Interest deductions on loans for vacant land

Before July 2019, loans on vacant land were an incredibly viable way of entering the property market. The interest was considered deductible, so overall, the cost of holding vacant land was less. However, in July 2019 a new regulation meant that this wasn't the case anymore. Here's how the law has changed, and how it might force you to make some changes.

You can't claim interest until the structure is complete

Previously, you may have been able to hold on to your plot of vacant land, deducting any interest gained on the loan as a tax deductible expense. Now that the legislation has changed, that interest is only deductible once something has been built on the land. Holding on to vacant land with the intention of keeping it vacant is no longer a feasible solution, as it's become more expensive to hold the land. 


In order to avoid the consequences of the law change, you'll need to get a structure down on the land faster. Not only does this mean that you'll be able to make the interest deductible sooner, but by having something built you can also have the building bringing in revenue sooner (i.e., by way of rental income). 

When the rules won’t apply to you 

It’s important to note that the deductibility of holding costs (i.e., interest expense) on vacant land will continue to be available in the following circumstances — there are other circumstances as well, but these are the main ones: 


  • The land is held by a corporate tax entity.
  • The land is used in carrying on a business by you and/or your affiliates.
  • The land is leased by you to another entity, who is carrying on a primary production business. 

This applies for existing properties too

If you own vacant land and have continued deducting interest from any loans you might have used to get it, the July change means that deductible interest on loans taken out before is now non-deductible. This means that if you purchased vacant land some time ago and it is still vacant with nothing built on it, your interest will be non-deductible until there is something there. 


In these cases, building something on the land will lower your tax burden, and get the revenue flowing sooner. There is an initial cost of getting a building started, but in the long run, it’s the best way to profit.

Need more advice? 

If you need advice on the changes to vacant land loan interest, Ascent Accountants have the best tax planning Perth has to offer. Our expert team has years of experience and can guide you on an ideal way forward, either when dealing with this change in the law or any changes that could come in the future. Please get in touch — we’d love to help. 

Need help with your accounting?

Find Out What We Do

June 30 Checklist for Business Owners

June 12, 2025
June is zooming by! Here’s another handy checklist for business owners—let’s get you sorted for EOFY and tick off those to-dos.

Our EOFY Guide for Taxpayers.

June 12, 2025
EOFY is almost here. Are you ready? Now’s the time to get your finances in order and maximise your tax return. Our latest guide covers top tax deductions, super contributions & co-contributions, SMSF must-dos, PAYG instalment tips and a 30 June checklist.

Maximise Your Rental Property Tax Deductions this EOFY

June 12, 2025
Whether you're a first-time landlord or managing multiple properties, understanding what you can claim at tax time can make a big difference to your bottom line. In our latest blog, we break down the most common (and often overlooked) deductions.

What is a Bridging Loan? And When Would You Need One?

May 12, 2025
Buying and selling property rarely lines up perfectly. The logistics of it all can be incredibly stressful. If you’ve found the perfect next home but haven’t sold your current one yet, a bridging loan can make your move easier, without having to wait on your current property sale.  What is a bridging loan? A bridging loan is a short-term loan that gives you the funds to buy a new property before your current property has sold. It’s designed to bridge the gap between buying and selling. These loans are generally interest-only and are typically offered for up to 12 months, giving you time to sell and settle on your current home while already owning the next one. When would I need a bridging loan? You might consider bridging finance if: You’ve found your next home but haven’t yet sold your current one. You want to avoid renting or moving twice between sales. You want more time to prepare your home for market to get the best sale price. You're building a new home while still living in your existing one. How does it work? Peak Debt: The lender combines your current mortgage, the cost of the new property (including stamp duty and legal fees), and any interest (if it’s being capitalised). This total is known as your Peak Debt. Interest Only: During the bridging period, you’ll typically pay interest only — or the interest may be capitalised (meaning it’s added to your loan rather than paid upfront). Sell Your Property: Once you sell your existing home, the sale proceeds are used to reduce your Peak Debt. End Debt: The remaining balance becomes your End Debt, which then continues as a standard mortgage. An example of a bridging loan. Your current home loan = $200,000 New home = $800,000 Total bridging loan (Peak Debt) = $1,000,000 After selling your home for $600,000, that amount is used to pay down your loan Remaining loan (End Debt) = $400,000 Things to consider. Like any major financial decision, it’s important to understand all the moving parts before you commit. Time pressure: You typically have 6–12 months to sell. If you don’t sell in time, the lender may step in to sell the property and/or charge default interest. This is an extra interest rate that a lender charges when you fail to meet your loan obligations — in this case, not selling your property within the agreed timeframe. Interest costs: If interest is capitalised, it means you're not making repayments during the loan period, so the interest gets added to the loan balance instead of being paid separately. This means your loan grows each month. Making even small repayments can help keep this under control. Equity & serviceability: Lenders will assess how much equity you have and whether you can manage the loan during the bridging period. Loan-to-value ratio: If your End Debt ends up being more than 80% of the new property’s value, you may have to pay Lenders Mortgage Insurance (LMI). Existing loan setup: If your current lender doesn’t offer bridging loans, refinancing may be required — sometimes triggering break fees if your existing loan is fixed. This means you may have to pay a penalty if you end a fixed-rate home loan early (before the agreed term is up). Is a bridging loan right for you? That’s the big question. Bridging finance can offer flexibility and peace of mind, helping you move forward with confidence rather than being held back by uncertain sale timing. But it’s not without risk or cost — so it’s vital to understand the structure, timeframe, and repayment expectations. If you’re considering your next property move and want tailored advice on whether bridging finance suits your situation, talk to the team at Ascent Property Co. or Ascent Accountants. We can also put you in touch with finance brokers to discuss what is best for you.

The true cost of work perks.

May 12, 2025
That work perk might be costing you more than you think… Fringe Benefits Tax (FBT) is charged at a whopping 47% — the same as the top personal tax rate. That means lower salary or fewer benefits. So, while salary packaging can save tax, in many cases it ends up costing you more.

Act Fast to Reduce Your Tax Bill!

May 12, 2025
If you’re expecting a higher income this financial year, now is the time to act. We’ve put together 9 Smart Tax Planning Tips that could save you thousands — but they only work before 30 June.
More Posts