Private ruling: CGT – sale of vacant land
Date of advice: 28 September 2018
Published: November 2018
Ruling period: Year ended 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the proceeds from the sale of several lots of vacant land be assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No. You are not considered to be carrying on a business of property development, or to have been carrying on or carrying out a profit-making undertaking or plan. The realignment of the boundaries on the lots and sale of the land is considered to be the mere realisation of a capital asset in the most enterprising way. Therefore, the proceeds from the sale of the land are not assessable under section 6-5 of the ITAA 1997. As such, consideration needs to be given to the capital gains tax (CGT) provisions. Further information on the taxation treatment of proceeds from the sale of land can be found by searching 'QC 23640' on ato.gov.au . | Q2: Will the proceeds from the sale of several lots of vacant land be assessable under the CGT provisions in Parts 3-1 to 3-3 of the ITAA 1997? | A2: Yes. CGT event A1 will happen when each of the lots are sold. As the proceeds from the sale of the lots are not assessable under section 6-5 of the ITAA 1997, they will be assessable under the CGT provisions. Further information about CGT can be found by searching 'QC 22147' on ato.gov.au

Relevant facts and circumstances: You are the sole owner of a multi lot property. The property is situated in a rural area and the lots are zoned as lifestyle blocks. You were gifted the lots over a period of time, being both pre and post CGT assets. You have never used the property for income producing purposes. You have treated a dwelling situated on one of the lots as your main residence for over four decades. Now in your retirement you have found the size of the property in excess of your personal lifestyle needs and are finding it increasingly difficult to manage the upkeep of the land due to health issues, so you made the decision to downsize and sell off several lots. In order to make the lots more attractive to potential buyers you engaged a professional land surveying company to draw up plans to realign all the lot boundaries to a more uniformed size, so that the lots can be marketed and sold as lifestyle blocks, which is in keeping with the current zoning. A land surveying company is attending to all the matters necessary to effect the land boundary realignment, including securing planning permits through the local council, insuring you adhere to all council requirements, dealing with other government authorities and engaging contractors. You have signed an exclusive sales authority with a local real estate agent. The blocks will be advertised in a local magazine and on the internet. You will incur costs associated with the boundary realignment and the sale of the vacant lots.

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