COV 20/08
Issued
30 Jun 2020
Published
01 Jul 2020
Start
17 Mar 2020
End
30 Nov 2020

Variation in relation to the definition of “finance lease” in s YA 1 of the Income Tax Act 2007

This variation applies to a person who has entered into an operating lease of an asset, but the lease term has been extended beyond 75% of the estimated useful life of the asset, and so in the absence of this variation it would be reclassified as a finance lease for tax purposes, with associated complexity and compliance costs.  The variation is subject to the conditions that the lease was entered into before 14 February 2020; that the lease term was not more than 75% of the estimated useful life when the lease was entered into; and that the lessee was prevented or discouraged from returning the lease asset at scheduled maturity, or because the lessee’s business has experienced a significant decline in actual or predicted revenue related to COVID-19 meaning the lessee had difficulty in satisfying their existing lease agreement. 

Tax Administration Act 1994: ss 6H and 6I
Income Tax Act 2007: s YA 1, paragraph (b) of the definition of finance lease