When a landlord makes a payment in cash to induce a tenant into signing in to a lease, the payment is usually deductible to the landlord. Under the existing rules, a lease inducement payment received by the tenant is non-taxable. This was confirmed in a ruling by the Privy Council case in CIR v Wattie (1998) 18 NZTC 13,991. The Government has proposed new rules whereby the lease inducement payments will become taxable in the hands of the tenant. The new rules will be effective from 1 April 2013.
Important: This is not advice. Clients should not act solely on the basis of the material contained in the Client Newsletter. Items herein are general comments only and do not constitute or convey advice per se. Changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas.