Depreciation of commercial swimming pool

Can the taxpayer, the owner-operator of a commercial swimming pool complex, deduct an amount for depreciation of the in-ground, concrete swimming pool in the complex under section 42-15 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Yes, the taxpayer can deduct an amount for depreciation of the swimming pool under section 42-15 (ITAA 1997).

The taxpayer owns and operates a commercial swimming pool complex. The taxpayer's swimming pool complex is open to the public for their use. The swimming pool is mainly used by schools, swimming clubs, private swimming tutors and their students.

The taxpayer charges a fee for admission to the complex and for the use of the facilities, including the swimming pool. The taxpayer derives income from the admission charges.

Under section 42-15 (ITAA 1997), the owner or quasi-owner of a unit of plant may deduct an amount for depreciation of that plant in an income year if the plant is used for the purpose of producing assessable income, or is installed ready for use for that purpose and is held in reserve.

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 v. FC of T (1990) 21 ATR 513; 90 ATC 4590.

In determining whether an item is plant, it is necessary to establish whether the item may be regarded as apparatus used by the taxpayer in carrying on a business. It is also necessary to determine whether the function of the item is such that the item may be regarded as plant and not just as a convenient setting for the operation of the business: Wangaratta Woollen Mills Ltd v. FC of T (1969) 119 CLR 1.

In this case, the taxpayer uses the pool for income producing purposes. The pool is readily identifiable as part of the apparatus used by the taxpayer in carrying on his or her business and it is integral to the taxpayer's income earning activities. The pool is clearly more than a mere setting for the business. Accordingly, the pool qualifies as 'plant' for the purposes of the inclusive definition in section 42-18 (ITAA 1997) and the taxpayer can deduct an amount for depreciation of the pool.

This conclusion is consistent with the decision in the UK case Cooke (Inspector of Taxes) v. Beach Station Caravans Ltd [1974] 3 All ER 159, where it was concluded that swimming pools and their attendant apparatus that are constructed for the use of customers of a caravan site are plant. [Note 1: Taxation Determination TD 92/190 states that a swimming pool used occasionally by a primary producer for fire fighting purposes does not qualify as plant used for income producing purposes. However, the facts considered in Taxation Determination TD 92/190 may be distinguished from those considered in this case. Accordingly, the conclusion reached in Taxation Determination TD 92/190 is not relevant here. Note 2: the Commissioner does not consider that the decision in Case T102 86 ATC 1178; Case 11 (1986) 18 ATR 3052 should be applied to deny depreciation for a swimming pool used by a taxpayer as part of the apparatus in carrying on their business. Case T102 86 ATC 1178; Case 11 (1986) 18 ATR 3052 should be confined to its facts.]