Agent and marketing expenses incurred on Assignment of a Crown Lease

Is a taxpayer entitled to a deduction under section 25-20 of the Income Tax Assessment Act 1997 (ITAA 1997) for agent and marketing expenses incurred on the assignment of a crown lease where the property had been used for income producing purposes?

No. A taxpayer is not entitled to a deduction under section 25-20 of the ITAA 1997 for agent and marketing expenses as they were not incurred in preparing, registering or stamping the lease.

The taxpayer acquired a leasehold property.

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

The taxpayer rented out the property for the purpose of producing assessable income.

The taxpayer has now disposed of the leasehold property by way of assignment of the lease to a third party.

The taxpayer incurred agent and marketing expenses in disposing of the lease.

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

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.

The expenditure incurred on agent and marketing fees is incurred in order to obtain a new lessee for the property. They were incurred prior to the preparation of the new lease. These expenses were not incurred in relation to the preparation, registration and stamping of the lease and therefore are not deductible under section 25-20 of the ITAA 1997.