Interpretation Statement IS 10/011 , sets the Commissioner's view on determining whether an item in a residential rental property is a separate item of depreciable property, or is part of the building.
The approach is a three-step test.
Step 1: Determine whether the item is in some way attached or connected to the building. If it is completely unattached, it will not form part of the building (plugged or wired items are not considered attached). If the item is attached, step 2
Step 2: Determine whether the item is an integral part of the residential rental property. Is the rental property considered incomplete or unable to function without the item. Integral items are part of the building. If the item is not integral, step 3
Step 3: Determine whether the item is part of the fabric of the building, considering the nature and degree of attachment, difficulty, and damage in removal. If the item is part of the fabric of the building, then it is part of the building.
Examples in IS 10/01
Part of the building
- Plumbing and piping - Attached, Integral
- Electrical Wiring - Attached, Integral
- Internal Walls - Attached, Integral
- Doors(Internal and external doors) - Attached, Integral
- Garage Doors(garage part of the residential building) - Attached, Integral
- Fitted Furniture(wardrobes and cupboards built into the wall) - Attached, Not integral but forms part of the fabric
- Kitchen cupboards - Attached, Integral
- Linoleum - Attached, Not integral but forms part of the fabric
- Tiles - Attached, Not integral but forms part of the fabric
- Heating/Air conditioning systems - systems that are built into the structure of the building are part of the building
Separate depreciable property
- Bathroom fittings and furniture - This could be argued as a separate asset based on the number and degree of attachment.
- Wardrobes and cupboards not built into the wall - Not attached
- Carpet - Attached, not integral, not considered part of the fabric
- Blinds - Attached, not integral, not considered part of the fabric
- Water heaters and hot-water cylinder - Not attached
- Heating/Air conditioning systems - When the attachment is not significant