The owner claimed it was for repairs, but court said glazing and seismic bill was capital
A property company lost its bid to deduct nearly $2 million on building works after the High Court ruled the spending was capital, not repairs.
The court gave its decision in Podium Investments Ltd v Commissioner of Inland Revenue [2026] NZHC 1920, upholding an earlier ruling by the Taxation and Charities Review Authority against Podium Investments Limited (Podium).
Podium sought deductions of $460,046 for seismic strengthening and $1,517,926 for ground-floor glazing on a mixed-use commercial building in central Hamilton. Under s. DA 2(1) of the Income Tax Act 2007, spending that is capital in nature – money that creates or improves an asset rather than maintaining it – cannot be deducted for income tax. Podium argued that the disputed items were repairs and maintenance and could be separated from the wider building project.
The court rejected that argument. It found that the seismic strengthening was an "integral and inseparable" part of an overall capital project that turned what it described as a "sub-standard, seismically non-compliant building" into a compliant office building. The court said that the building could not have been renovated into lettable office space without the strengthening, so the work drew its character from the project.
Assessing the seismic work on its own, the court held that it still amounted to capital expenditure. It found that the limited physical extent of the work did not matter, because the work changed the character of the building from an unsafe, sub-standard structure into one that met a far higher seismic standard.
The court also considered a defective beam that Podium said should be treated separately. The judge accepted that the construction defect was not caused by wear and tear, and that remedying it improved the asset rather than restoring it. The court noted that the cost of putting an asset into a state suitable for its intended use is a cost of acquisition, not maintenance.
On the glass facade, the court found that the work went beyond replacing scratched glass or meeting new safety standards. It said that removing solid walls, extending the glazing, and enclosing part of the building significantly altered the building's character.
The court concluded that Podium failed to prove that the expenditure was for repairs and maintenance and dismissed the appeal. It indicated that the Commissioner of Inland Revenue appeared entitled to costs on a standard scale, to be agreed by the parties or decided on the papers.
