if it either comes within the ordinary meaning of ‘plant’ or it meets the extended definition of ‘plant’ in S.45-40.
The ATO states that an item will come within the ordinary meaning of ‘plant’ where “the function performed by the item is so related to the particular taxpayer’s income-earning activities or special that it warrants the item being held to be plant”. Refer to paragraph 39 of TR 2007/9.
- As a general rule, an item that forms part of premises is not regarded as plant except in the rare case that the premises are themselves plant. Refer to paragraph 35 of TR 2007/9. This may be contrasted with an item that retains a separate identity, which is plant provided its characteristics are as described in paragraph 39 of TR 2007/9 above. Relevant factors to be considered in determining whether an item forms part of premises or retains a separate identity include:
- whether the item appears visually to retain a separate identity;
- the degree of permanence with which it has been attached;
- the incompleteness of the structure without it; and
- the extent to which it was intended to be permanent or whether it was likely to be replaced within a relatively short