Private ruling: Income – capital v. revenue – land subdivision
Date of advice: 6 December 2018
Published: March 2019
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the profit on the disposal of Unit 1 be assessable income under section 6-5 of the Income Tax Assessment Act 1997 as an isolated profit making transaction? | A1: No. Having regards to your circumstances, and the factors listed in Taxation Ruling TR 92/3, it is accepted that the profit from the disposal of the unit is not assessable on revenue account as a result of an isolated business transaction. Further information on subdividing land can be found by searching ‘QC 23640’ on ato.gov.au

Relevant facts and circumstances: You purchased a property. When this property was purchased, you planned to demolish the existing building and rebuild a new dwelling to live in. Upon receiving quotations to build a new home upon the land, you determined that this option was not feasible as you did not have the borrowing capacity and could not afford to proceed with the construction of the new dwelling to live in. You entered into a Joint Venture Agreement with a developer to build two townhouses on the land. Of the two townhouses to be build, Unit 1 was to be transferred to the Developer upon completion and subdivision and Unit 2 was to be retained as your owner occupied primary residence. The Agreement stipulated that you were to contribute the land and the Developer was to cover all project expenses where the project was to construct two townhouses on the land. The Agreement also required that upon completion of the project and subdivision, the Developer was to retain Unit 1 as consideration for the construction of the two dwellings. You never intended to profit from this development as it was purely a means for you to construct a new home to live in.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5