Queenstown Airport has lost a battle with the taxman over what is land and what is not.
The airport corporation (QAC) signalled to the Inland Revenue it intended to claim a rebate for a two-year project to build a safety run-off area.
It spent $8.5 million constructing an embankment out from the existing cliff over the Kawarau/Shotover River delta at the eastern end of the runway.
The ‘runway end safety area’ (RESA) provides a safety zone should an aircraft overshoot or undershoot the runway.
QAC hoped to claim back between $312,000 and $419,000 a year - claiming the RESA is ‘depreciable property’.
Not so fast, says the taxman.
That’s just ‘land’, the commissioner says, and therefore not ‘depreciable property’.
QAC took the case to the High Court - and lost.
Its lawyers say QAC made ‘land improvements’ that will degrade over time.
They argued the RESA could be classed as ‘airport runways’, or ‘hardstanding’, or ‘roads’, which are depreciable property.
But the commissioner’s lawyers argued against each definition saying that, unlike runway tarmac, the RESA wouldn’t decline in value through wear and tear.
Only components would need replacing over time, likely in 120 years, not the whole asset.
Justice Brendan Brown agreed. Brown says: “I agree with the commissioner’s submission that any damage to the east RESA is most likely to occur in only the rare event of an aircraft undershooting or overshooting the runway.
“Even then it is expected that only a small portion of the top layer of the embankment would be damaged - for example in the form of the ruts by an aircraft’s wheels.”
That could be repaired by grading or re-sowing grass, which is minor work, similar to regular maintenance.
“Consequently I conclude that QAC has not established that the east RESA and embankment are property that, in normal circumstances, might reasonably be expected to decline in value while they are available for use.”
The commissioner is entitled to costs.