New legislation to deny some land owners a tax deduction for the costs of holding vacant land is awaiting Royal Assent.

The new law will deny individuals, self-managed superannuation funds and discretionary trusts a tax deduction for borrowing costs, interest on loans to acquire the land, land taxes, council rates and maintenance costs.

Land is considered vacant if:

  • at the time the expense was incurred, the land did not contain a substantial and permanent structure; or
  • the land did contain a substantial and permanent structure that is residential premises, the premises is not lawfully able to be occupied, or it is not rented out or made available for rent.

The new law will apply where the land is held pending the development of residential property or where land is leased to a lessee who is not conducting a business. This includes land leased to a community club, government organisation, charity or hobby farm, where there is no business activity being undertaken.

Once Royal Asset is obtained, the new legislation will be effective from 1 July 2019 and will apply even if the land was held by the entity before 1 July 2019.