Sorry for butting in but funny you should mention vacant land. Steele's Case was specifically associated with a scenario like that. While the facts of the case are a little complicated and involved the jist of the case (not withstanding the Judge's comments that interest was capital which left people scratching their heads) was that if interest was too remote then you couldn't claim it. You really have to have an intention of deriving assessable income if you want to claim interest. With vacant land, you might find that the ATO are less willing to entertain the thought of people claiming interest expenses in the vain hope that you might derive rents in the near future. You really have to be at a point where plans are in place and you can demonstrate that, yes, you will be earning interest soon.
Don't forget that the ATO does have negatively geared people on its hitlist. It wants to see income offsetting deductions claimed. A lot of prudent advisors might say that interest should be capitalised in a situation where it may be too early to claim after which time you may revisit the issue of claiming an outright deduction.
