The Government announced the intention to disallow deductions from 1 July 2019 for holding costs where vacant land is not genuinely held for the purpose of earning assessable income. Land banking property developers in particular should be aware of these proposed changes. At its simplest, the rules will not apply from the point where a property has been built and is available for rent, or where a primary production business is being carried on. It is expected that “genuinely held for the purpose of earning assessable income” may be up for some interpretation. Deductions that will be denied include common expenses such as interest on loans, borrowing costs, rates (council, water and sewerage), insurance and land tax. These deductions will not be able to be carried forward to future years, however may be able to be included in the cost base of the land, subject to the existing cost base rules. This new measure purports to increase revenue by $50 million over the budgeted forecast.

For a summary of the main budget changes for 2018, see Pilot Partners Chartered accountants summary here.

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