Update: Tax deductions for costs related to holding vacant land

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In September 2019, we raised concerns about a Bill that was before Parliament designed to deny deductions connected to the ownership of vacant land.

Government responded to feedback and made changes to the Bill which has now been enacted. The new law applies from 1 July 2019. The changes mean that there will now be no impact in the following 3 situations:

where the land is under lease, hire or licence to another entity (i.e. is being used to generate income from rent) as a result of a dealing at arm’s length and the land is in use, or available for use, in carrying on a business (other than one using the land solely for the purpose of providing services or other supplies to the taxpayer that holds the land);
where the land is under lease, hire or licence to another entity and the taxpayer, or an entity related to the taxpayer, is carrying on a primary production business; or
where the land previously contained a substantial and permanent structure, but due to some exceptional circumstance, such as fire or flood, the building is incapable of occupation or unsafe to occupy. There are further conditions to be met for this exception to apply.

While these changes are welcome, it will still be important to consider the scope of these new rules in any transaction where you or your client is buying land through a non-corporate entity.

The material in this article was correct at the time of publication and has been prepared for information purposes only. It should not be taken to be specific advice or be used in decision-making. All readers are advised to undertake their own research or to seek professional advice to keep abreast of any reforms and developments in the law. Brown Wright Stein Lawyers excludes all liability relating to relying on the information and ideas contained in this article.

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