Depreciation: Rental Property (Shower Screen)

Whether depreciation on a shower screen in the taxpayer's rental property is an allowable deduction under section 42-15 ( Income Tax Assessment Act 1997 (ITAA 1997)).

No. Depreciation is not allowable in respect of the shower screen under section 42-15 (ITAA 1997).

The taxpayer purchases a home unit as a rental property. The bathroom has a floor to ceiling glass shower screen with an outward opening door. The screen is fixed permanently to the floor and ceiling and cannot be removed easily without damage to it or the floor or ceiling.

Section 42-15 (ITAA 1997) allows depreciation for plant owned and used, or installed for use, in the production of assessable income.

The question of whether depreciation can be claimed for a shower screen is dependant on whether the item can be categorised as 'plant'.

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 Pty Ltd v FCT (1990) 21 ATR 513; 90 ATC 4590).

Generally, when determining whether or not an item can be categorised as 'plant', consideration is given to the nature and function of the item in question ('functional test').

The concept of 'setting' is a crucial aspect of the 'functional test' in that those items which are an 'integral part' of the property as a residential unit, or which form part of the 'fabric' of such property are not 'plant' ( Case 101 (1964) 11 CTBR (NS); Case 11/97 97 ATC 173; (1997) 35 ATR 1022).

In considering whether an item is 'plant' or 'setting' for letting purposes, the questions that need to be answered are: (i) whether the item forms part of the 'fabric' of the property (is an integral part of the structure of the premises), and whether it is able to perform a function independent of, and isolated from, the general function of the building to which it is attached; and (ii) whether the function performed by the thing is so related to the taxpayer's operations or special that it warrants it being held to be plant. That is, does the item perform a function sufficiently related to the leased residence? Relevant to this determination is the extent to which an item can be removed from its setting and put in another setting without damage to the item or the original setting.

Also relevant, is the extent to which an item is an 'integral' or 'essential' part of the 'complete' setting.

In this case, the shower screen is fixed permanently to the floor and ceiling and cannot be easily removed without damage to it or the floor or ceiling. It can therefore be considered to form part of the infrastructure of the bathroom which in turn is seen as part of the infrastructure of the unit as a complete lettable entity.

On this basis, the shower screen is not plant but is considered part of the 'setting; of the income earning activity and as such would not be depreciable in terms of 42-15 (ITAA 1997).