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Edited version of private advice
Authorisation Number: 1051996675605
Date of advice: 20 June 2022
Ruling
Subject: Vacant land holding costs
Question 1
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 ITAA 1997?
Answer
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.
This ruling applies for the following periods:
Year Ending 30 June 20XX
Year Ending 30 June 20XX
The scheme commences on:
21 November 20XX
Relevant facts and circumstances
You purchased an investment property.
The property is a strata titled unit in a complex.
Building defects were discovered and the building was deemed unsafe for habitation.
The property had been rented at market rates for the entire period since you purchased the property apart from a 2-week period due to a change in tenants.
The cost of rectification works required to repair the building to a habitable state was in excess of $x.
The repairs were neither required nor able to be funded by the property owners as liability for the building defects lay with three separate liable entities.
The Owner's Corporation has pursued legal action against the liable parties with negotiations ongoing.
The Owner's Corporation has also pursued redevelopment opportunities with negotiations ongoing.
The complex has remained unfit for habitation therefore you have been unable to rent out your property since it was vacated.
Due to the ongoing legal proceedings, you have continued to incur holding costs associated with your ownership of the property.
As the negotiations are undertaken by the Owner's Corporation on behalf of yourself and the other property owner's, the duration of the proceedings is beyond the individual owners' control.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 26-102