Vacant land

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Depending on your intention when purchasing vacant land, the acquisition can come under CGT, for private or investment purposes, or GST, for business or profit-making ventures with the land. Although a fairly similar process to obtaining and reporting land with an existing structure, vacant land can have a few different aspects to its buying and selling.

Undeveloped land under CGT has the same rules, records of the date and cost of obtaining the land must be kept along with ongoing expenses, such as council rates and loan interest. If the land does not generate income, these expenses cannot be claimed as an income tax deduction, rather they can be added to the cost base of the land for the purposes of calculating your capital gain or loss if you decide to sell.

Vacant land with the intention to build for rental purposes may be able to claim tax deductions for expenses such as loan interest, council rates and some other holding costs. To be eligible for this though, you will need to actively prove you intend to rent on the property upon competition of construction. If you decide the property will no longer be for rental purposes or you decide to sell, deductions must cease to be claimed as soon as possible. Keep records of any expenses claimed, remaining costs may form part of your cost base when calculating capital gain or loss.

A one-off transaction can categorise your property as a business or commercial pursuit, meaning you would need to register for GST. This will allow you to claim credits for the GST in the price of some business purchases, under regular GST rules. You will also need to report transactions by completing a business activity statement.

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