© 2010 Deloitte Touche Tohmatsu

Sustainable Business Australia

Counting the beans - retro-fitted commercial buildings

Chris LeachPartner, National Leader Tax - Sustainability and Climate Changechleach@deloitte.com.au

13 April 2011

© 2010 Deloitte Touche Tohmatsu

Environmental upgrade structure – scenario 1

3

© 2010 Deloitte Touche Tohmatsu

Lender

Council/Council SPV

Building Owner

Tenant

ESCO

Rate schedule

Funding (Debt)

rate

Scenario 1:

ESCO performs retrofit works for Building Owner.

Funding to Council

Repay Funding to Lender

Accounting & Tax issues :

1. Debt at building owner level

2. Balance sheet recognition

3. EU assets ownership – tax 50% bonus deduct

4. Deductibility of outgoings

5. Classification debt v equity

Purchases retrofit

Rate outgoing

4

Alternative structure – scenario 2

5

© 2010 Deloitte Touche Tohmatsu

Lender

Council / Council SPV

Building Owner

Tenant

ESCO

Rate schedule

rate

Scenario 2: No link between Funding and Rate

ESCO performs building retrofit works for Building Owner. - leases to building owner or tenant (?)

Funding (debt) to ESCO and repayment by ESCO

Council passes levy to ESCO

Accounting and Tax issues:

1.ESCO financial position 2.Ownership of EU assets3.Nature of lease arrangement to tenants/building owner4.Change in Leasing accounting standard (June 2016)5.Tax issues per scenario 1 – 3,4 &5

Rate outgoing

6

© 2009 Deloitte Touche Tohmatsu

Questions and Answers

7

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