Land Deductions

hrmmm. Does this include the interest from the loan?

Hi Guys,

Not 100% sure but I would actually check that out as the ATO only allow tax deductibility for assets that are income producing. Land on it’s own is not be income producing and thus the interest not tax deductible.

David P

[cap]

I recall reading about an ATO ruling for an individual that allowed deductions while holding a block of land. From my hazy memory it was a fairly exceptional set of circumstances that involved the intention to build a house, continual delays and then a complete change of circumstances which meant the house was never actually started despite all the approvals, loans etc being obtained.

I would be very wary of simply buying a block of land for investment and claiming all expenses.
Even though I think that you would not be able to claim the expenses as you go along, I would expect them to be taken into account when calculating any CGT liability.

But then again, I am not an accountant so if you plan to take that path I would suggest good professional advice.

Marg

See:
TR 2000/17W
“Income tax: deductions for interest following the Steele decision”
http://law.ato.gov.au/atolaw/view.htm?locid='TXR/TR200017/NAT/ATO'&PiT=99991231235958

Hangon, this was withdrawn by the ATO on 9 June 2004)

try this one:
TR 2004/4
“Income tax: deductions for interest incurred prior to the commencement of, or following the cessation of, relevant income earning activities”

Here is a quote:
Interest incurred prior to assessable income

9. It follows from Steele that interest incurred in a period prior to the derivation of relevant assessable income will be ‘incurred in gaining or producing the assessable income’ in the following circumstances:

·
the interest is not incurred ‘too soon’, is not preliminary to the income earning activities, and is not a prelude to those activities;

·
the interest is not private or domestic;

·
the period of interest outgoings prior to the derivation of relevant assessable income is not so long, taking into account the kind of income earning activities involved, that the necessary connection between outgoings and assessable income is lost;

·
the interest is incurred with one end in view, the gaining or producing of assessable income; and

·
continuing efforts are undertaken in pursuit of that end

You can get the Tax Ruling here:
http://law.ato.gov.au/atolaw/view.htm?rank=find&criteria=AND~2004%2F4~basic~exact&target=EA&style=java&sdocid=TXR/TR20044/NAT/ATO/00001&recStart=1&PiT=99991231235958&recnum=4&tot=29&pn=ALL:::RDB

You can also view the Judgments in the case, Steele v. Commissioner of Taxation – (18 March 1997), here:
http://law.ato.gov.au/atolaw/Browse.htm?ImA=folder&Node=4~2~9~193&OpenNodes=,4~2,4,4~2~9&DBTOC=05%3ALRP%3AFederal%20Court%3A1997%3ASteele%20v.%20Commissioner%20of%20Taxation%20-%20(18%20March%201997)#4~2~9~193

And

Terryw
Discover Home Loans
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Wayne

Which part of the Country are you in ?

Cheers

Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
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Hi Wayne

I don’t have any vacant land, so have never really looked into it and have not read those documents in full either – nor am I an accountant. I have listed them as a guide that interest can be claimed in certain circumstances.

If you don’t intend to build, then I am not sure if you could claim. But it is certainly worth looking into. Don’t rely on your accountant completely as they often are not up to date.

Terryw
Discover Home Loans
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