Private ruling: Subdivision - disposal Subdivision - disposal
Date of advice: 20 April 2026
Published: 13 July 2026
Ruling period: Year ending 30 June 20YY
Date scheme commenced: DD MM 20YY

Ruling: Q1: Will the proceeds from the future sale of subdivided block be assessed under the capital gains tax provisions of Part 3-1 and Part 3-3 of the Income Tax Assessment Act 1997? | A1: Yes. | Q2: Am I considered to be carrying on an enterprise of property development and as a result will the sale of the subdivided lot be a taxable supply in accordance with section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A2: No. You will not make a taxable supply under section 9-5 of the GST Act because you are not registered or required to be registered for GST.

Relevant facts and circumstances: You are an individual You do not have an ABN and are not registered for GST. On DD MM 20YY, you and person B signed the purchase contract for the property located at XXXXX (the Property) You are employed by the XXX and work as a policy director. Your daily duties involve analysing the effects of government policy on XX operations in XX and advocating on their behalf. Prior to this, you were employed within the X industry. Person B's occupation is a XX officer in XX for the local council On DD MM 20YY, settlement occurred and renovations commenced on the property as follows: • Removal of approximately X% of asbestos fibro cladding, including all external cladding and the walls and ceiling of X internal rooms. All removed cladding was replaced with non-asbestos material. • Removal of all asbestos fibro cladding on the garage. • Full bathroom renovation, and replacement of the kitchen and laundry Much of the work was undertaken by you over a X month period No council consent was required because the works were, for council purposes, classified as repairs, replacements, or maintenance - effectively making the house safe and liveable. All asbestos removal was undertaken by certified asbestos removalists (XX Asbestos Removalists). Around mid-20YY, you had a discussion with the council about subdividing the land. The council advised this was unavailable as the size of your lot was too small, and you would need to build a house to enable the subdivision After the renovations were completed, you lodged a development application. However, you decided not to proceed with that approach given the complexity and cost of building a dwelling and then subdividing. Given the complexity and cost of building a dwelling and then subdividing you decided not to proceed along this path In MM 20YY, you started renting the property. This is your second residential investment property. On DD MM 20YY, you applied for development application, On DD MM 20YY, the development application was approved On DD MM 20YY, you submitted modification application to modify the original development application On DD MM 20YY, the modification application to modify the original development application was approved On DD MM 20YY, subdivision certificate application was lodged On DD MM 20YY, the subdivision certificate was approved On DD MM 20YY, the new block of land (X sqm) was registered No borrowings were required to undertake the subdivision. You advised that the vacant block of land is not yet listed for sale

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 15-15 | Income Tax Assessment Act 1997 Part 3-1 | Income Tax Assessment Act 1997 Part 3-3 | A New Tax System (Goods and Services Tax) Act 1999 section 9-5 | A New Tax System (Goods and Services Tax) Act 1999 section 9-20 | A New Tax System (Goods and Services Tax) Act 1999 section 23-5 | A New Tax System (Goods and Services Tax) Act 1999 section 23-15 | A New Tax System (Goods and Services Tax) Act 1999 section 188-20 | A New Tax System (Goods and Services Tax) Act 1999 section 188-25 | A New Tax System (Goods and Services Tax) Regulations 2019 section 23-15.01

Reasons for decision: Detailed Reasoning - Treatment of profits from land development: Broadly, profits from land development, subdivision and sale can be treated for taxation purposes in the following three ways: • As ordinary income under section 6-5 of the ITAA 1997 (revenue account) resulting from carrying on a business of land development and the sale of subdivided land as trading stock. • As ordinary income under section 6-5 of the ITAA 1997 (revenue account) resulting from isolated business or commercial transaction entered into by a non-business taxpayer, or outside the ordinary course of business of a taxpayer carrying on a business, which is the commercial exploitation of an asset acquired for a profit-making purpose. To the extent that any capital gain arises it is reduced by the assessable amount of ordinary income. • Solely as statutory income under the capital gains tax (CGT) provisions. Under section 6-5 of the ITAA 1997, your assessable income includes the ordinary income you derived directly or indirectly from all sources, during the income year. Additionally, section 15-15 of the ITAA 1997 includes profit