Buying land for investment purpose

Hi Thai,

This is prefaced with "see your accountant" and I am not one. However, my understanding is that tax deductions can only be offset against an income producing asset. This would mean that as your block of land is not producing an income, you are unable to claim a deduction. I believe that the deductions are accrued againt the cost base of the property meaning that if you were to sell in the future and realise a capital gain, then all costs associated with holding that property are taken into account and added to the purchase price to change the cost base and thus reduce your eventual capital gain.

Again, check with your accountant, but I hope this helps.

Tammy

Hi again.

Yes, it was Steele v FCT in 1999. Since then the ATO has released a tax ruling:
TR 2004/4
Income tax: deductions for interest incurred prior to the commencement of, or following the cessation of, relevant income earning activities
http://law.ato.gov.au/atolaw/view.htm?locid='TXR/TR20044/NAT/ATO'&PiT=99991231235958

See this legal newsletter for a brief explanation
http://www.kdjohns.com.au/files/briefly_in_tax_mar2006.pdf

The case is
Steele v. Deputy Commissioner of Taxation (Cth) – (4 March 1999)
http://law.ato.gov.au/atolaw/Browse.htm?ImA=folder&Node=4~3~8~8&OpenNodes=,4~3~8,4~3,4&DBTOC=05%3ALRP%3AHigh%20Court%3A1999%3ASteele%20v.%20Deputy%20Commissioner%20of%20Taxation%20(Cth)%20-%20(4%20March%201999)#4~3~8~8