The New Tax Rules For Vacant Land

By Author: Lester Ong
Total Articles: 43
Comment this article

Do you hold vacant land? Then you must learn about the changes to deductions for vacant land which were brought in by the federal government. The changes 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. The amendment has affected the following types of entities including, individuals, private trusts, whereas companies, public super funds, and public investment unit trusts aren’t affected by this.

According to the experts from a leading tax law firm in Perth, the ultimate goal of these changes is to deny tax deductions for the holding costs of vacant land, until the land either has a significant structure or being available for use or rent.

Vacant Land

The land is considered to be vacant if it didn’t house a permanent and substantial structure during the time it was held. The term vacant land can be used for a permanent residential ...
... structure that’s constructed when the land was held but cannot be occupied lawfully. The Australian Taxation Office also considers land to be vacant, if it’s occupied lawfully, but couldn’t be available for rent or sale during the period.

Until July 2019, all costs involved in holding the land was able to be claimed by a taxpayer as deductions. But now these costs are added to the cost base on the sale of the asset for capital gains tax purposes such as interest, ongoing borrowing costs, land tax, rates, land maintenance, and more.

How to Claim Deductions to Vacant Land?

The tax lawyer in Perth lists some entities that are not affected by these changes, and they are Public unit trust, Corporate tax entity, Managed investment trust, and more. Tax deductions for vacant land can be claimed 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. 

Exceptional Circumstances Exemption

You can claim for the deductions on holding costs of vacant land if any of the following exceptional circumstances exemption applies.

- A natural disaster

- A major building fire

- Substantial building defects (where the structure can no longer be lawfully occupied).

A taxation lawyer in Perth states, in order for the exemption to be applied, there must have been a substantial and permanent structure on the land prior to the time that the exceptional circumstance occurred. If the substantial and permanent structure was residential premises, then the residence must have been lawfully able to be occupied and have been either rented or available for rent prior to the exceptional circumstance.

To apply for the exceptional circumstances exemption, you have a three-year limit time from the date of exceptional circumstance. You can ask for an extension in this time limit if there are delays in council or local government approval, your builder has ceased trading or gone into liquidation, and legal disputes.

For more information, schedule an appointment with a leading tax law firm in Perth.

The author of this article is associated with a leading tax law firm in Perth and has a vast knowledge of both Federal and State taxation policies. In this article, he explains about tax deductions for vacant land. Visit https://www.munrodoig.com.au/ for more information.

Founded in 2002, by its directors Colin Munro and Ron Doig, Munro Doig Lawyers is a leading law firm based in Perth, Western Australia. We have extensive experience in the areas of tax, superannuation, succession, intergenerational wealth transfer, estate planning and commercial law. Our clients include high-net worth individuals and small-medium enterprises. We are also leaders in migration law (assisting clients with visa applications through to appeals and solving complex and difficult migration problems). Munro Doig Lawyers is committed to providing first-class assistance, trustworthy advice and strategic solutions. We maintain long-standing relationships with our clients; we think outside the box and provide leading-edge solutions. We look forward to helping you. Call us on 08 9426 6222 or visit http://www.munrodoig.com.au to find out more!