Private ruling: Capital gains tax - subdivision - main residence
Date of advice: 7 April 2020
Published: May 2020
Ruling period: Year ending 30 June 2020 | Year ending 30 June 2021
Date scheme commenced: 1 July 2019

Ruling: Q1: Will the profit or gain derived from the sale of the proposed Lot 1 be subject to capital gains tax provisions in Parts 3-1 and 3-3 of the Income Tax Assessment Act (ITAA) 1997? | A1: Yes. Any proceeds from the sale of your ownership interest in Lot 1, represents a mere realisation of a capital asset which will fall for consideration under the capital gains tax provisions in Parts 3-1 and 3-3.

Relevant facts and circumstances: You have owned The Property since XXXX. The Property is your main residence. The Property is on a residential block. You have sought and obtained approval to subdivide The Property into Lot 1 and Lot 2. You have provided the subdivision plans. You will engage a Builder to manage the subdivision of The Property. You will sell Lot 1 to the Builder for $XXX,XXX under an Agreement which will allow the builder to commence construction on Lot 1 before title has been obtained. The contract date is proposed to be in the XXXX financial year. You do not have any rights to any payments other than the $XXX,XXX being received for Lot 1. You expect to spend approximately $YYY,YYY in obtaining subdivision approval, obtaining a separate title and completing the sale of Lot 1. This is a one off subdivision and you are not in the business of subdividing or considering any further subdivisions in the future. You are not registered for GST and you are not carrying on an enterprise for the purposes of GST.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-110 | Income Tax Assessment Act 1997 Section 118-115 | Income Tax Assessment Act 1997 Section 118-150 | Income Tax Assessment Act 1997 Part 3-1 | Income Tax Assessment Act 1997 Part 3-3