Private ruling: Property subdivision
Date of advice: 15 May 2020
Published: June 2020
Ruling period: 1 July 20XX to 30 June 20XX | 1 July 20XX to 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the proceeds from the sale of the blocks be subject to the capital gains tax (CGT) provisions under Part 3-1 of Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. On balance, the sale of the subdivided lots is considered to be a mere realisation of a capital asset. Profits from the sale of the subdivided lots will not be assessable as ordinary income under section 6-5 of the ITAA 1997. The proceeds represent a mere realisation of a capital asset which will fall for consideration under the CGT provisions in Part 3-1 of the ITAA 1997.


Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 subsection 104-10(5)


Relevant facts: You acquired an interest in a dwelling after 20 September 1985(the dwelling) | The land is approximately X sqm and the dwelling was your main residence. | Your spouse passed away a number of years ago and the dwelling fell into a state of disrepair. | You moved into a rental unit as the dwelling was not habitable. | You decided to demolish the existing dwelling and rebuild. | You will subdivide the land into a number of blocks and sell one of the subdivided blocks. | You will fund the cost of subdivision from savings. | You estimate that the land value prior to subdivision was approximately $X-$Y. | The approximate costs of the subdivision are an amount. | You will sell one of the subdivided blocks for $x to $y. | You have engaged a project manager who will undertake the necessary requirements in relation to the subdivision of the land. The approximate cost of this is an amount. | You did not acquire additional land. | You will have no major involvement in the subdivision process. External contractors will carry out the works in accordance with the development approval. | Neither you nor any related entities have been involved in any property development or subdivision activities. | Neither you nor any related entities plan to be involved in any property development or subdivision activities in the future. | There is no business plan. | The works only involved what was necessary to secure the approval.