| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1051255213621
Date of advice: 21 July 2017
Ruling
Subject: Deduction - Lease Expenses
Questions and Answers
Are you entitled to a deduction under section 25-20 of the Income Tax Assessment Act 1997 (ITAA 1997) for the stamp duty incurred in the assignment of a lease where the property is used for income producing purposes?
Yes
This ruling applies for the following periods
1 July 2016 to 30 June 2017
The scheme commences on
1 July 2016
Relevant facts and circumstances
The property is a residential property
The 'Lessor' of the property is Entity A.
The 'Assignors' is Entity B.
You are the 'Assignees'.
The original leases between the 'Lessor' and 'Assignors' has a terminating date of 20XX.
A 'Deed of Consent to Assignment of Leases' document was executed in 201X between the 'Lessor', 'Assignors' and 'Assignees'.
Stamp duty of $X was paid by the Assignees in relation to the assignment of the lease.
One of the requirements of the assignment was that the Assignors were allowed to live in the property for a period of two years.
A 'Residential Tenancy Agreement' was entered into between the 'Assignees' (Landlords) and 'Assignors' (Tenants) for the two year period. This agreement is at market rates.
The Assignees are undecided on what to do at the end of the Tenancy Agreement; they will either extend the tenancy or move into the property themselves.
Apart from the assignment of the lease there is no other relationship between the parties.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 25-20(1)
Income Tax Assessment Act 1997 Subsection 25-20(2)
Reasons for decision
Subsection 25-20(1) of the ITAA 1997 provides that a deduction is allowable for the cost of preparing, registering or stamping a lease of property or an assignment or surrender of a lease of property, where the property has been or will be used solely for the purposes of producing assessable income.
Further, under subsection 25-20(2) of the ITAA 1997, a portion of the lease expenditure is an allowable deduction if the leasehold property is or was used partly for income producing purposes in the income year.
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.
As the property is used for income producing purposes you are entitled to a deduction for the stamp duty incurred with regard to the assignment of the lease.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
