Income Tax Act 2007 section 809ZA

Plant and machinery leases: capital receipts to be treated as income

Section 809ZA requires that certain capital payments connected with plant and machinery leases are treated as taxable income of the lessor, as an anti-avoidance measure.

• Where a plant or machinery lease (or related arrangement) includes an unconditional obligation to make a capital payment, or where such a payment is actually made without a formal obligation, the section applies
• The lessor is treated as receiving taxable income equal to the full amount of the capital payment
• If the payment arises from an unconditional obligation, it is taxed as income in the period of account when that obligation first came into existence
• If the payment is made voluntarily (without an obligation), it is taxed as income in the period of account in which the payment is actually made