IBA is made to the person who holds the relevant interest in a
building.
The construction expenditure incurred on a building defines
the relevant interest in that building. The relevant interest in
relation to an item of construction expenditure is the interest in
the building to which the person who incurred that construction
expenditure was entitled when the expenditure was incurred.
There are special rules where the industrial building is a
road and the person who constructs it has a highway concession
relating to it
CA38000.
Since the construction expenditure may be incurred at
different times and by different people there may be several
relevant interests in a building.
Example Warren builds a factory on land that he
owns. The relevant interest for the factory is the freehold
interest. If Warren leases the factory to Lowell and Lowell builds
an extension, the relevant interest for the extension is Lowell's
leasehold interest. So there are two relevant interests for the
factory - Warren's freehold interest for the factory and Lowell's
leasehold interest for the extension.
A person who constructs a building may be entitled to more
than one interest in the building when the construction expenditure
is incurred. If so, the relevant interest is the interest that is
reversionary on all the others.
Example Douglas builds a factory on land that he
owns. He grants a long lease of the factory to Clayton. Douglas's
business expands so that he needs more factory space and he leases
the factory back from Clayton. Douglas then builds an extension to
the factory. Douglas has both the freehold interest and a leasehold
interest in the factory when he builds the extension. The relevant
interest in the extension is the freehold interest because the
freehold interest is reversionary on the leasehold interest.
