The short answer is Yes. If you buy a vacant land with the intention of building a dwelling which will be used to earn Rental income, then you can claim the interest costs, council rates etc. to be entitled to a deduction, one must demonstrate that steps have been undertaken to build the dwelling and make it available for rent as soon as it is completed.
he interest expenses on borrowed funds used to acquire land that will be solely used in income-producing operations. As your intention throughout is to build an income producing building and there is no private or domestic purpose for holding the property. And the length of time between the purchase of the property and commencement of construction is not considered to have been so long that the necessary connection between outgoings and the assessable income is not lost. You would be entitled to a deduction for the interest expense under section 8-1 of the tax act.
Changes from 1st July 2019. he Government says it will deny deductions for all expenses associated with holding vacant land. This so-called integrity measure will “address concerns that deductions are being improperly claimed…where the land is not genuinely held for the purpose of earning assessable income”. This measure will not apply to expenses associated with holding land that is incurred after: (i) a property has been constructed on the land, it has received approval to be occupied and is available for rent; or (ii) the land is being used by the owner to carry on a business, including a business of primary production. Interest deductions denied can form part of the CGT cost base