Private ruling: Two lot land subdivision – power and water only
Date of advice: 21 November 2018
Published: March 2019
Ruling period: Year ending 30 June 2019
Date scheme commenced: 1 July 2018

Ruling: Q1: Will the proceeds from the sale of the subdivided lots on property A (the lots) assessable as ordinary income? | A1: No. The activities related to the subdivision of the property are not commercial in nature or part of carrying on a business. | Q2: Will the proceeds from the sale of the subdivided lots be subject to the capital gains tax (CGT) provisions? | A2: Yes. On balance, the Commissioner consider that proceeds from the sale of the property will be subject to the CGT provision in Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 (ITAA 1997). | Q3: Will the sale of the lots be a taxable supply? | A3: No. Having applied all the principles in Miscellaneous Taxation Ruling MT 2006/1 to the present circumstances, we conclude that the sale of the property will 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 work full time in a field not related to property development. You have never been involved in land subdivision. You purchased property A in town A for private use after 20 September 1985. You provided the size and the price of the land at acquisition. After 20 September 1985, you purchased property B. The dwelling on property B could be relocated onto property A. Due to personal circumstances, the relocation did not occur and you rented property B. In 20xx, you enquired with Council A about obtaining permits to relocate the house from property B to property A. Due to the imminent revision of the structure plan you were advised against the relocation. Following completion of the revised structure in 20x, smaller lots size were permitted in town A and you decided to subdivide the property in two in view to relocate a house and build a granny flat on the adjacent land. In 20xx, using the services of Company A, you applied for a two lot subdivision and you received an approval from Council A. In 20xx, Company B placed a stop on certifying the plan arguing that you needed to do some more work on the lots before the subdivision. In 20xx, after years of discussion with Company B, a more economic work was accepted. In 20xx, you engaged an engineer to assist with the work to be done and completed the job in 20xx. In 20xx, Company C undertook the work and completed it in 20xx. You provided the cost of the work done to date. The plan of subdivision has not yet been approved as more work needs to be done and more fees need to be paid. No other work has been done on the land and it is vacant. Due to change in personal circumstances you now want to finalise the subdivision and sell the two lots separately. You have sought advice from a real estate agent but you have not engaged one.

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