If you own vacant land and are hoping to claim tax deductions, you’ll need to meet strict conditions set by the Australian Taxation Office (ATO). Eligible deductions may include interest payments on loans, land taxes, council rates, and maintenance costs, but only under specific circumstances.

What Counts as Vacant Land?
According to the ATO, land is considered vacant if:

  1. It does not contain a substantial and permanent structure; or
  2. It has a residential structure that was built or significantly renovated while you owned the land, but cannot be lawfully occupied or has not yet been rented or made available for rent.

Examples of substantial and permanent structures:
✅ Homestead on a farm
✅ Commercial garage
✅ Fencing
✅ Silos
✅ Woolsheds

Structures that are NOT considered substantial:
❌ Residential garages or sheds
❌ Pipes and powerlines
❌ Residential landscaping
❌ Letterboxes

Changes to Tax Deductions for Vacant Land
Since 1 July 2019, tax deductions for vacant land are no longer allowed in most cases. Before this change, landowners could claim deductions if the land was held for income-producing purposes or business activities.

When Can You Still Claim Deductions?
You may be eligible to claim deductions if:

  1. You are a specific type of entity, such as a corporate tax entity, a superannuation fund, or a managed investment trust.
  2. The land is used for business purposes, or leased to another entity for business. (However, the land must not contain an existing or under-construction residence.)
  3. The land is used for primary production by you, an affiliated entity, or your spouse. (with no existing or under-construction residence.)

If your land does not meet these criteria, you cannot claim deductions for holding costs.

Exemptions for Exceptional Circumstances The ATO allows temporary exemptions in cases of unforeseen events like natural disasters or major building fires that destroy a structure on your land. In such cases, you may be able to claim deductions for a limited period. 

For more details or assistance with tax deductions on vacant land contact our office today.

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