The Senate recently passed the Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019. It contains several important measures, and one of these is an amendment to Income Tax Assessment Act 1997, which sets a limit on tax deductions for losses or outgoings incurred that relate to holding vacant land.
Under the Income Tax Law, taxpayers may claim the costs of holding vacant land if it is held for the purpose of gaining or producing assessable income or carrying on a business for the purpose of gaining such income. But there was concern that some taxpayers were still claiming deductions for costs associated with holding vacant land even if it was not genuinely held for the purpose of gaining or producing assessable income.
In the current law, a taxpayer can claim deductions for losses or outgoings incurred that relate to holding vacant land if:
- the losses or outgoings were incurred in gaining or producing their assessable income; or
- the losses or outgoings relate to the taxpayer carrying on a business in order to derive assessable income.
In the new law, a taxpayer cannot claim deductions for losses or outgoings incurred that relate to holding vacant land.
However, the amendments do not apply to any losses or outgoings relating to holding vacant land to the extent the land was:
- used or held available for use by the taxpayer in the course of a business the taxpayer carries on; or
- used or held available for use by an affiliate, spouse or child of the taxpayer, or an entity that is connected with the taxpayer or of which the taxpayer is an affiliate, in carrying on a business.
- holding land that is used or made available for use in carrying on such a business by certain entities related to the taxpayer.
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