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Income Tax Act 2007

Recharacterisation of certain transactions - Transfers of relationship property

FB 19: Leased assets

You could also call this:

"Tax rules for things you lease, like cars or machines"

Illustration for Income Tax Act 2007

You lease something like a car or machine. You get a tax deduction for the lease payments. If you buy the leased item, or someone related to you buys it, and then sells it for a profit, you may have to pay tax on that profit. You might have to pay tax if you sell the item for more than you paid for it. The tax you pay is the smaller of two amounts: the profit you made, or the total tax deductions you got for the lease payments. The amount you paid for the item is called the transfer amount. This amount is usually the item's value when you bought it, or what it cost if you bought it that year.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516365.

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Part FRecharacterisation of certain transactions
Transfers of relationship property

FB 19Leased assets

  1. This section applies when—

  2. a person leases, rents, or hires plant, machinery, or other equipment, including a motor vehicle or a temporary building; and
    1. they are allowed a deduction in an income year for an amount paid under the agreement to lease, rent, or hire; and
      1. they acquire the lease asset at any time, or a person associated with them acquires the asset; and
        1. either they, or the associated person, transfer the asset on a settlement of relationship property.

          1. If the transferee disposes of the asset for an amount that is more than the transfer amount, they are treated as deriving income as described in section FA 5 (Assets acquired and disposed of after deduction of payments under lease) in the income year of the disposal of the asset equal to the lesser of—

          2. the amount by which the amount derived on disposal is more than the transfer amount; or
            1. the sum of the amounts for which the transferor has been allowed a deduction.

              1. In this section, the transfer amount is the amount that equals, as applicable,—

              2. the adjusted tax value of the asset at the start of the year of transfer; or
                1. if the asset was acquired by the transferor or the associated person during the year of transfer, the base value of the asset.

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