In the 2018-19 Budget, the Government announced that it would improve the integrity of the tax system by denying certain deductions for expenses associated with holding vacant land. This is to address integrity concerns that deductions are being improperly claimed for holding vacant land where the land is not genuinely held for the purpose of earning assessable income.
The Government has released exposure draft legislation and explanatory material for amendments to give effect to this Budget announcement.
From 1 July 2019, the proposed legislation will limit deductions for expenses associated with holding vacant land. The measure does not apply to expenses associated with holding vacant land that is used by the owner or a related entity to carry on a business. For example, the measure will not apply to a business of primary production or to a property developer that is carrying on a business and is holding land for the purpose of that business.
The measure also does not apply to corporate tax entities, managed investment trusts, public unit trusts and unit trusts.
Public consultation on the exposure draft legislation and explanatory material will close on Wednesday, 31 October 2018.