If you’re looking for a reason why Australia’s tax system is overwhelmingly complex and in desperate need of reform look no further than the recent habit of our legislators to play whack-a-mole with every so-called ‘integrity’ concern, at the expense of simplicity and ease of administration.
A good recent example of this is the Government’s Budget announcement that it will deny deductions for vacant land from 1 July 2019, and the subsequent release in October 2018 by Treasury of an Exposure Draft for consultation.
The change is said to be required to ‘address concerns that deductions are being improperly claimed for expenses . . . related to holding vacant land, where the land is not genuinely held for the purpose of earning assessable income’, and also ‘reduce tax incentives for land banking’.
But are the provisions of the Act as they currently stand not capable to achieving this outcome? Do we really need yet another specific denial of deduction provision? Yes, it’s true that the principle set down in Steele’s case allows, in appropriate circumstances, deductions for interest incurred in periods during which no relevant assessable income was derived. However – and this is an important point – interest is deductible only where, among other things, continuing efforts are undertaken in pursuit of assessable income. Land banking, as this author understands the term, constitutes the very absence of continuing activities undertaken in pursuit of assessable income, in which case interest would not be deductible to such taxpayers anyway.
And if that’s not enough, have a look at the exception to the exception in the proposed s 26-105(3) to ensure that holding costs for residential premises will not be deductible until the premises are actually being rented, or are available for rent. This clearly adds nothing to the existing deductibility of rental property expenses, but is presumably included to plug a hole created by the very introduction of s 26-105 itself.
The monster continues to eat itself! Whilst the workload of the ATO and tax practitioners becomes heavier and heavier for little or no benefit to the revenue or to taxpayers.
 Steele v Deputy FC of T  HCA 7
 Steele v Deputy FC of T  HCA 7 per Callinan J at 112