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tangalinronnel1(Enthusiast)Enthusiast
9 Oct 2025

Hi ATO Community,


I’m looking for guidance on how the vacant land rules (before and after 1 July 2019) impact Capital Gains Tax (CGT) for a property I’ve owned for over 21 years.


Key Facts:

  • The land has never been farmed.
  • The property was otherwise vacant, and we did not actively use it in any business ourselves.
  • The buyer intends to use the land as a lifestyle property (to build a home and keep horses).

Question:


What is the impact of the vacant land rules introduced on 1 July 2019 on my CGT calculation when I sell the land?


Specifically:

  • Are holding costs (e.g. council rates, land tax, maintenance, interest) incurred before 1 July 2019 still eligible to be included in the CGT cost base?
  • And are holding costs incurred after 1 July 2019 excluded from the cost base, due to the land being considered “vacant” under section 26-102 of the ITAA 1997?

I would appreciate clarification or links to relevant rulings or guidance on how these rules apply to my situation.


Thanks!

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506 views
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YellowPotato(Taxicorn)Taxicorn
9 Oct 2025

Should see a tax agent.

I think the purpose of the 1 July 2019 change is to stop expenses from the vacant land itself being a deduction whilst constructing a rental property. Can still claim interest on a loan used for the construction itself.

  1. Should be able to claim holding cost before 1 July 2019. Don't think you would have been able to claim a deduction on it.
  2. Pretty sure they're talking about can't claim the expense or cost as a deduction, not can't claim the expense or cost. So you should be able to claim it in the cost base.

"Third element: costs of owning the CGT asset

The costs of owning an asset include:

  • rates
  • land taxes
  • repairs
  • insurance premiums
  • any non-deductible interest on loans used to finance  
    • the acquisition of a CGT asset
    • capital expenditure to increase an asset’s value.

These expenses can be included in the cost base only if they are not deductible. This would happen if, for example, they were incurred for vacant land."


https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/calculating-your-cgt/cost-base-of-asset

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Vacant Land – Are Holding Costs Allowed in CGT Cost Base? | ATO Community