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Schedule 3—Limiting deductions for vacant land

Schedule 3 Limiting deductions for vacant land


Income Tax Assessment Act 1997

1  Section 12-5 (before table item headed “land degradation”)




land degradation, see primary production


vacant land, limit on deduction.........................................


2  Section 12-5 (table item headed “land degradation”)

Repeal the item.

3  After section 26-100


26-102   Expenses associated with holding vacant land

Limit on deduction

             (1)  If:

                     (a)  at a particular time, you incur a loss or outgoing relating to holding land (including interest or any other ongoing costs of borrowing to acquire the land); and

                     (b)  at the earlier of the following (the critical time ):

                              (i)  that time;

                             (ii)  if you have ceased to hold the land—the time just before you ceased to hold the land;

                            there is no substantial and permanent structure in use or available for use on the land having a purpose that is independent of, and not incidental to, the purpose of any other structure or proposed structure;

you can only deduct under this Act the loss or outgoing to the extent that the land is in use, or available for use, in carrying on a business covered by subsection (2) at the time applying under subsection (3).

Note 1:       The ordinary meaning of structure includes a building and anything else built or constructed.

Note 2:       The land need not be all of the land under a land title.

             (2)  A * business is covered by this subsection if the business is carried on for the purpose of gaining or producing the assessable income of one or more of the following entities:

                     (a)  you;

                     (b)  your * affiliate, or an entity of which you are an affiliate;

                     (c)  if you are an individual—your * spouse, or any of your * children who is under 18 years of age;

                     (d)  an entity * connected with you.

             (3)  The time applying under this subsection is the critical time unless:

                     (a)  the business referred to in subsection (1) ceases before the critical time; and

                     (b)  the loss or outgoing is otherwise deductible because of the use or availability for use of the land at an earlier time or during an earlier period; and

                     (c)  at that earlier time or during that earlier period the land was in use or available for use in carrying on that business;

in which case the time applying under this subsection is that earlier time or the end of that earlier period.

Disregard certain residential premises if not rented etc.

             (4)  For the purposes of paragraph (1)(b), treat a building as not being a substantial and permanent structure if it is * residential premises constructed, or * substantially renovated, while you hold the land unless:

                     (a)  the residential premises are lawfully able to be occupied; and

                     (b)  the residential premises are:

                              (i)  leased, hired or licensed; or

                             (ii)  available for lease, hire or licence.

Note:          If all of the structures on the land are disregarded under this subsection, then subsection (1) may deny you a deduction for a loss or outgoing relating to the land.

Exception—kind of entity

             (5)  Subsection (1) does not stop you deducting a loss or outgoing if, at any time during the income year in which the loss or outgoing is incurred, you are:

                     (a)  a * corporate tax entity; or

                     (b)  a * superannuation plan that is not a * self managed superannuation fund; or

                     (c)  a * managed investment trust; or

                     (d)  a public unit trust (within the meaning of section 102P of the Income Tax Assessment Act 1936 ); or

                     (e)  a unit trust or partnership, if each * member of the trust or partnership is covered by a paragraph of this subsection at that time during the income year.

4  Application of amendments

The amendments made by this Schedule apply in relation to losses or outgoings incurred on or after 1 July 2019 (whether the applicable land is acquired before, on or after 1 July 2019).