March 2025 Newsletter

Please click on the following link to view this month's newsletter for March 2025. We would like to highlight the following articles:-

Claiming tax deductions for vacant land

If you're looking to claim tax deductions on vacant land, be aware that the rules are strict and only apply in limited circumstances. Deductible expenses — such as interest on loans, land tax, council rates, and maintenance costs — are only allowed if specific conditions are met.

What qualifies as vacant land?

The ATO defines land as vacant if:

It has no substantial and permanent structure; or
It contains a residence built or renovated while the owner held the land, but the residence is either not legally occupiable or hasn’t been rented or made available for rent.

Substantial structures include items like farm homesteads, silos, commercial garages, and woolsheds. Minor structures such as residential sheds, fencing, or landscaping do not qualify.

Key rule change from 1 July 2019
Deductions for holding vacant land are generally no longer permitted, unless certain exceptions apply. Prior to this, deductions were allowed if the land was held for income-producing purposes.

Current exceptions where deductions are allowed:

The land is held by specific entities (e.g. companies, superannuation funds, managed investment trusts).
The land is used in a business or leased for business purposes — provided no residence exists or is being constructed.
The land is used for primary production by you, your spouse, or an affiliated entity, with no residence on the land.

Exceptional circumstances
In cases where events outside your control — such as natural disasters or fires — result in the loss or disuse of a structure, the ATO may allow a temporary exemption to continue claiming deductions.

General transfer balance cap increases to $2.0 million

The Consumer Price Index (CPI) released for December 2024 confirms that the general superannuation transfer balance cap will rise by $100,000 to $2.0 million for the 2025–26 income year.

The transfer balance cap, introduced in 2017, is a lifetime limit on the amount that can be transferred into retirement phase income streams, where earnings are tax-free and most withdrawals after age 60 are also tax-free. The cap is designed to ensure fairness and sustainability in the superannuation system.

Unlike contribution caps, the transfer balance cap is indexed to CPI in $100,000 increments — not to wages growth (AWOTE). Historical caps:

$1.6 million (2017–2021)
$1.7 million (2021–2023)
$1.9 million (2023–2025)
$2.0 million (from 1 July 2025)

Your personal transfer balance cap is set when you first commence a retirement phase income stream and equals the general cap at that time. Those starting from 1 July 2025 will have a personal cap of $2.0 million. Earlier starters will have a cap between $1.6 million and $1.9 million, with potential for proportional indexation if the full cap was not previously used.

Exceeding your personal cap will trigger an ATO determination, requiring you to withdraw the excess or return it to your accumulation account, and pay an excess transfer balance tax.

Please do not hesitate to contact us if you have any queries in relation to your tax and accounting matters.