8 - Leases

Question 1

what is a lease premium?

Answer 1

a non-refundable consideration paid in addition to/instead of rent, by lessee to lessor for right to use certain assets

Question 2

what are the tax consequences for the lease premium for the lessee?

Answer 2

they get a specific deduction for the lease premium

Question 3

what are the tax consequences for the lease premium for the lessor?

Answer 3

special inclusion

Question 4

what is a leasehold improvement?

Answer 4

an improvement made by a lessee to the leased property to customize it to the needs of the lessee

Question 5

impact of leasehold improvement on lessor?

Answer 5

value is special inclusion into GI at lease value, or at reasonable value if no value stipulated in lease

Question 6

impact of leasehold improvement on lessee?

Answer 6

• gets specific deduction
• gets cap allowances as they will be deemed the owner per s12N

Question 7

what relief will be provided for lessor?

Answer 7

if they will only benefit from the improvement at the end of the lease, they can get a specific deduction determined by the Commissioner

Question 8

what relief will be provided for lessee?

Answer 8

if they have no obligation/exceed the amount stipulated in the lease contract, they can claim a 5% s13 allowance for the excess portion