Income Tax Act 2007 section 681CB

Leased trading assets

Section 681CB sets out the conditions that must be met before the restriction on tax deductions for lease payments on trading assets (in section 681CC) comes into effect.

• A lease payment on a relevant asset must be deductible in calculating trade profits for income tax purposes (condition A), and either condition B or condition C must also be satisfied.
• Condition B applies where the asset was previously used in the same trade and was owned by the person then carrying on that trade, before the lease was created.
• Condition C applies where the asset was previously used in a different trade, owned by the person then carrying on that other trade, and that person was also carrying on the trade in which the lease deduction is claimed.
• The provisions do not apply to leases created on or before 14 April 1964, preserving a grandfathering rule from when the legislation was first introduced.