Private ruling: Lease surrender payments
Date of advice: 24 June 2025
Published: 18 August 2025
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX

Ruling: Q1: Are the payments made by Company A considered deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No | Q2: Are the payments made by Company A deductible under section 25-15 of the ITAA 1997? | A2: No | Q3: Where the Commissioner's answer to (1) and (2) are both no in relation to the payments made by Company A, are those payments deductible under section 25-110 of the ITAA 1997? | A3: Yes

Relevant facts and circumstances: Company A made payments in respect of a lease it held.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 section 25-15 | Income Tax Assessment Act 1997 section 25-110

Reasons for decision: Summary: Company A is not entitled to claim a deduction for payments under section 8-1 of ITAA 1997 because the payments are of a capital nature. Company A is not entitled to claim a deduction for the payments under section 25-15 because the payments have not been made because of a failure to comply with a lease obligation. Company A is entitled to a deduction for the payments under section 25-110 because the capital expenditure resulted in the termination of a lease incurred in the carrying on of a business.