Private ruling: CGT - subdivision
Date of advice: 22 June 2021
Published: August 2021
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the sale of the subdivided lot be subject to the capital gains tax (CGT) provisions in Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. As you originally acquired the property to build your own home, and also needed to subdivide the property to achieve your aim, your change in intention does not mean that your activities constitute a business operation, commercial transaction or an isolated profit making venture. Instead, the proceeds you will receive from the sale of the land will represent the mere realisation of a capital asset which will fall under the CGT provisions in Part 3-1 and 3-3 of the ITAA 1997.

Relevant facts and circumstances: You and a friend jointly purchased a property containing a dwelling several years ago. The property came with a subdivision permit. You planned to subdivide the property so that one lot would contain the dwelling and the other lot would be vacant land. You also intended to demolish the dwelling and build a new dwelling on each lot for each of you to live in. The existing dwelling was not lived in by either of you nor rented out for the first two years of ownership. Due to changes in personal and financial circumstances, your plan to build a residence on each block was abandoned. Your friend commenced living in the existing dwelling. You still intend to proceed with the subdivision and you will receive the vacant lot after the registration of the subdivision is completed. You and your friend will transfer your respective interests in each lot to each other so that you own each lot outright. You are now planning to sell the vacant land. You have not owned any other properties and have been living in a rental property for several years.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 15-15 | Income Tax Assessment Act 1997 section 104-10


This ruling applies for the following period periods :