CONTINUEThis site uses cookies. By continuing to browse this site you are agreeing to our use of cookies. Find out more.
  1. Front Page
  2. News By Topic
  3. NZ Court Rules Turbines Are Buildings For Tax Purposes

NZ Court Rules Turbines Are Buildings For Tax Purposes

by Mary Swire, Tax-News.com, Hong Kong

30 August 2019


New Zealand's tax agency has drawn attention to a recent tax ruling in Mercury NZ Ltd v. Inland Revenue ([2019] NZHC 1524), noting it is only the second time New Zealand courts have analyzed the modern depreciation regime, introduced in 1993.

The case was heard in the High Court at Auckland in June and centered on whether the turbines at Nga Awa Purua and Kawerau are buildings or not.

IRD had said the turbines were buildings and therefore subject to a depreciation rate of zero percent, while the power company said that they were part of the plant, specifically the gantry crane, and therefore the 9.6 percent rate should apply.

On July 1, 2019, the Court ruled in favor of the IRD, finding that Mercury's geothermal turbine halls at Nga Awa Purua and Kawerau were buildings, and accordingly had a depreciation rate of 0 percent.

Responding to the judgment in an August 26, 2019, statement, the tax agency said: "It was an important decision for the department as it was the first case to consider the meaning of 'building' in the Income Tax Act 2007, an area of particular significance after the 2010 Budget reduced the depreciation rate for buildings to zero percent."

The IRD highlighted the following wording from the July 1, 2019, ruling: "This is not one of those relatively rare cases where a structure is part of the apparatus for carrying on a business, or so integral to the production process itself, that it should be properly classified as 'plant'"

The IRD said the judgment is consistent with the Commissioner's published interpretation statement on the meaning of "building." The ruling is also said to have provided guidance by confirming the questions to be asked and the order of those questions when applying the depreciation provisions.

In the judgment, Justice Hinton said: "The financial implications flowing from the different approaches to depreciation of the powerstation/turbine hall are considerable. The additional depreciation claimable by Mercury for the 2012–2015 years alone … is estimated at NZD7.4m."

Mercury did not appeal the decision.

TAGS: court | tax | business | New Zealand | Tax

To see today's news, click here.

 















Tax-News Reviews

Cyprus Review

A review and forecast of Cyprus's international business, legal and investment climate.

Visit Cyprus Review »

Malta Review

A review and forecast of Malta's international business, legal and investment climate.

Visit Malta Review »

Jersey Review

A review and forecast of Jersey's international business, legal and investment climate.

Visit Jersey Review »

Budget Review

A review of the latest budget news and government financial statements from around the world.

Visit Budget Review »



Stay Updated

Please enter your email address to join the Tax-News.com mailing list. View previous newsletters.

By subscribing to our newsletter service, you agree to our Terms and Conditions and Privacy Policy.


To manage your mailing list preferences, please click here »