ATO Interpretative Decision
ATO ID 2001/82 (Withdrawn)
Income Tax
Deductions : deductibility of land tax paid on property no longer producing incomeFOI status: may be released
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This ATO ID is withdrawn as the ATO View on this issue is contained in the Rental Properties Guide.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Whether a claim for land tax under section 8-1 of the Income Tax Assessment Act 1997 can be apportioned if a property ceases to be income producing part way through the year.
Decision
No. A claim for land tax is fully deductible notwithstanding the later conversion of the property to a non-income producing purpose.
Facts
As a result of the income producing use to which a land owner has put his property he receives a land tax assessment. Later in the same financial year the land owner either sells the property or uses it as his residence.
Reasons For Decision
An outgoing for land tax is deductible to the extent that it is incurred in gaining or producing assessable income.
A land owner becomes liable to land tax for the period commencing either 1 January or 1 July (depending on the particular state legislation) if, at a certain point in time (either 31 December or 30 June), he or she satisfies the conditions for its imposition, for example, if the property is being used for income producing purposes. Where a land owner is under an obligation at the start of the land tax financial year to pay land tax because the property is used for income-producing purposes, there will be a sufficient nexus between the outgoing and the production of assessable income for the outgoing to be deductible.
If later in the year, after incurring the expense, the property is sold or it becomes the land owner's residence, there is no requirement to apportion the claim for a deduction for the expense incurred.. The land tax was incurred solely for an income producing purpose because the liability for it was founded in the property's use for income-producing purposes.
In the event of the property being sold and there being an adjustment of the land tax an assessable recoupment will arise for the vendor in accordance with Subdivision 20-A of the Income Tax Assessment Act 1997.
Date of decision: 5 May 1999
Legislative References:
Income Tax Assessment Act 1997
section 8-1
Subdivision 20-A
Keywords
Land taxes
Rental expenses
Rental property
ISSN: 1445-2782
| Date: | Version: | |
| 5 May 1999 | Original statement | |
| You are here | 14 July 2015 | Archived |