Private ruling: Lease expenses – transfer duty
Date of advice: 12 December 2017
Published: April 2018
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Is the transfer duty for the transfer of a leasehold property deductible under section 25-20 of the Income Tax Assessment Act 1997 (ITAA 1997) to the extent that the property is used for the purpose of producing assessable income? | A1: Yes

Relevant facts and circumstances: You have acquired leasehold property by means of a contract which settled in the 2016 income year. You are required to pay transfer duty for the transfer of the leasehold property. The lease is a perpetual lease. The property is used wholly for the purpose of earning assessable income in the course of a primary production business. The land must only be used for the purpose for which the lease is issued.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 section 25-20

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature. Generally, costs associated with acquiring a property are not deductible. However, section 25-20 of the ITAA 1997 specifically provides: 1. You can deduct expenditure you incur for preparing, registering or stamping: (a) a lease of property; or (b) an assignment or surrender of a lease of property; if you have used or will use the property solely for the purpose of producing assessable income. 2. If you have used, or will use, the leased property only partly for that purpose, you can deduct the expenditure to the extent that you have used, or will use, the leased property for that purpose. The stamp duty paid was for acquiring a leased property and you are using the property wholly for income producing purposes. Therefore the transfer duty will be deductible under section 25-20 of the ITAA 1997. The rulings in the register have been edited and may not contain all the factual details relevant to each decision. Do not use the register to predict ATO policy or decisions.

The advice in the Register has been edited and may not contain all the factual details relevant to each decision. Do not use the Register to predict ATO policy or decisions.