The old rules for claiming deductions on 'vacant land' were tricky because they relied on what the landholder said about why they owned the land. Some people took advantage of this by claiming expenses for land they didn't really have plans to use for making money.
For instance, if someone said they bought land to build a rental property but ended up building their own home instead, it was hard for the tax office to prove what their original intention was. This made it tough for them to enforce the rules.
So, to fix this issue, a new rule called S.26-102 was introduced. This rule limits or denies deductions that certain taxpayers can claim for costs related to holding 'vacant land'. Now, it doesn't matter what the taxpayer's intention was initially.
The new rules don't apply to everyone, though. They don't affect companies, certain types of superannuation funds, public unit trusts, or managed investment trusts. These entities can still claim deductions for holding costs for vacant land as per the usual rules.
Got questions? Reach out to Tax Ideas Accountants & Advisers at +61 2 83181545 or book an appointment on our live calendar.