As long as a ‘substantial and permanent' structure is capable of being used or occupied, then it will generally be treated as being ‘in use or available for use’
When is a structure considered to be ‘in use or available for use’?
At the current stage, for the purpose of S.26-102, little insight is given by the relevant Explanatory Memorandum (EM) and current ATO materials on when a structure satisfies the term ‘in use or available for use’.
However, the ATO has indicated that this term can be interpreted broadly, and the concept of being ‘in use or available for use’ is broader than the requirement for a property to be rented or available for rent; it would appear that as long as a ‘substantial and permanent’ structure is capable of being used or occupied, then it will generally be treated as being ‘in use or available for use’ for the purpose of S.26-102(1).
The timing for when land must contain a structure.
For those entities targeted by the new measure, in order for an otherwise deductible cost of holding ‘vacant land’ to remain deductible, the land must contain an eligible substantial and permanent structure that is ‘in use or available for use’ at the time the outgoing is incurred, which means the land must not be identified as ‘vacant’ at the time a particular cost is incurred.
If a taxpayer incurs a loss or outgoing after ceasing to hold the land, any otherwise deductible loss or outgoing will generally continue to be deductible given that the land was not considered to be ‘vacant’ just before the taxpayer ceased to hold it. Refer to S.26-102(1)(b)(ii).
A special rule for ‘new’ residential premises – refers to S.26-102(4)
It applies where land contains ‘residential premises’ (as defined in the GST Act) that were constructed or substantially renovated while the taxpayer held the land, such residential premises are not considered as being an eligible substantial and permanent structure; and the land is treated as being ‘vacant land’ for the purpose of S.26-102 (despite the fact it contains a residential structure),and the landholder cannot deduct otherwise deductible holding costs unless and until they are:
- lawfully able to be occupied (e.g., an occupancy certificate has been issued for newly constructed or substantially renovated residential premises); and
- genuinely available for rent (i.e., the premises are leased, hired or licensed, or are available for lease, hire or license).
How is the term ‘residential premises’ defined?
With referring to S.195-1 of the GST Act., it is generally accepted that premises will be considered ‘residential’ if they provide shelter and basic living facilities, are fit for human habitation, and are either:
- occupied by a person as a residence or for residential accommodation; or
- intended to be occupied and capable of being occupied, as a residence or for residential accommodation.
Premises that lack the feature of shelter and basic living facilities are not regarded as ‘residential premises’.