Private ruling: Expenses related to holding land
Date of advice: 4 June 2021
Published: August 2021
Ruling period: Year ended 30th June 20XX | Year ended 30th June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner allow further time for the taxpayer to deduct losses and outgoings relating to holding land due to exceptional circumstances? | A1: Yes, due to circumstances outside of your control, the Commissioner will exercise his discretion in subparagraph 26-102(6)(d)(ii) of the ITAA 1997. This means you can deduct expenses you incurred in holding the land past the three-year time limit in subparagraph 26-102(6)(d)(i) of the ITAA 1997.

Relevant facts and circumstances: You acquired a property to provide rental income. The building was destroyed by a natural disaster. Your insurance payout was delayed. You entered into a construction contract with a builder before receiving the insurance payout. The construction was hampered by the wet season. The builder went into liquidation and withheld funds you had paid. Construction was delayed because you required contractors capable of doing a particular standard of work. Further delay to the building was caused when the area was locked down as a result of Covid19. Although you received certain building approvals and an occupation certificate, the building was still not available for lease due to building defects. The land was no longer defined as vacant land after defects were rectified and you placed the property on the rental market. The residential building is a substantial size. You incurred expenses related to holding land between the time the building was destroyed and when it was rebuilt and available for lease. This period exceeded three years stated in subparagraph 26-102(6)(d)(i) of the ITAA 1997.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsections 26-102(6)(a)-(d) | Income Tax Assessment Act 1997 paragraphs 26-102(6)(d)(i)-(ii)