By Phil Barlow – 24 October 2012

Following an initial public consultation period, there has now been a few changes to the proposed legislation around the taxation of lease inducement payments offered by commercial landlords. One of the major changes being the date the new rules will take effect.

The following alterations have been made to the proposed legislation:

  • The legislation once enacted will no longer apply retrospectively from 26 July 2012; instead the new legislation will apply to lease inducement payments on commercial leases entered into on or after 1 April 2013.
  • The proposed changes will override the capital limitation, thereby making lease inducement payments tax deductible.
  • Income and expenditure that arises from the lease inducement payments will be spread over the term of the lease.

In addition, the proposed legislation will target other lease-related payments which are subject to unequal tax treatment, such as lease surrender payments (currently lease surrender payments paid by tenants to exit a lease early are taxable to the landlord, but non-deductible to the tenant). Under the proposed legislation, lease surrender payments made on or after 1 April 2013 will be treated as tax deductible to the payer and taxable income to the recipient.

If you have any questions regarding these proposed changes, please contact your Hayes Knight adviser or our Tax Team:

Phil Barlow

Tax Director
T + 64 9 414 5444

Shelley-ann BrinkleySenior Manager – Tax Consulting
T +64 9 414 5444