arising from carrying on or carrying out of a profit-making undertaking or plan. However, this provision does not apply to a profit that is assessable as ordinary income under section 6-5 of the ITAA 1997, or which arises in respect of the sale of property acquired on or after 20 September 1985. Although the income tax legislation does not define income according to ordinary concepts, a substantial body of case law has evolved to identify various factors that indicate the nature of ordinary income. In FC of T v The Myer Emporium (1987) 163 CLR 199; 87 ATC 4363; (1987) 18 ATR 693 ( Myer Emporium ), the Full High Court expressed the view that profits made by a taxpayer who enters into an isolated transaction with a profit making purpose can be assessable income. Taxation RulingTR 92/3 considers the assessability of profits on isolated transactions in light of the principles outlined in Myer Emporium . According to Paragraph 1 of TR 92/3, the term isolated transactions refers to: • those transactions outside the ordinary course of business of a taxpayer carrying on a business, and • those transactions entered into by non-business taxpayers. Paragraph 6 ofTR 92/3 provides that a profit from an isolated transaction will generally be income when both the following elements are present: • your intention or purpose in entering into the transaction was to make a profit or gain, and • the transaction was entered into, and the profit was made, in the course of carrying on a business or in carrying out a business operation or commercial transaction. Additionally, if a taxpayer acquires an asset with the intention of using it for personal enjoyment but later decides to commit the asset, either: • as the capital of a business or • into a profit-making undertaking with the characteristics of a business operation or commercial transaction, this activity constitutes the carrying on of a business, or a business operation or commercial transaction. The profit from such activity is income even though the taxpayer did not have the purpose of profit-making at the time of acquiring the asset. Some of the factors to consider when looking at whether an isolated transaction amounts to a business operation or commercial transaction are listed at paragraph 13 of TR 92/3. They are: a) the nature of the entity undertaking the operation or transaction b) the nature and scale of other activities undertaken by the taxpayer c) the amount of money involved in the operation or transaction and the magnitude of the profit sought or obtained d) the nature, scale and complexity of the operation or transaction e) the manner in which the operation or transaction was entered into or carried out f) the nature of any connection between the relevant taxpayer and any other party to the operation or transaction g) if the transaction involves the acquisition and disposal of property, the nature of that property and h) the timing of the transaction or the various steps in the transaction. Profits on the sale of subdivided land can therefore be income according to ordinary concepts within section 6-5 of the ITAA 1997, or as a profit-making undertaking or plan within section 15-15 of the ITAA 1997, if the taxpayer's subdivisional activities have become a separate business operation or commercial transaction, or an isolated profit-making venture. In contrast, paragraph 36 of TR 92/3 notes that the courts have often said that a profit on the mere realisation of an investment is not income, even if the taxpayer goes about the realisation in an enterprising way. However, if a transaction satisfies the elements set out above it is generally not a mere realisation of an investment. | Detailed Reasoning - Application to your circumstances: You and Person B have no history of being employed or carrying on a business in the property development industry. You purchased the property as a long-term investment property, you did some repairs and renovations to the property, this was not carried out to make a profit, it was completed to make the property livable and safe for you to rent out. Your desire to reduce the costs of maintaining the land is the reason provided for the decision to subdivide, and the sale of the vacant block will be carried out to help reduce the costs of the debt on the property due to the repairs and renovations. | Detailed Reasoning - Land sold as part of carrying on a business of property development: Whether the sale of land is a disposal in the course of carrying on a business is determined by examining and weighing all the relevant facts and circumstances taken as a whole. In this case, it is accepted that you are not in the business of property development. The subdivision was completed to reduce maintenance costs due to the size of land and to help reduce the costs to the property after the renovations were undertaken to make | Detailed Reasoning - Profit from an isolated business or commercial transaction: In this case, it is considered that the proceeds from the sale of the vacant portion of the land will not