Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Income - Income from holding property (excluding equity)

CC 12: Lessor acquiring lease asset on expiry of term of lease

You could also call this:

“Owner's income from reselling or re-leasing an item after a finance lease ends”

When you rent something valuable like a car or a machine, the agreement is called a finance lease. This law talks about what happens when the lease ends. If you’re the owner of the item, you might sell it or rent it to someone else after the first lease is over.

If you do this and get more money than what was agreed at the end of the first lease, you need to know two things:

Firstly, this rule applies when you sell, give, or rent the item to another person under a new finance lease.

Secondly, if you get more money than what was agreed at the end of the first lease, and you don’t give this extra money to the person who was renting from you before, you have to count this extra money as income. You need to include this income in your taxes for the year when the first lease ended.

Remember, there are other parts of the law that explain how to figure out the amount of money agreed at the end of the lease. You can find this information in section FA 10(2).

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1512533.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
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CC 11: Lessee acquiring lease asset on expiry of term of lease, or

“Paying tax when you sell something you bought after leasing it”

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CC 13: Amounts paid in income years after hire purchase agreement ends, or

“Handling payments made after a hire purchase agreement has ended”

Part C Income
Income from holding property (excluding equity)

CC 12Lessor acquiring lease asset on expiry of term of lease

  1. This section applies for the purposes of section FA 10(3) (Treatment when lease ends: lessor acquiring asset), when, after the term of a finance lease,—

  2. a lessor under the lease sells, assigns, or leases the personal property lease asset to another person under another finance lease; and
    1. the consideration is more than the amount determined under section FA 10(2).

      1. To the extent to which the difference between the amount determined under section FA 10(2) and the consideration is not paid by the lessor to the lessee under the original finance lease, the amount is income of the lessor in the income year in which the original lease term ends.

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