Display Homes and Tax Deductions: A Win for Builders on Marketing Costs

If you’re a residential builder or construction group using display homes to generate sales, a recent tribunal decision could significantly improve your tax position.

In a landmark case involving Masterton, the Administrative Review Tribunal (ART) confirmed that the cost of constructing temporary display homes can be fully deductible as marketing expenses, rather than being locked into slow capital write‑offs.

This decision is especially relevant for builders operating in display villages, project home builders, and construction groups that regularly refresh designs to keep up with market demand.

The Background: How Display Homes Are Used in the Real World

Masterton is a long‑established custom home building business. Like many builders, it constructs temporary display homes in designated display villages so potential buyers can walk through, compare layouts, and choose a design.

These were not ordinary houses:

1. They were not designed to be lived in

   
   

2. Not connected to water or electricity

   
   

3. Built on slabs for showroom purposes

   
   

4. Designed to last only for the life of each product design

   
   

5. Regularly demolished and replaced as designs changed

Importantly, these display homes did not create a new business — they simply supported Masterton’s existing contract‑building operations. In fact, around 60% of NSW sales were linked to customers who had visited the display village.

The Tax Dispute: Capital Asset or Marketing Expense?

For decades, Masterton treated these display homes as depreciating assets, a treatment previously accepted by the ATO.

However, when Masterton later sought to access the temporary full expensing rules, the ATO changed its view and argued that:

1. Display homes were capital works

2. The costs were capital in nature

3. Deductions should be limited under Division 43

4. No immediate write‑off was available

Masterton challenged this position and took the matter to the ART.

The Key Question the Tribunal Had to Answer:

Were the costs of constructing display homes capital expenses — or were they deductible revenue expenses under section 8‑1 of the tax law?

This distinction is critical:

1. Capital costs → slow deductions over many years

2. Revenue (operating) costs → immediate tax deductions

The Tribunal’s Decision: Marketing, Not Capital

The ART ruled in favour of Masterton, finding that the display homes were marketing tools, not capital assets.

The Tribunal relied on well‑established tax principles from cases such as Sun Newspapers and National Australia Bank, focusing on what the expenditure was really for.

Why the costs were deductible

The Tribunal found that:

• The display homes were built solely to promote existing home designs

• They did not enlarge or restructure the business

• The expenditure was recurrent and ongoing as part of Masterton’s normal operations

• Each display home supported sales during its product cycle and was then demolished

• The outlay was comparable to advertising or promotional expenditure, even though each build involved a single payment

Crucially, the Tribunal emphasised that a one‑off payment can still be deductible if it relates to the day‑to‑day operation of the business rather than the business structure itself.

Why This Matters for Builders and Construction Groups

This decision is highly relevant if your business:

• Builds display homes or show homes

• Regularly updates designs to reflect buyer preferences

• Uses display villages as a core sales channel

• Incurs significant upfront construction costs for marketing purposes

In the right circumstances, these costs may now be:

• Fully deductible upfront

• Treated as ordinary marketing expenses

• Deductible even if each display home lasts several years

This can result in substantial tax savings and improved cash flow.

Key Takeaway for the Construction Industry

Tax treatment depends on substance, not labels.

Even if something looks like a “building,” it doesn’t automatically mean it’s capital. If the expenditure:

• Supports existing business activities

• Is part of a recurring marketing strategy

• Does not create a lasting structural advantage

…it may still be deductible as a revenue expense.

How We Help Builders Navigate This

At Epictax, we specialise in:

• Construction and property tax advice

• Capital vs revenue analysis

• ATO engagement and dispute support

• Retrospective deduction reviews

If you’re unsure whether your display home costs have been treated correctly, or whether you may be entitled to additional deductions, we can help review your position and quantify the opportunity.

Thinking about your display homes differently could unlock significant tax benefits.

Get in touch to discuss how this decision applies to your construction business.

Citation Masterton Corporation Holding Company Pty Ltd and Commissioner of Taxation (Taxation) [2026] ARTA 160 (Deputy President G Lazanas, Sydney) http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/ARTA/2026/160.html