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Edited version of private ruling
Authorisation Number: 1011636667881
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Ruling
Subject: Capital gains tax-land subdivision
Question 1
Whether land as identified is an active asset pursuant to Subsection 152-35 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer: Not relevant as the land is trading stock.
Question 2
Whether small business CGT concessions apply, namely the 15 year active asset exemption pursuant to Subsection 152-105 of the ITAA 1997?
Answer: No.
Relevant facts and circumstances
You have provided a history of the property and you are carrying on a business of land subdivision.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 118-25(1)
Income Tax Assessment Act 1997 Subsection 118-20(1)
Income Tax Assessment Act 1997 Section 152-35
Income Tax Assessment Act 1997 Division 70
Reasons for decision
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
In this case you are carrying on a business of land subdivision and sale. In this kind of business, land held for development, subdivision and resale is regarded as your trading stock.
Subsection 104-220 of the ITAA 1997 states that a K4 CGT event would have occurred when you first ventured your land into your land subdivision and development business, thereafter the land became your trading stock.
Subsection 118-25(1) of the ITAA 1997 advises that capital gains tax does not apply to trading stock. Further, the Anti- overlap provisions under subsection 118-20(1) state that the CGT provisions do not apply where some other provision of the ITAA 1997 Act is applicable.
Division 70 of the ITAA 1997 deals with the taxation treatment for trading stock and therefore is the applicable legislation and the CGT regime is not applicable.
Consequently, the small business concession you are seeking, being the 15 year exemption is not available to you.
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