© 2010 Deloitte Touche Tohmatsu Sustainable Business Australia Counting the beans - retro-fitted commercial buildings Chris Leach Partner, National Leader Tax - Sustainability and Climate Change 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 assets 3.Nature of lease arrangement to tenants/building owner 4.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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