constitute an isolated profit-making transaction or the profit arising from the carrying on or carrying out of a profit-making undertaking or plan. Instead, the proceeds will represent the mere realisation of a capital asset. The property has been held by you and your spouse as an investment property since XXX 20YY. The subdivision was carried out to help pay the property debt incurred in getting the investment property ready for rent by removing the asbestos and making the place liveable and healthy, making the property bushfire safe, and reducing the yard size to save on maintenance. Consequently, the proceeds will not be assessable under either section 6-5 or section 15-15 of the ITAA 1997. The proceeds will be assessed solely on capital account under the capital gains tax provisions of the ITAA 1997. | Detailed Reasoning - Question 2: Am I considered to be carrying on an enterprise of property development and as a result will the sale of the subdivided lot be a taxable supply in accordance with section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | Detailed Reasoning - Detailed reasoning: A supply is taxable under section 9-5 of the GST Act if: a) you make the supply for consideration; and b) the supply is made in the course or furtherance of an enterprise that you carry on; and c) the supply is connected with the indirect tax zone; and d) you are registered, or required to be registered. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. You satisfy subsections (a) and (c) of section 9-5 of the GST Act because you will receive consideration when you sell the vacant land, and the land is connected with the indirect tax zone. No GST-free provision or input taxed provision applies. We therefore address whether you will make the supply in the course or furtherance of an enterprise and whether you are registered or required to be registered for GST at the time of the supply. | Detailed Reasoning - Course or furtherance of an enterprise: An enterprise is defined broadly in section 9-20 of the GST Act to relevantly include activities done in the form of a business, an adventure in the nature of trade, and activities undertaken on a regular basis in the form of a lease. The question is whether your activities surrounding the Property and vacant land have the character of an enterprise, and if so, what that enterprise is. Our views on the meaning of 'carrying on an enterprise' are outlined in Miscellaneous Taxation Ruling MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number (MT 2006/1). While MT 2006/1 concerns the ABN framework, its views are equally applied to GST through Goods and Services Tax Determination GSTD 2006/6 Goods and services tax: does MT 2006/1 have equal application to the meaning of 'entity' and 'enterprise' for the purposes of the A New Tax System (Goods and Services Tax) Act 1999? . Paragraphs 170 to 176 of MT 2006/1 explain that the phrase 'in the form of a business' widens the enquiry beyond formal businesses to the commercial character of what is done. The characterisation turns on an overall impression drawn from factors including purpose and intention, the way the activities are organised and carried out, their scale and repetition, and whether they resemble how such activities are ordinarily conducted in the same or similar trades. It is the weighing of these factors that leads to a conclusion; no single factor is determinative. Additionally, the concept of enterprise expands on 'in the form of a business' with 'in the form of an adventure or concern in the nature of trade'. Although an activity may be an isolated or one-off transaction which would not amount to a business, paragraph 234 of MT 2006/1 provides that it may nevertheless have the characteristics of a business deal. Conversely, paragraph 244 of MT 2006/1 states that the mere fact that an asset is sold at a profit does not, of itself, give the activity a commercial character. In relation to one-off property and subdivision transactions, paragraph 265 of MT 2006/1 identifies contextual factors that may indicate a business or an adventure or concern in the nature of trade. These include whether: • there is a change of purpose for which the land is held; • additional land is acquired to be added to the original parcel of land; • the parcel of land is brought into account as a business asset; • there is a coherent plan for the subdivision of the land; • there is a business organisation - for example a manager, office and letterhead; • borrowed funds financed the acquisition or subdivision; • interest on money borrowed to defray subdivisional costs was claimed as a business expense; • there is a level of development of the land beyond that necessary to secure council approval for the subdivision; and • buildings have been erected on the land. Enterprise also encompasses leasing. Activities done on a regular or continuous basis in the form of a lease are within section 9-20 of the GST Act. You acquired the approximately X sqm block of land with a deteriorated residential dwelling on XX XXX 