Private ruling: Subdivision of land - realisation of a capital asset or a taxable supply?
Date of advice: 14 November 2025
Published: 5 January 2026
Date scheme commenced: 1 July 202X

Ruling: Q1: Is the subdivision and sale of your X acre lot the mere realisation of a capital asset and assessable under capital gains tax provisions? | A1: Yes. If you subdivide land and sell the vacant lots without a profit-making intent or business-like undertaking, this scheme is considered to be a capital transaction with the result being a capital gain instead of ordinary income. | Q2: Will the sale of the subdivided lots be a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A2: No. Sale of the subdivided lots does not constitute a taxable supply. This private ruling applies for the following periods: Year ended 30 June 202X The scheme commenced on: 1 July 202X

Relevant facts and circumstances: XX and XY XXXXXX (the 'taxpayers') purchased a X acre block of land at XX XXXXXX XXXXXXX XXXXXXXXX in 19XX. They built the family home on the land and have lived there as their main residence since that time. They each own a 50% share in the land. The subdivision began X years ago when the local council applied to the state government to rezone the land allowing subdivision of the land into smaller lots. The land was originally zoned by the local council as rural residential and could not be subdivided into less than five acre lots. The taxpayers were approached by a neighbour with the idea to subdivide the area. They considered subdividing as a result of their local council's actions. The taxpayers and their neighbours hired an architect to draw up plans which were submitted to their local council. Although they submitted the plans as a group, they intended to deal with the subdivision of their individual lots separately once the plans had been approved. Each land holder would be separately responsible for their outgoings including the building of a road. This would allow each owner of the holding to begin their own development at different stages and at different speeds depending on their available cash flow. The taxpayers had plans, pending council approval, which were submitted in XXXXXXX 202X and the commencement date depended on council approval. Their intention was to meet the council's standards for subdivision and conduct no further work before sale. They did not intend to create an entity to deal with the subdivision but instead managed the subdivision themselves directly. No developer was involved in the subdivisions. The taxpayers had no prior experience with subdivision. They contacted a money lender who advised that they would prefer that a management company, an earthworks and haulage company, organised the majority of the subdivision. The taxpayers' intention was to keep the main residence and reside there both during and after the development. They intended to sell a couple of lots every year to fund their retirement. They sold the blocks themselves. Their intention was to capitalise interest against development costs to form part of the cost bases. They previously supplied a copy of the subdivision plan that they had submitted to council, Titles Annexure A. They intended to divide the land into several blocks, one of which was a drainage reserve and therefore unsuitable for property development. Another block would remain as the land on which their main residence was built on. The blocks of land have now been progressively sold over the last X years according to the facts of the scheme outlined in the previous ruling (Reference XXXXXXXXXXXXX), except for the last block located at XX XXXXX XX XXXXXX (XXX square metres) which is to be sold in the period of this ruling by XXX XXXXX Real Estate. They intend to continue to reside in the main residence that has been subject to an amended street address as a consequence of the subdivision and is now known as XX XXXXXX Street XXXXXXXXXXX XXXX. The taxpayers had a private ruling but were unable to sell the last block before the ruling expired. They applied for this private ruling to cover the 2026 income year and the sale of that last block. The taxpayers have never gained assessable income from the remaining block of land.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1936 subsection 25(1) | A New Tax System (Goods and Services Tax) Act 1999 section 9-5