CA90900 - Structures and buildings allowance (SBA): relevant interest: merger of leasehold interest

CAA01/S270DE

If the holder of a relevant interest, which is a leasehold interest, acquires a reversionary interest when the lease is extinguished, the interest into which the leasehold interest merges becomes the relevant interest.

Example

Andy, the freeholder, constructs a commercial building and grants Betty a 40-year lease, which meets the conditions CA90600 for Betty to be treated as acquiring the relevant interest. Betty subsequently incurs fit-out expenditure which is qualifying expenditure for SBA. At that point, Betty is able to claim SBA separately on the construction expenditure and also on the fit-out expenditure.

Before the end of the lease, Betty buys the freehold interest from Andy. At that point the leasehold interest is extinguished, but because the leasehold interest is merged with the freehold interest, Betty may continue to claim SBA on both the construction and fit-out expenditure, despite the lease ending.