Private ruling: Vacant land holding costs
Date of advice: 5 October 2022
Published: December 2022
Ruling period: Year ended 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: DDMMYYYY

Ruling: Q1: Will the Commissioner allow you to deduct holding costs for vacant land beyond the third anniversary of the date that the residential structure containing your investment property was deemed to be uninhabitable as provided for in section 26-102(6)(d)(ii) of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. The circumstances causing the residential premises to be uninhabitable are exceptional and outside of your control, allowing you to deduct the holding costs for the land as provided for in subparagraph 26-102(b)(i) of the ITAA 1997. The commissioner will exercise his discretion allowing you to deduct the holding costs for vacant land beyond the third anniversary of the date that the structure was deemed to be uninhabitable as provided for in subparagraph 26-102(6)(d)(ii) of the ITAA 1997.

Relevant facts and circumstances: You purchased an investment property. The property is a unit within a residential complex. A fire destroyed multiple units within the complex and all units within the complex were deemed uninhabitable. A Storm and Fire claim was commenced by the unit owners in relation to the damage. Due to ongoing legal proceedings, you have continued to incur holding costs associated with your ownership of the property. No work to repair/rebuild the residential complex can be undertaken until the matter has been settled with the insurer. The complex has remained unfit for habitation and remains closed therefore you have been unable to rent out your property since it was vacated. The duration of these proceedings is beyond the individual owner's control.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 26-102