TR 2021/D5 - Income tax: expenses associated with holding vacant land

 

The Property Council welcomes the opportunity to comment on the ATO’s draft taxation ruling TR 2021/D5 (the draft ruling). The draft ruling provides welcome clarity on the ATO’s view of the application and the exclusions of section 26-102 of the Income Tax Assessment Act 1997 and some of the practical compliance approaches for certain situations.

However, the draft ruling does not adequately address situations where property developers use special purpose vehicles (SPVs) such as discretionary trusts as part of a broader property development business.

Our submission recommends two simple amendments to the draft ruling to ensure the provisions dealing with expenses associated with holding vacant land operate as intended:

• Clarify that when determining whether an SPV is carrying on a business, regard will be given to the activities carried out by the wider group; and

• Acknowledge that land acquired in an SPV trust for the purpose of construction and use in that business should be regarded as land ‘available for use’ or in ‘actual use’ by that business.