Private ruling: Capital gains tax provisions
Published: June 2012
Ruling period: Year ended 30 June 2012. | Year ended 30 June 2013.
Date scheme commenced: 1 July 2011.

Ruling: Q1: Will the proceeds from the sale of your investment property be assessable under the Capital Gains Tax (CGT) provisions? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 - Section 6-5 | Income Tax Assessment Act 1997 - Section 102-20 | Income Tax Assessment Act 1997 - Section 104-10

Reasons for decision: Summary: You are likely to be entering into a profit-making activity if you acquire a property or construct a dwelling on vacant land with the intention of selling it at a profit, and go about it in a business-like way. This could have implications for the way the profit is treated for tax purposes (income or CGT). | Detailed Reasoning - Some of the questions you need to ask are:: · Are your property development activities regular and repetitive? · What is the size and scale of the activities? · Are they planned, organised and carried on in a business-like manner? · Are they carried on for the purpose of making a profit? · Do you rely on the income received to meet you and your dependants' regular expenses? · Are they of a similar kind and carried on in a similar manner, to the activities of other property businesses? In this case, you purchased a vacant block of land. You constructed a dwelling on the land that upon completion was used to earn rental income. The purchase of the land and construction of the dwelling was not done in a business like manner and is not regular or repetitive as you have only owned one other rental property. You are also in no way connected with land development. Therefore the proceeds from the sale of your investment property at X will be assessable under CGT provisions.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | You intended to construct a dwelling on the vacant block of land that was to become a rental property. | Due to delays in the construction process and the global financial crisis, construction of the dwelling took longer than expected to complete. | As soon as construction of the dwelling was complete it was used to earn rental income. | Construction of this dwelling was not done in carrying on a business. | You are in no way connected with land development. | You have been approached by local real estate agents with offers to purchase the investment property. | You are seriously contemplating the sale of the investment property. | You and your partner have owned one other rental property that was subsequently sold.