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Income Tax Act 2007

Deductions - Specific rules for expenditure types

DB 20B: Consideration for agreement to grant, renew, extend, or transfer leasehold estate or licence

You could also call this:

“Tax deductions for payments to obtain or extend land use rights”

When you pay someone to grant, renew, extend, or transfer a right to use land, you can deduct that cost from your taxes. This applies if you own the land or the right to use the land, and you’re paying someone else to get that right. The right to use land could be a lease that isn’t forever or a licence to use the land.

You can take this deduction even if it’s normally considered a capital expense. However, you still need to meet the general rules for tax deductions, and other limitations still apply.

Remember, this only works if you’re the one who owns the land or the right to use it, and you’re paying someone else to get that right. It doesn’t work the other way around.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM5493736.

Topics:
Money and consumer rights > Taxes
Housing and property > Land use
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DB 20C: Consideration for agreement to surrender leasehold estate or terminate licence, or

“Tax deduction for paying to end a lease or land use licence early”

Part D Deductions
Specific rules for expenditure types

DB 20BConsideration for agreement to grant, renew, extend, or transfer leasehold estate or licence

  1. This section applies when—

  2. a person (the payer) incurs an amount of expenditure as consideration for the agreement by another person (the payee) to the grant, renewal, extension, or transfer of a right (the land right) that is a leasehold estate not including a perpetual right of renewal, or is a licence to use land; and
    1. the payer is the person who owns—
      1. the land right:
        1. the estate in land from which the land right is granted; and
        2. the payee is the person who is obtaining the land right.

          1. The payer is allowed a deduction for the amount.

          2. This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.

          Notes
          • Section DB 20B: inserted (with effect on 1 April 2013 and applying to an amount that is incurred on or after that date in relation to a lease or licence entered, renewed, extended, or transferred on or after that date), on , by section 27(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
          • Section DB 20B(1)(a): amended, on (applying to an amount incurred on or after that date), by section 44(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
          • Section DB 20B list of defined terms depreciable intangible property: repealed (with effect on 1 April 2013), on , by section 65 of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).