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Income Tax Act 2007

Deductions - Terminating provisions

DZ 14: Deductions under specified leases

You could also call this:

“Rules for claiming deductions on special property leases”

When you lease a personal property item under a special type of lease called a specified lease, there are some rules about what you can and can’t claim as a deduction. These rules apply to both the person who owns the item (the lessor) and the person who is leasing it (the lessee).

If you’re the owner of the item, you can’t claim a deduction for any loss in value (depreciation) of the item during the time it’s being leased under a specified lease.

If you’re the person leasing the item, you can only claim a deduction for your lease payments if two things are true. First, the payment must be something you could normally claim as a deduction under section BD 2. Second, the amount you’re claiming can’t be more than what’s calculated using a special formula in section FZ 3(2)(a).

These rules are very strict and they override the normal rules about what you can claim as a deduction. You can find more information about specified leases in sections FZ 2 and FZ 4 of the law.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1514246.

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Part D Deductions
Terminating provisions

DZ 14Deductions under specified leases

  1. This section applies for the purposes of sections FZ 2 and FZ 4 (which relate to specified leases).

  2. In an income year in which a lessor leases a personal property lease asset to a lessee under a specified lease, the lessor is denied a deduction for an amount of depreciation loss for the asset.

  3. A lessee under a specified lease is denied a deduction for expenditure incurred by them under the lease except to the extent to which the expenditure—

  4. would be allowed as a deduction to the lessee under section BD 2 (Deductions); and
    1. is no more than the sum of the amounts calculated under section FZ 3(2)(a) (Income of lessor under specified lease) for the initial period, if any, and each instalment period that ends in the income year.

      1. This section overrides the general permission.

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