20XX. At the time of acquisition, you intended to repair and lease out the Property and to also explore the possibility of subdivision. Subdivision was considered because it would assist in offsetting expected repair costs and would reduce the size of the yard attached to the Property, thereby reducing future maintenance requirements. The dwelling required extensive remediation due to the presence of asbestos and general dilapidation. This included asbestos removal and the installation of new essential facilities. You performed most of the work required to bring the dwelling to a liveable condition. Although these works were significant, they were undertaken to prepare the dwelling for leasing purposes rather than for resale. You leased out the Property in XXX 20XX. This was your second residential investment property, with your first property still held as a long-term rental. Therefore, you are carrying on an enterprise of leasing. However, it is necessary to consider whether the subdivision and sale are undertaken in the course or furtherance of that leasing enterprise, or whether they constitute a separate adventure in the nature of trade. Due to council planning rules imposing minimum lot-size restrictions (X sqm), subdivision of the Property could not proceed unless a dwelling was first constructed on the proposed new lot. You later decided not to proceed due to the complexity and cost of construction, including the need for financing during a period where rent could not be derived from the Property, contractor coordination, construction industry instability, and rising material costs. These factors led you to abandon the proposed construction and subdivision. In 20XX, the council revised its rules to allow subdivision of undersized lots where the council is satisfied that a dwelling could feasibly be built on the new lot. These revisions were implemented in XXX 20XX. Under these changes, construction before subdivision was no longer always required and subdivision became viable without the previously associated risks and costs. After the rule change, you undertook only the minimum steps necessary to complete the subdivision process. You had not previously undertaken a subdivision and did not hold the skills or experience typically associated with subdivision. You relied on external professionals in progressing the subdivision, including surveying and planning consultants, bushfire consultants, and licensed contractors. You also did not borrow additional funds for the subdivision-related activities. The steps taken were limited to those reasonably necessary to obtain approval and registration. Your sequence of activities demonstrates that you acquired and held the Property for leasing, that subdivision was initially explored as a means of offsetting renovation costs and reducing the land area (and therefore maintenance costs) attached to the leased dwelling and that subdivision proceeded only once external rule changes reduced the complexity, risk, and cost of doing so. The scope of the subdivision was limited to a single lot, and the activities were confined to those required to complete that outcome. Although you undertook some steps commonly seen in subdivision enterprise contexts, those features are not determinative. The overall pattern of activity is more consistent with managing and adjusting a residential rental investment in the course of a leasing enterprise, and the eventual subdivision represents a restructuring incidental to that investment, rather than undertaking a subdivision in the form of a business or trade. | Detailed Reasoning - Registered or required to be registered for GST: A supply is taxable under section 9-5 of the GST Act only if you are registered for GST or required to be registered at the time of the supply. You are not registered for GST. Under section 23-5 of the GST Act, registration is required where an enterprise is carried on and GST turnover meets the registration threshold. The registration threshold is $75,000, as provided in section 23-15 of the GST Act and section 23-15.01 of the A New Tax System (Goods and Services Tax) Regulations 2019 . For the purposes of projected GST turnover under section 188-20 of the GST Act, supplies of a capital asset are disregarded; section 188-25 of the GST Act. You will dispose of the vacant land that arose from subdividing the block containing your leased dwelling. The vacant lot is a capital asset because it is not held for sale in the ordinary course of any enterprise that you carry on. Accordingly, proceeds from the sale will not be included in your projected GST turnover. As you are not making any other supplies that would be included in your GST turnover, your projected GST turnover will not meet the registration threshold, and you are therefore not required to be registered for GST. | Detailed Reasoning - Conclusion: You will not make a taxable supply under section 9-5 of the GST Act when you sell the vacant land, because you are not registered for GST and are not required to be registered for GST.