The Institute of Chartered Accountants is supporting a move by the Government to crack down on lump sum payments that are used by commercial landlords to encourage tenants to sign a lease.
The transactions are known as lease inducement payments and have greater tax benefits than other methods of inducement, such as discounts on rent or landlord contributions towards fit-out costs.
Institute of Chartered Accountants tax director Craig Macalister says if the lease is $100,000 a year and the lease inducement payment is $40,000, that means the tenant will essentially pay only $60,000 rent for the year but will get a tax deduction for the full amount.
He says the tax saving is sometimes shared between the landlord and tenant.
Revenue Minister Peter Dunne says audits have identified an increasing number of these payments as commercial landlords seek to attract long-term tenants in the current tight economic environment.
He says the payments give the tenants an unfair tax advantage and taxing them would bring New Zealand into line with Britain, Ireland and Canada.
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