Lease Incentives: Should I take it as a fit out or rental reduction?

Question:

We’re negotiating our new office and discussing fit out etc.  The landlord is giving an incentive amount of $115,000 over 5 years. So we can either take this in rental reductions or a combination of rental reductions and fitout.

I’m wondering whether we should take a combo of rental reductions and fit out or pay for the fitout ourselves (i.e. $30,000 to $80,00) and get the incentive in 100% rental reductions. I figured if we pay for the fitout then we could claim perhaps depreciation etc.

Riz, we’re at the pointy end of negotiations. A quick response would be very helpful in securing this deal. I look forward to hearing from you.

Answer:

Great question – from a tax perspective it all boils down to this …

Which strategy gives you most tax savings soonest?

Here’s my take based on the info provided:

So boiling it down the pro’s and con’s can be measured again 3 key measures.  Tax deductibility, Current Cashflow and Ongoing Cashflow.

Ultimately we want business owners to avoid a lease altogether and be able to Use their SMSF to Purchase Your Business Premises.

But in the meantime, let us help you run the numbers on your scenario before you sign on the bottom line.