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Income Tax Act 2007

Deductions - Specific rules for expenditure types

DB 20C: Consideration for agreement to surrender leasehold estate or terminate licence

You could also call this:

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

You can get a deduction for money you spend to end a lease or land use licence early. This applies when you pay someone to give up their right to use land. You can claim this deduction if you own the land or the right to use the land, and you’re paying someone who owns the land or has the right to use it.

The amount you spend on ending the lease or licence early can be deducted from your taxes. This is true even though it might seem like a big, one-time expense. However, you still need to follow the general rules about what you can claim as a deduction.

Remember, this only works for leases that don’t go on forever and for licences to use land. It doesn’t apply to leases that can be renewed forever.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM5493738.

Topics:
Money and consumer rights > Taxes
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DB 20B: Consideration for agreement to grant, renew, extend, or transfer leasehold estate or licence, or

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

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DB 21: Amounts paid for non-compliance with covenant for repair, or

“Tax deductions for repair payments due to broken lease agreements”

Part D Deductions
Specific rules for expenditure types

DB 20CConsideration for agreement to surrender leasehold estate or terminate 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 surrender or termination 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 a person who owns the land right or a person who owns the estate in land from which the land right is granted; and
      1. the payee is a person who owns the estate in land from which the land right is granted or a person who owns 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 20C: inserted (with effect on 1 April 2013 and applying to an amount that is incurred on or after that date), on , by section 27(2) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
        • Section DB 20C(1)(a): amended (with effect on 1 April 2013 and applying to an amount incurred on or after that date), on , by section 45(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).