Most helpful replyATO Certified Response
Author: AshleyATO(Tax Time Tech Expert)Tax Time Tech Expert ATO Certified Response1 Aug 2024
Hi @vicandshaun
Your understanding of TR 2023/3 is correct. The interest costs for construction of a structure on the land is not a cost of holding land. If the interest cost for the construction would otherwise be deductible, the vacant land provisions would not prevent a deduction.
Whether the new vacant land provisions apply to deny a deduction for interest costs on the deposit, you need to consider the terms and conditions of the contract with the developer. If the conditions mean that you hold an interest in the land, you would not be entitled to a deduction for the interest cost on the deposit.
Typically, an off-the-plan purchase occurs when you enter a contract to purchase new residential premises before construction is completed. At this stage you’re purchasing a contractual right to have the property built. You pay a deposit on signing a contract with a developer. You pay the balance of the purchase price on settlement. On settlement, you’re purchasing a new residential premises.
If the conditions indicate you do not own an interest until the premises is constructed, then you will not be taken to hold the land. The vacant land provisions will not operate to deny deductions on the interest incurred on the deposit.
Under the existing CGT rules, holding costs that are not deductible may be included in the cost base of the asset.
For further information see - Deductions for vacant land
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