ATO Interpretative Decision
ATO ID 2002/58
Income Tax
Agent and marketing expenses incurred on Assignment of a Crown LeaseFOI status: may be released
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is a taxpayer entitled to a deduction under section 25-20 of the Income Tax Assessment Act 1997 (ITAA 1997) for agent and marketing expenses incurred on the assignment of a crown lease where the property had been used for income producing purposes?
Decision
No. A taxpayer is not entitled to a deduction under section 25-20 of the ITAA 1997 for agent and marketing expenses as they were not incurred in preparing, registering or stamping the lease.
Facts
The taxpayer acquired a leasehold property.
The property was held under a crown lease with a term of 99 years.
The taxpayer rented out the property for the purpose of producing assessable income.
The taxpayer has now disposed of the leasehold property by way of assignment of the lease to a third party.
The taxpayer incurred agent and marketing expenses in disposing of the lease.
Reasons for Decision
Subsection 25-20(1) of the ITAA 1997 provides that a deduction is allowable for the costs of preparing , registering or stamping an assignment or surrender of a lease of property where the property has been used solely for the purpose of producing assessable income.
Although the term 'lease' is not defined in the ITAA 1997 the general law requirement is that a lease must be granted for a definite period. A crown lease with a term of 99 years is a 'lease' for the purposes of section 25-20 of the ITAA 1997.
The expenditure incurred on agent and marketing fees is incurred in order to obtain a new lessee for the property. They were incurred prior to the preparation of the new lease. These expenses were not incurred in relation to the preparation, registration and stamping of the lease and therefore are not deductible under section 25-20 of the ITAA 1997.
Date of decision: 31 August 2001Year of income: Year ended 30 June 2001
Legislative References:
Income Tax Assessment Act 1997
section 25-20
subsection 25-20(1)
ATO ID 2001/614 ATO ID 2002/59
Keywords
Assignment of leases
Crown leases
Disposal of assets
Marketing expenses
Termination of lease
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 31 August 2001 | Original statement |
| 6 June 2008 | Archived |