Changes to Deductions for Vacant Land

If you hold vacant land which you intend to build an investment property on, then you may be interested to learn about the changes to deductions for vacant land which were brought in by the federal government last year. 

The changes to the legislation were put in place to restrict deductions that can be claimed on costs on or following 1st July 2019, even if the land was obtained before this time. 

For more information please keep reading our latest blog, or give our Certified Practising Accountant a call today on 0428 887 104 or contact online hereto discuss your situation. 

What is Considered Vacant Land? 

Land is deemed vacant if it didn’t house a permanent and substantial structure during the time it was held. 

The term ‘vacant land’ also refers to land which did house a permanent residential structure, which was constructed or significantly renovated during the time the land was held, but it couldn’t be occupied lawfully. 

According to the ATO, it would also be vacant land if there was a structure which could be occupied lawfully, but it hadn’t been rented out or made available to rent during the period.  

Holding Costs 

Prior to 1st July, 2019, all costs involved in holding the land were able to be claimed by a taxpayer as deductions.  

These holding costs will now be added to the cost base on the sale of the asset for capital gains tax purposes, and include: 

  • Interest 
  • Ongoing borrowing costs 
  • Land tax 
  • Rates 
  • Maintenance of the land 

These changes impact land held by individuals, trusts, partnerships and SMSF (self-managed super fund) and relate to costs experienced on or after 1st July, 2019, even if you had a stake in the land prior to then.   

Claiming Deductions to Vacant Land 

According to the ATO some entities aren’t impacted by the change to legislation.  

Those include: 

  • Superannuation plan which isn’t a self-managed super fund 
  • Public unit trust 
  • Corporate tax entity  
  • Managed investment trust 

Deductions can still be claimed for holding vacant land on a couple of other occasions, such as if it’s used in some type of business, including farming, or if it’s held by a primary producer but leased by another entity. 

Changes to Deductions for Vacant Land 

For more help to navigate the changes to deductions for vacant land, or discuss your specific situation, give our experienced Certified Practising Accountant a call today on 0428 887 104 or enquire online here. 

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