If you are a lessee who paid a lump-sum lease premium for commercial or industrial property, SARS lets you claim a section 11(f) lease premium allowance, a deduction spread evenly over the lease term. This free TaxTim section 11(f) lease premium allowance calculator works out exactly how much you can deduct each year of assessment, including renewal periods and the 25-year maximum spread, so you can claim the right amount on your tax return for the 2027 tax year (1 March 2026 – 28 February 2027).
A lease premium is a consideration with an ascertainable money value that passes from a lessee to a lessor, distinct from (and in addition to or in lieu of) rent. It is usually a lump sum paid at the start of a lease. Section 11(f) of the Income Tax Act 58 of 1962 lets the lessee deduct this premium, but it must be spread over the period of the lease rather than claimed all at once. The annual allowance is the greater of the premium divided by the number of years the lessee is entitled to use or occupy the asset (including renewal periods), or one twenty-fifth of the premium, and the spread is capped at a maximum of 25 years. In practice this means a lease of 25 years or less is spread over its actual term, while a lease longer than 25 years is spread over 25 years (premium ÷ 25 each year). Two conditions apply: the asset must be used for the production of income (trade use), and the premium must actually be paid, not merely incurred, so the deduction starts in the year the premium is paid. Partial first or last years are apportioned. On the lessor's side, the full premium is included in gross income under paragraph (g) of the gross income definition (it is not spread). This calculator handles the spreading, apportionment and 25-year cap automatically.
Section 11(f) has no monetary rates, brackets or thresholds that change by tax year. It is a structural spreading rule. The only quantitative limits are:
Example (2027 tax year). A business pays a lease premium of R150,000 for an industrial unit used in its trade. The lease runs for 20 years with no renewal option. The annual allowance is the greater of R150,000 ÷ 20 = R7,500 or 1/25 of R150,000 = R6,000, so R7,500 per year applies. If the lease commenced part-way through the year of assessment, say 8 of the 12 months fell in the first tax year, the first-year allowance is apportioned: R7,500 × 8/12 = R5,000, with the full R7,500 deductible in each subsequent full year. (If the lease instead ran 30 years, the 25-year spread cap applies: R150,000 ÷ 25 = R6,000 per year for 25 years, after which no further deduction is allowed even though the lease continues.)
It is a tax deduction under section 11(f) of the Income Tax Act for a lessee who pays a lease premium (a lump-sum consideration distinct from rent) on property used in their trade. Instead of deducting it all at once, you spread the premium over the lease term, with the spread capped at a maximum of 25 years.
The yearly allowance is the greater of: the premium divided by the number of years you are entitled to use the asset (including renewals), or one twenty-fifth of the premium. The spread is capped at 25 years, so 1/25 is the minimum per-year portion. Partial first and last years are apportioned.
Yes. Even if the lease, including renewal periods, runs for 30 or 40 years, the premium is spread over a maximum of 25 years. The annual allowance becomes the premium divided by 25 (one twenty-fifth), and the deduction ends after 25 years even though the lease continues.
No. Section 11(f) requires the premium to be actually paid, not merely incurred or owing. The deduction commences only in the year of assessment in which you pay the premium. You must also use the leased asset for the production of income (trade purposes) to qualify.
The lessor (landlord) must include the full lease premium in gross income under paragraph (g) of the gross income definition, in the earlier of the year it is received or accrues, and it is not spread over the lease term on the lessor's side. Your section 11(f) deduction as lessee is separate from this.
No. Section 11(f) covers a lease premium, a cash consideration paid for the right to lease. Leasehold improvements (a separate allowance under section 11(g)) cover the cost of buildings or improvements you are obliged to make to leased property. They are calculated differently, so use the right calculator for each.
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