Buying Vacant Land With Intention To Build And Rent

Many clients that have constructed investment properties in the past (or know people that have)  might be familiar with rules that previously allowed clients with an intention to rent the completed dwelling to claim holding costs whilst the property is being constructed which as we know can be quite a protracted experience in the current market. There have been rule changes in regards to this area of tax law that all clients should be aware of. 

What are holding costs?

This includes interest expenses or other ongoing borrowing costs to acquire the land, land taxes, council rates or maintenance costs.

Can we claim holding costs yearly whilst we have vacant land?

From 1 July 2019, expenses related to holding vacant land, including land on which a residential rental property is either under construction or being substantially renovated, or which has a completed residential property that is not available for rent ,are not deductible, regardless of when the land was purchased. The restriction applies to individuals, SMSFs and closely held partnerships and trusts, but not to companies and institutional investors, such as other superannuation funds and MITs.

Expenses denied under these rules can be included in the CGT cost base of the property.

It is important to keep original and detailed records of these holding costs as when you sell these holding costs may be able to reduce the CGT cost base .

Always check before you buy so you know what tax consequences there may be 

Call MKG and book a consult with one of our tax accountant specialists.