Section FZ 3 — Income Tax Act 2007: Income of lessor under specified lease

FZ 3 Income of lessor under specified lease Interest (1) The income of a lessor derived under a specified lease is treated as interest. Treatment of amount derived (2) The amount of interest derived under subsection (1) is treated as— (a) during the term of the lease, derived during the initial period and each instalment period, an amount that is calculated either,— (i) on the outstanding balance for the initial period, and each instalment period, at such a rate and in such a manner that the aggregate of all of the amounts so calculated is equal to the amount first mentioned in paragraph (b); or (ii) for the initial period and each instalment period, under such other method commonly applied in commercial usage as, having regard to the term of the lease and to the frequency of the personal property lease payments, results in the allocation to that initial period and to each instalment period of an amount that is fair and reasonable and results in the sum of all amounts so allocated being equal to the amount first mentioned in paragraph (b): (b) in relation to the term of the lease, an amount that is equal to the sum of the personal property lease payments under the specified lease and the amount of the guaranteed residual value, if any, under the specified lease, reduced by the cost price of the personal property lease asset. Calculation for income year (3) The interest derived by a lessor is, for an income year, treated as an amount equal to the sum of the amounts calculated under subsection (2)(a) as calculated for the initial period, if any, and each instalment period that ends in the income year. Some definitions (4) In this section,— initial period means the period— (a) starting on the date of the start of a lease; and (b) ending just before the start of the instalment period that follows the start of the lease instalment period means the period— (a) starting on the day on which an instalment is payable; and (b) ending with the day just before the day on which the next instalment is payable. Defined in this Act: amount , guaranteed residual value , income , income year , initial period , instalment , instalment period , interest , lessor , outstanding balance , pay , personal property lease asset , personal property lease payment , specified lease , term of the lease , Compare: 2004 No 35 s FC 7