Deny Deductions for Vacant Land
From 1 July 2019 The Government will deny deductions for expenses (e.g. interest costs and rates) associated with holding vacant land (for either commercial or residential purposes) where such land is not genuinely held for the purpose of earning assessable income.
Furthermore, the Government also intends to reduce the tax incentives that are currently available for land banking (i.e. where land may not be used for housing or other development).
However, there will be no denial of such a deduction of expenses incurred after:
- A building has been constructed on the vacant land, the building has received approval to be occupied and is available for rent; or
- The vacant land is being used by the owner to carry on a business (e.g. a business of primary production).
Tax deductions that have been denied in respect of vacant land will not be able to be carried forward for use in later years. Depending on the nature of the expense, the expense may not be included in the cost base of the vacant land when calculating any capital gain upon the land’s disposal. However, expenses such as borrowing expenses and council rates may be included in the cost base of the vacant land.