ATO Interpretative Decision

ATO ID 2001/317 (Withdrawn)

Income Tax

Costs incurred for the payment of rates on a vacant block of land
FOI status: may be released

This ATO ID is withdrawn from the database as it is a straight application of the law in section 8-1 of the Income Tax Assessment Act 1997 and does not contain an interpretative decision.

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is a deduction available for rates paid on a vacant block of land used as collateral for a loan used to purchase investment property?

Decision

No. A deduction for costs incurred for the payment of rates on a vacant block of land is not available under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) as the cost is not directly related to the gaining of assessable income from the investment property.

Facts

The taxpayer owned a vacant block of land for a number of years. This block does not produce assessable income. The taxpayer subsequently purchased an investment property and used the vacant block as collateral for the loan used to purchase the investment property. Without using the vacant block of land the taxpayer would not have been able to purchase the investment property. The rates on the vacant land were paid in full.

Reasons for Decision

Section 8-1 of the ITAA 1997 provides that expenditure will generally be deductible if its essential character is that of expenditure that has a sufficient connection with the operations or activities which more directly gain or produce assessable income, provided that the expenditure is not of a capital, private or domestic nature.

The rates paid on the vacant block of land are not incidental and relevant to the gaining of income on the investment property. The necessary connection between the payment of the rates on the vacant block of land and the gaining of income from the investment property does not exist. Thus, no deduction can be claimed for the rates on the vacant block of land.

Date of decision: 8 August 2001

Legislative References:
Income Tax Assessment Act 1997
section 8-1

Keywords
Deductions & expenses
Local government rates & taxes expenses

Business Line: Private Groups and High Wealth Individuals

Date of publication: 12 September 2001

ISSN: 1445-2782

history

	Date:	Version:
	8 August 2001	Original statement
You are here	25 July 2008	Archived

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