Private ruling: Capital gains tax (CGT) and goods and services tax (GST), subdivision
Date of advice: 1 November 2018
Published: January 2019
Ruling period: 1 July 20XX to 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are the proceeds from sale of the subdivided lots subject to capital gains tax (CGT)? | A1: Yes. On balance, the Commissioner considers that proceeds from the sale of the lots will not be assessable as ordinary income from carrying on a business or an isolated commercial transaction. Thus, the proceeds will be subject to the CGT provisions in Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 (ITAA 1997). | Q2: Are the proceeds from the sale of the subdivided lots assessable as ordinary income? | A2: No. The proceeds will be subject to the CGT provisions in Parts 3-1 and 3-3 of the ITAA 1997. | Q3: Is the sale of the subdivided lots a taxable supply? | A3: No. Having applied all the principles in MT 2006/1 to the present circumstances, we conclude that the sale of the lots does not amount to an enterprise and the sale of the subdivided lots will not be taxable supplies pursuant to section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 . The sale of the lots will be regarded as the mere realisation of a capital asset.

Relevant facts and circumstances: You and your spouse (you) are not involved in the field of property subdivision or development. You own several properties including the subdivided property. You are not registered for GST for the purpose of property development. You jointly bought the property post 20 September 1985 and provided the value at acquisition. You moved into the dwelling on the property after settlement on acquiring the property and treated the dwelling as your main residence. You have provided relevant details of the land including its size. The property was rezoned following a council planning scheme. Shortly after you moved in you made an application for subdivision of the property. The purpose of the subdivision was to build investment properties. The titles were granted the following year. You personally funded the subdivision. You provided the market value prior subdivision. The subdivision process was managed by you. You have previously not been involved in any subdivision or property activities. You engaged a number of consultants and contractors to provide the necessary expertise to undertake the required activities and have provided details of the total cost of their services. You personally undertook some minimal building activities in relation to the subdivision. Due to financial difficulties, you sought finance to obtain funds to build on the lots. Changes to lending criteria prevented you from acquiring the funds. As a result you couldn’t build the investment properties on the lots. The same year, the subdivided vacant lots were advertised for sale via an agent and sold with settlement occurring within months. You have not claimed any tax deductions in relation to the subdivision works. You provided the sale amount for each lot. Due to personal circumstances, you no longer reside at the property but have retained one lot and rented it out. You provided the rent amount and the value of this lot.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 10-5 | Income Tax Assessment Act 1997 section 102-5 | Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 112-25 | A New Tax System (Goods and Services Tax) Act 1999 section 9-10 | A New Tax System (Goods and Services Tax) Act 1999 section 195-1