Feedback sought on taxation of lease inducement payments
26 July 2012
An officials’ issues paper released today seeks feedback on proposals to tax lease inducement payments made by commercial landlords to tenants. For more information see the media statement and the issues paper, The taxation of lease inducement payments. Submissions close on 31 August.
Feedback sought on taxing lease inducement payments
Revenue Minister Peter Dunne has welcomed the release today of an Inland Revenue tax policy consultation paper on tax issues around cash payments made by commercial landlords to tenants.
The paper, The taxation of lease inducement payments, suggests that such payments, known as lease inducement payments, be made taxable.
“Currently, commercial landlords can generally claim a tax deduction for these payments while the tenant pays no tax on them,” Mr Dunne said.
“This gives the tenant an unfair tax advantage over other lease inducements such as reduced rents or landlord contributions towards fit-out costs.”
He said tax audits had identified an increasing number of these payments as commercial landlords seek to attract long-term tenants in the current tight economic environment.
The proposed change was, he said, consistent with the Government’s efforts to protect its revenue base and make the tax system fairer for all taxpayers.
“Making lease inducement payments taxable would be consistent with the Government’s approach to areas that posed similar revenue risks such as contributions to fit-out costs, which were addressed in Budget 2010,” Mr Dunne said.
“The proposed reform would also bring the New Zealand tax rules into line with the tax treatment of similar payments in the United Kingdom, Ireland and Canada.”
He said the proposed reforms could be included in a future tax bill and would apply to commercial lease arrangements entered into from today.
The taxation of lease inducement payment is available on Inland Revenue’s tax policy website, www.taxpolicy.ird.govt.nz. Submissions close on 31 August.
Mark Stewart | Press Secretary | Office of Hon Peter Dunne
Cell +64 21 243 6985