Private ruling: Sale of residential property
Date of advice: 21 August 2019
Published: October 2019
Ruling period: Year ending 20XX
Date scheme commenced: 1 July 19XX

Ruling: Q1: Will the proceeds from the sale of the duplex in Town A, be considered ordinary income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) as a result of profit from an isolated commercial or business transaction? | A1: No. You do not carry on a business of buying, selling or developing property. You have held the property for a substantial period of time during which time you did not consider its development. You attempted to sell the property before its subdivision without success. You had minimal involvement in the works. You planned that the property continues to be used for private and domestic purposes, by you and your family however your situation has changed due to issues outside your control. On balance, the proceeds from the sale of the duplex will not be included in your ordinary income. | Q2: Will the proceeds from the sale of the duplex be subject to the capital gains tax (CGT) provisions in Parts 3-1 and 3-3 of the ITAA 1997? | A2: Yes. On balance, the proceeds represent a mere realisation of a capital asset under the capital gains tax (CGT) provisions in Parts 3-1 and 3-3 of the ITAA 1997. | Q3: Will the sale of the duplex be subject to GST? | A3: No. Having applied all the principles in MT 2006/1 to the present circumstances, the activities and sale of the duplex do not amount to an enterprise for GST purposes. The sale of the duplex will not be considered a taxable supply and will not be subject to GST.

Relevant facts and circumstances: After 20 September 1985, you bought a property in Town A. You have provided the value at acquisition and the size of the property. The dwelling at the property was used as your main residence for a number of decades. A few years ago, you engaged Entity A to demolish the existing home, subdivide the land and build a duplex. Company A applied for the required development approval with the council. One side of the duplex would be used and occupied by you and your spouse as your main residence. The other side would be occupied by your child. You also engaged the services of a surveyor and provided details of the costs involved. Approvals in relation to the works were granted later that year and construction activities started the following year but were slow due to inclement weather. Later that year, you received a letter from the local council (the Council) advising that they were undertaking a study to change the zoning area from a low density housing zone to a high density residential zone, which would allow nearby high rise buildings. In consultation with the Council, construction ceased as the Council advised you that it was likely the property would become parkland under a voluntary acquisition proposal. You have provided copies of the Council correspondence. You decided to put the property on the market that year but received no offers for the duration it was listed to the following year. You details provided the value of the property at that time. After a few years, a newly elected Council voted against the parkland proposal, but allowed the properties directly behind and besides your property to go to public exhibition for amended land use. You subsequently recommenced construction as the parkland proposal had not gone ahead, however, the Council decided to allow buildings that were several storeys high on the properties that were directly adjacent. Due to the significant decisions by Council, you no longer wanted to reside there due to the surrounding properties and loss of privacy. You decided to sell the property and engaged the services of a real estate agent. You have provided details the expected sale price the property and details the total costs incurred. You used your own funds and did not borrow any funds to finance the activity. You are not registered for GST. You or any related entities have no previous involvement in any subdivision or property development activities. You or any related entities do not intend to be involved in any future subdivision or property development activities.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 Part 3-1 | Income Tax Assessment Act 1997 Part 3-3 | A New Tax System (Goods and Services Tax) Act 1999 section 9-5 | A New Tax System (Goods and Services Tax) Act 1999 section 9-20