Property Developers, Primary Producers and Business Owners: Do not be misled by these sweeping summaries or headline hype.
Generally, the new Act, which received royal assent on Monday, denies taxpayers access to tax deductions for the costs related to holding ‘vacant land’ from 1 July 2019 as part of the governments ongoing efforts to curb housing affordability concerns. ‘Vacant land’ is land on which there is no substantial building or structure on the land. If the building is residential premises, that building must be lawfully able to be occupied and leased, or available for lease in order to meet the criteria. An integrity measure says such ‘substantial structure’ must have ‘a purpose that is independent of, and not incidental to, the purpose of any other structure’ -e.g. if a residential premises is denied due to now being available for lease, a separate garage will not meet the substantial structure criteria as its purpose is incidental to the house.
However, there are several significant exceptions to be considered:
- The new rules do not apply to companies, non-self-managed superannuation funds, managed investment trusts, public unit trusts and partnerships of these entities.
- Therefore the entities affected by the change are: Individuals, self-managed superannuation funds and private trusts.
- An exemption applies where the vacant land is used by the landholder or related parties for the carrying on of a business.
- Where land is under an arm’s length lease, hire or licence to another entity and the land does not contain residential premises (nor is it being constructed), it is exempt if:
- The land is being used in the carrying on of a business; or
- The landholder is carrying on a primary production business.
- Land which has become vacant land only due to exceptional circumstances beyond the landholders control (such as natural disaster) has an exemption up to a maximum of three years.
While these exceptions do reduce the potential reach of the new Law, Property Developers, Property Investors and Primary Producers should review their landholding usage, contractual arrangements and business plans to ensure that tax deductions are not denied. This is of particular important due to the effective date of 1 July 2019, as the Act is therefore in force for the current 2020 financial year.
For further information, please contact Noé Vicca at email@example.com or call on +61 412 642 017.
Date of Issue: 30 October 2019 Author: Noé Vicca
Disclaimer: The contents herein are intended for general information only and should not be construed as legal or accounting advice. Vicca Chartered Accountants Brisbane bears no responsibility for any loss that might occur from reliance on information contained in this publication. Please do not reproduce, transmit or distribute the contents herein in any form without prior permission from Vicca Chartered Accountants, Taxation Accountants Brisbane Australia.