Lessors shortchanged

Treasury is continuing with plans to move depreciation benefits from property owners to tenants, with new criteria proposed that could affect nearly every property lease in Australia.

Under the original Ralph proposals, the provisions applied to leases with a value:

• greater than $0.5 million if the contract is for a period longer than five years; and

• greater than $1.0 million if the contract is for a period longer than three years.

Under Treasury’s new proposals, any lease would be included if:

• lease incentives were exchanged, such as rent-free periods and fit outs

• a lessee gave a bank guarantee to a lessor to ensure that rent is paid;

and rental payments were calculated on a lessee’s turnover.

This would mean tenants would receive the depreciation benefits that currently belong to property owners and it is considered it would place a compliance burden on the industry.

The Property Council has raised this inequity directly with the Treasurer’s office and have scheduled meetings with key Treasury and Tax Office officials to discuss the issue.

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