Deductibility of stamp duty and transfer expenses with regard to a crown lease

Is the taxpayer entitled to a deduction under section 25-20 of the Income Tax Assessment Act 1997 (ITAA 1997) for the stamp duty and registration of transfer expenses incurred in acquiring a crown lease for a property which is partly used for income producing purposes?

Yes, the taxpayer is entitled to a partial deduction under section 25-20 of the ITAA 1997 for the stamp duty and registration of transfer expenses incurred in acquiring a crown lease to the extent that the property is income producing.

The taxpayer acquired a leasehold property.

The property is held under a crown lease with a term of 99 years.

Half of the property is held by the taxpayer as a rental property and is used to produce assessable income.

The taxpayer lives in the other half of the property.

Stamp duty and registration of transfer costs were incurred by the taxpayer in acquiring the leasehold property.

Subsection 25-20(1) of the ITAA 1997 provides that a deduction is allowable for the costs of preparing, registering or stamping a lease of a property where the property is used solely for the purpose of producing assessable income.

A portion of the lease expenditure is an allowable deduction under subsection 25-20(2) of the ITAA 1997 if the leasehold property is used partly for income producing purposes in the income year.

Although the term 'lease' is not defined in the ITAA 1997, the general law requirement is that a lease must be granted for a definite period. A crown lease with a term of 99 years is a 'lease' for the purposes of section 25-20 of the ITAA 1997.

As only half of the property is used for income producing purposes the taxpayer is entitled to a deduction for 50% of the stamp duty and registration of transfer costs incurred with regard to acquiring the crown lease.