September 14, 2015

Entering a new lease – don’t forget tax planning

Mark Hann, Director

When you enter into a new lease, it’s worth seeking advice from your accountant about potential tax implications.

Tactica recently had a client who was in the process of negotiating a lease for a new premises. The landlord was happy to pay for the fitout valued at around $200k.

Initially the lease was drafted to give the tenant responsibility of the fitout. This put the client in a very poor cashflow position – the fitout would have left the client with a $60k tax bill in the first year, minus some relatively minor depreciation claims. Upon review of the draft lease, we were able to advise the client to have the landlord retain the fitout, which meant the client gained the fitout tax free.

Other issues that may lead to serious tax consequences for the landlord and tenant include;
  • Cash incentives
  • Rent free periods
  • Termination of a lease
  • Make good clauses

If you are in the process of renegotiating your existing lease, or are looking at signing on to a new lease, we would always recommend seeking advice from your accountant. You can find details for contacting Tactica Partners here.

Please Note: Many of the comments in this article are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

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