Limiting Tax Deductibility on New Empty Lands

New vacant land tax measures

A new ‘vacant land’ measure limits the deductibility of costs incurred on or after 1 July 2019 (i.e., from the 2020 income year) that relate to holding vacant land, even if the land in question was first held before that date.
Importantly, however, the new provisions include (amongst other exceptions) a ‘carrying on a business’ exception. This exception means that the limitations will not apply to the extent that the ‘vacant land’ is used, or available for use in carrying on a business, including a business carried on by either the taxpayer (i.e., the owner of the land) or by a specified related entity.
Further, an additional business exception also applies where ‘vacant land’ is leased at arm’s length for use in any business (i.e., not just a business of the taxpayer or of a related entity).
In addition, land is considered to be “available for use” if it is held for future use in a business currently carried on by the taxpayer or is made available to a specified related entity for future use in a business that entity currently carries on.

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