Monday 27 February 2017 11:13 AM
Queenstown Airport loses second bid to keep depreciation tax deductions in Court of Appeal
By Sophie Boot
Feb. 27 (BusinessDesk) - Queenstown Airport has lost a second legal dispute with the Inland Revenue Department over its
runway end safety area (RESA), with the Court of Appeal dismissing its claim for depreciation tax deductions.
The RESA is an area beyond a runway which is there as a safety zone if a plane undershoots or overruns the runway
surface. At the eastern end of Queenstown Airport's runway, there was a steep drop off where the Shotover and Kawarau
Rivers merge, so Queenstown Airport built an $8.7 million embankment from the existing cliff for the RESA.
The airport argued it should be able to claim depreciation on the RESA at the eastern end of its international runway
for the 2012 and 2013 tax years, and in the future. It wanted to claim between $312,000 and $419,000 per year in
depreciation, dependent on whether the RESA qualified as runway or as hardstanding or road. IRD said the area was land,
and therefore not depreciable.
In July 2016, High Court Justice Brendan Brown ruled that the IRD was correct in refusing the airport's claim for tax
deductions, and awarded costs for two counsel to the IRD. The judge ruled that the eastern RESA was neither an airport
runway nor hardstanding under the Income Tax Act, a finding that the appeal court upheld in its judgment delivered on on
Friday. However, the appeal bench said it was possible that in different circumstances, such as Wellington Airport, the
RESA could be considered runway for depreciation purposes.
Queenstown Airport's lawyer David Goddard QC argued that the High Court had used a narrow construction of the Income Tax
Act and had lost sight of the overarching question of whether the eastern RESA was depreciable property. Justice Brown
found that it was not property that might be expected to decline in value while being used in normal circumstances,
which the airport disputed. The Court of Appeal bench said there was no evidence to suggest any work would need to be
done on the majority of the structure, and any amount properly deductible as depreciation would be "reduced to a very
low level accordingly." The court awarded further costs for two counsel to the IRD.
The airport recognised the full deferred tax liability for the RESA of $2.64 million in its 2016 accounts.
(BusinessDesk)
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