Private ruling: Capital gains tax
Published: March 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Questions and answers | 1. Will the subdivision of land constitute an event for the purpose of CGT? | No | 2. Will the subdivided land retain the pre-20 September 1985 acquisition date of the original land? | Yes

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You and your spouse purchased a property in the early 1980's. This is your principal place of residence. There has been no major capital improvement or development on the property since the introduction of capital gains tax in September 1985. The area of the property is in excess of 2 hectares. The property was re-zoned by Council several years ago. Consequently, there is potential for sub-division into X lots of approximately 1 hectare each. You and your spouse intend to sell the home and land as you find the property too large to manage. You plan to apply to the local council for the possibility to further divide the land into smaller blocks. You may still sell the property on one title.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10 , | Income tax Assessment Act 1997 Section 112-25 and | Income Tax Assessment Act 1997 Subsection 108-5(1).

Reasons for decision: Summary: Land and buildings are defined as capital gains tax (CGT) assets and the disposal of a CGT asset is a CGT event A1. A capital gain or loss may be disregarded if you acquired the asset before 20 September 1985. In your circumstances, the land and dwelling were acquired prior to 20 September 1985, consequently, any capital gain on their disposal is disregarded. Subdivision of land is not a CGT event, provided you are the owner of the original asset and remain the owner of the newly split assets. Neither does subdivision of land change the status of the land from being pre CGT. Accordingly the pre CGT status is applicable to the subdivided blocks of land.