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Income Tax Act 2007

Timing and quantifying rules - Spreading of specific expenditure

EJ 10: Personal property lease payments

You could also call this:

“How to spread payments for leasing personal property over time”

This section of the law talks about how you handle payments for leasing personal property. It applies to leases that are for personal property assets, but not to finance leases, specified leases, or certain operating leases.

When you lease personal property, you spread the payments over the entire time of the lease. This means you don’t pay for everything at once, but instead, you pay a bit at a time throughout the lease period.

To figure out how much of the lease payment belongs to each year, you use a special calculation. You divide the part of the lease that falls in the year by the total length of the lease. Then, you multiply this by the total amount you’ll pay for the whole lease. This gives you the amount that belongs to that year.

In this calculation, ‘part of term’ means the portion of the lease that’s in the current year. ‘Term of the lease’ is defined in another part of the law called section YA 1. ‘Total of payments’ is all the money you’ll pay for the entire lease.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515118.

Topics:
Money and consumer rights > Taxes
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Part E Timing and quantifying rules
Spreading of specific expenditure

EJ 10Personal property lease payments

  1. This section applies to a lease that—

  2. is of a personal property lease asset; and
    1. is not a finance lease; and
      1. is not a specified lease; and
        1. is not an operating lease to which section EJ 10B applies.

          1. Personal property lease payments are treated as being paid for the term of the lease.

          2. The expenditure that the lessee incurs is allocated to income years using the formula—

            (part of term ÷ term of the lease) × total of payments.

            Where:

            • In the formula,—

            • part of term is the part of the term of the lease that falls within the income year:
              1. term of the lease has the meaning given in section YA 1 (Definitions):
                1. total of payments is the total amount of the personal property lease payments.

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                  Notes
                  • Section EJ 10(1)(d): inserted (with effect on 1 January 2019), on , by section 43(1) (and see section 43(3) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
                  • Section EJ 10 list of defined terms operating lease: inserted (with effect on 1 January 2019), on , by section 43(2) (and see section 43(3) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).