The federal budget was released on Tuesday night, which saw the announcement of measures that are designed to discourage the holding of vacant land.
The new measures will see a cut back on tax deductions for those who are holding vacant land for a long period of time, known as ‘land banking’. These property owners will no longer be able to claim deductions for holding costs such as interest and council rates on their tax returns.
Set to be implemented on the 1st of July 2019, property owners need to be aware and weary of these changes when considering purchasing land in the future.
There are some exclusions to the changes. They will not apply to the following:
- Land owned to carry out a business, including a business of primary production (this includes plant or animal cultivation, fishing or pearling and tree farming or felling).
- Land where a property has been constructed on the land, the property has received approval to be occupied or the property is available for rent but not yet leased.
A large issue with new measures, despite these exclusions, are they do not take into consideration land where approvals for development are currently being sought. This process can often take considerable time and will result in land owners being penalised for the slow-process outside of their control.
Given these proposed changes have just been announced, we await further clarification from the Australian Taxation Office should these measures be implemented.
We are opposed to the proposed legislation, and hope that industry bodies such as the Real Estate Institute of Australia are lobbying government to ensure a better outcome for property owners and developers.
Should you have any concerns about if and how the new federal budget affects land you currently hold, or are considering buying, please contact your tax agent/accountant for specialist advise.