Extension of S.26-102 to ‘new’ residential premises
A special rule in S.26-102(4) applies where land contains residential premises (as defined in the GST Act) that were constructed or created through substantial renovations while the taxpayer held the land. This applies even where the taxpayer constructed or substantially renovated the property while they held the land prior to 1 July 2019 (i.e., prior to the introduction of the new ‘vacant land’ provisions). In this case, such residential premises are not regarded as being a ‘substantial and permanent structure’, unless and until they are:
- lawfully able to be occupied (e.g., an occupancy certificate has been issued for newly constructed residential premises); and
- rented or genuinely available for rent (i.e., the premises are leased, hired or licensed, or are available for lease, hire or license).
In effect, where this S.26-102 extension to ‘new’ residential premises applies (i.e., where a taxpayer constructs a residential dwelling on land or carries out substantial renovations to an existing residential dwelling), the land is treated as being ‘vacant land’ (despite the fact it contains a substantial and permanent structure) and, therefore, the landholder cannot deduct any otherwise deductible costs associated with holding the land until these additional requirements are met.
Examples of eligible and non-eligible structures
The following description considers whether various structures result in the property being ‘vacant land’ for the purposes of S.26-102(1).
1. Vacant land S.26-102(1) applies (i.e., otherwise allowable holding cost deductions under S.8-1 may be denied)- Fences, retaining walls, pipes and powerlines
- Letterbox
- Residential garage or shed
- Residential landscaping
- Residential premises (in use or available for use)
- Constructed or created through substantial renovations while the taxpayer held the land where: (a) the construction is not complete; or (b) the residential premises are not lawfully able to be occupied (i.e., an occupancy certificate has not been issued); or (c) the premises are not leased, hired or licensed, nor are they available for lease, hire or licence
- Pre-existing residential premises in use or available for use (i.e., that were not constructed or substantially renovated by the taxpayer while they held the land)
- Commercial premises in use or available for use
- Commercial parking garage in use or available for use
- Woolshed for shearing and baling wool in use or available for use
- Grain silo in use or available for use
- Homestead in use or available for use on farmland