Private ruling: CGT- Subdivision of land
Date of advice: 29 June 2017
Published: October 2017
Ruling period: Year ending 30 June 20CC
Date scheme commenced: 1 July 20BB

Ruling: Q1: Are the proceeds from the sale of unit X assessable as statutory income under the CGT provisions in Part 3-1 and 3-3 of the ITAA 1997? | A1: Yes

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. In mid-2001 you purchased a dwelling (the dwelling). The dwelling was used from the date of acquisition as a rental income generating asset and continued to be used for this purpose until it was sold. You engaged a builder and separate town planning consultant and surveyor to organise plans, permits and obtain approval. In mid-20AA, you entered into a contract to construct a building at the rear of the property. You did not borrow any money to fund the construction of the building. It was your intention to use both properties for income generating purposes, but during the construction, changed financial circumstances resulted in you considering selling one of the properties. These circumstances included: ● You owned two other businesses. The building in which one of your businesses operated from was placed on the market and you wanted to raise finance to purchase the premises freehold. ● Both retail businesses operated by you were affected by a decline in retail sales. The dwelling was listed for sale in mid to late 20CC and the building was listed for sale the previous year. The dwelling has been rented since the date of acquisition. The building was never rented following its construction and prior to its sale. The building was sold under the margin scheme in late 20BB. The dwelling was sold in late 20CC as there had been some minor refurbishments undertaken internally. You have not undertaken any property development in the past. You and your spouse have another property. You claim that the intention at the time of building was to gain rental income from the property and maintain both the dwelling and the building as long term investments.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 118-20

Reasons for decision: Summary: The proceeds received from the sale of the subdivided land were not derived in the course of carrying on a business. Similarly, proceeds from the sale of the subdivided land are not considered an isolated profit making transaction, but a mere realisation of a capital asset. Therefore, as the proceeds from the sale of the building will be considered a mere realisation of a capital asset and subject to the capital gain tax provisions.