Port of Portland Pty Ltd v Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Administrative Appeals Tribunal (VT2006/349-352)
Judgment date: 23 December 2008
Date published: 3 August 2009
Decision outcome: Partially adverse

Summary of decision:
Outlines the Tax Office's response to this case which concerned whether two man-made breakwaters were "plant" for the purpose of the taxpayer being entitled to claim depreciation or decline in value deductions in respect of the breakwaters

Overview of facts:
• The taxpayer is a privatised port authority, who derives income from providing port facilities for shipping vessels at the Port of Portland. It also derives rent from the occupation by a fertilizer factory of reclaimed land adjoining the Port. • The Portland harbour is formed by two man-made breakwaters owned by the taxpayer; the Main Breakwater and the Lee Breakwater ("the Breakwaters"). The southern part of the Main Breakwater, the Pivot Groyne, runs adjacent to, and protects reclaimed land occupied by the fertilizer factory. • In August 2005, the taxpayer notified the Commissioner that it had claimed depreciation or decline in value deductions for its Breakwaters and the Groyne for each of the income years ended 30 June 2001 to 30 June 2004. • The Commissioner disallowed the deductions for the depreciation or decline in value of the Breakwaters and the Groyne as the Commissioner was not satisfied that they constituted plant. | • The taxpayer is a privatised port authority, who derives income from providing port facilities for shipping vessels at the Port of Portland. It also derives rent from the occupation by a fertilizer factory of reclaimed land adjoining the Port. • The Portland harbour is formed by two man-made breakwaters owned by the taxpayer; the Main Breakwater and the Lee Breakwater ("the Breakwaters"). The southern part of the Main Breakwater, the Pivot Groyne, runs adjacent to, and protects reclaimed land occupied by the fertilizer factory. • In August 2005, the taxpayer notified the Commissioner that it had claimed depreciation or decline in value deductions for its Breakwaters and the Groyne for each of the income years ended 30 June 2001 to 30 June 2004. • The Commissioner disallowed the deductions for the depreciation or decline in value of the Breakwaters and the Groyne as the Commissioner was not satisfied that they constituted plant. | Issues decided by the tribunal | • The heart of the business of the taxpayer is the provision of the port facilities. An inseparable part of those activities is the provision of a safe harbour, in which the Breakwaters play an important role (paragraphs 19, 20 and 29). • The Breakwaters are plant, as they are integral to, and form a significant part of, the means by which the taxpayer carries on its business, rather than merely providing a setting in which the taxpayer's business is carried on (paragraphs 1, 22, 23, 29 and 30). • The Tribunal was not satisfied that the function of the Groyne is sufficiently associated with the taxpayer's port operations for it to be classified as plant (paragraph 32). | • The heart of the business of the taxpayer is the provision of the port facilities. An inseparable part of those activities is the provision of a safe harbour, in which the Breakwaters play an important role (paragraphs 19, 20 and 29). • The Breakwaters are plant, as they are integral to, and form a significant part of, the means by which the taxpayer carries on its business, rather than merely providing a setting in which the taxpayer's business is carried on (paragraphs 1, 22, 23, 29 and 30). • The Tribunal was not satisfied that the function of the Groyne is sufficiently associated with the taxpayer's port operations for it to be classified as plant (paragraph 32).

Issues decided:
• The heart of the business of the taxpayer is the provision of the port facilities. An inseparable part of those activities is the provision of a safe harbour, in which the Breakwaters play an important role (paragraphs 19, 20 and 29). • The Breakwaters are plant, as they are integral to, and form a significant part of, the means by which the taxpayer carries on its business, rather than merely providing a setting in which the taxpayer's business is carried on (paragraphs 1, 22, 23, 29 and 30). • The Tribunal was not satisfied that the function of the Groyne is sufficiently associated with the taxpayer's port operations for it to be classified as plant (paragraph 32). • The heart of the business of the taxpayer is the provision of the port facilities. An inseparable part of those activities is the provision of a safe harbour, in which the Breakwaters play an important role (paragraphs 19, 20 and 29). • The Breakwaters are plant, as they are integral to, and form a significant part of, the means by which the taxpayer carries on its business, rather than merely providing a setting in which the taxpayer's business is carried on (paragraphs 1, 22, 23, 29 and 30). • The Tribunal was not satisfied that the function of the Groyne is sufficiently associated with the taxpayer's port operations for it to be classified as plant (paragraph 32).

ATO view of decision:
The decision applies established principles of law about what is plant to the particular facts of this case. The decision was open to the Tribunal on the evidence as presented.

Administrative treatment:
Implications on current Public Rulings & Determinations | None

Legislative references: Income Tax Assessment Act 1997 (Cth) (ITAA 1997) former section 42-15 former section 42-18 Division 40 (as amended) Income Tax (Transitional Provisions) Act 1997 (Cth) (Transition Act) 40-10 Portland Harbour Trust Act 1949 (Vic)
Case references: Cooke (Inspector of Taxes) v Beach Station Caravans Ltd [1974] 1 WLR 1398 [1974] 3 All ER 159 Federal Commissioner of Taxation v Broken Hill Pty Co Ltd (1969) 120 CLR 240 at 270 1 ATR 40 69 ATC 4028 Imperial Chemical Industries of Australia and New Zealand Ltd v Federal Commissioner of Taxation [1970] HCA 9 (1970) 120 CLR 396 70 ATC 4024 1 ATR 450 Inland Revenue Commissioners v Barclay, Curle & Co Ltd [1969] 1 WLR 675 [1969] 1 All ER 732 Wangaratta Woollen Mills Ltd v Federal Commissioner of Taxation [1969] HCA 39 (1969) 119 CLR 1 69 ATC 4095 1 ATR 329 Yarmouth v France (1887) 19 QB 647
Subject references: Depreciation of plant Decline in value Breakwaters Business