(c) An independent (and not incidental) purpose to the purpose of any other structure or proposed structure on the land – Whether this is the case is a question of fact.
According to the EM, structures that exist to support the use or functioning of another structure
(e.g., pipes) or to increase their utility (e.g., a residential garage) will not satisfy this requirement. Alternatively, a woolshed for shearing and baling wool and a grain silo would all usually have an independent purpose (rather than being incidental to some other structure) as they operate separately from, and independent of, any other structure on the land. Importantly, the EM states that the separate primary use of a structure to generate income is an indicator of the structure having an independent (and not incidental) purpose. Refer to paragraph 3.24 of the EM.
The timing for when land must contain a structure
Generally, for a loss or outgoing in relation to land to be deductible, the land must contain a suitable structure (i.e., a substantial and permanent structure):
- whose purpose is independent of, and not incidental to any other structure or proposed structure; and
- that is in use, or available for use.
at the time the loss or outgoing is incurred. Refer to S.26-102(1).
However, if a taxpayer incurs a loss or outgoing after ceasing to hold the land (e.g., where they pay interest (i.e., ‘post-cessation interest’) on a loan shortfall after the land is sold), the loss or outgoing will be deductible if the land was not ‘vacant land’ for the purpose of these provisions just before the taxpayer ceased to hold it. Refer to S.26-102(1)(b)(ii).