Private ruling: Disposal of a capital asset
Date of advice: 11 December 2018
Published: April 2019
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Does the disposal of the townhouses constitute the mere realisation of a capital asset? | A1: Yes. You were not in the business of property development; you were building the properties as an investment as an individual. The disposal was therefore a mere realisation of a capital asset.

Relevant facts and circumstances: You purchased a residential property. At the time of purchase you were working in an unrelated field. The property was purchased as a long term investment; your parents lived next door. Your plans were to live in and to renovate the property; renovations were delayed due to funding. You changed careers to building and property development. You established a separate company with an investor. Your company undertook substantial developments of apartment projects. After a number of years your parents moved out of the next door property to a new house. The houses on both properties were demolished and new townhouses were built; half on your property and half on your parents property. The properties were then leased, to generate income for yourself and your parents. Your townhouses were sold in the year ending 30 June 2016. You were never registered for or claimed GST on the construction.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 118-20 | Income Tax Assessment Act 1997 section 995-1