Edited version of private advice

Authorisation Number: 1052280559897

Date of advice: 25 July 2024

Ruling

Subject: Vacant land - exceptional circumstances

Question

Will the Commissioner extend the exceptional circumstances exemption relating to vacant land and allow you to continue to deduct ongoing strata fees as per section 26-102 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes, the Commissioner will extend the exceptional circumstances exemption relating to vacant land and allow you to continue to deduct ongoing strata fees, limited to the administration levies, not capital works.

The exemption may apply where an exceptional circumstance outside your control occurs that results in the substantial and permanent structure no longer being on your land or the structure being disregarded. That is, there must have been a substantial and permanent structure on the land prior to the time that the exceptional circumstances occurred. If the substantial and permanent structure was residential premises, then the residence must have been lawfully able to be occupied and have been either leased or available for lease prior to the exceptional circumstances.

Your circumstances are exceptional circumstances as per section 26-102 of the ITAA 1997 and therefore you can deduct the losses or outgoings incurred in holding the apartment pursuant to section 8-1 of the ITAA 1997. The losses or outgoings that can be deducted are those that incurred in gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.

With respect to body corporate fees, not all body corporate fees are deductible under section 8-1 of the ITAA 1997. The deductibility of body corporate fees will depend on the purpose to which the fees are being applied. Mascot Towers body corporate has raised several different levies, including some to take legal action.

Taxation Ruling TR 2015/3 Income tax: matters relating to strata title bodies constituted under strata title legislation provides that in determining what body corporate fees are deductible. The individual owners can claim the deduction if the body corporate is raising the money for a deductible purpose pursuant to section 8-1 of the ITAA 1997. As a general rule, deductible purposes are administrative fees, not capital works.

Further information about deductions for vacant land can be found by searching 'QC60628' on ato.gov.au

This private ruling applies for the following period:

Year ending 30 June 20xx

The scheme commenced on:

xx/xx/20xx

Relevant facts and circumstances

You acquired a Property in a complex on xx/xx/xx. You resided in the Property and it was available for rent from xx/xx/xx. You sold the Property on xx/xx/xx.

This Property was deemed uninhabitable due to substantial and permanent structural defects since xx/xx/xx. You have been unable to acquire a tenant for the Property or dispose of the Property since then while still incurring associated expenses. There were delays in remedial works due to legal disputes with the developers, court hearings and the Government. The Property remains uninhabitable to this day.