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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your written advice

Authorisation Number: 1012773966080

Ruling

Subject: Land Subdivision

Question 1

Will the proceeds from the sale of the subdivided blocks of land be from carrying on a business and assessable as ordinary income with the blocks of land being considered as trading stock under section 70-30 of the ITAA 1997?

Answer

No.

Question 2

Will the proceeds from the disposal of the subdivided blocks be assessable income according to ordinary concepts under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No.

Question 3

Will the proceeds from the disposal of the subdivided blocks be subject to the capital gains tax (CGT) provisions under Parts 3-1 and 3-3 of the ITAA 1997?

Answer

Yes.

Question 4

Can you apply the discount method under Division 115 of the ITAA 1997 to calculate your capital gain in relation to the disposal of your interests in the subdivided blocks?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 2015

Year ended 30 June 2016

The scheme commences on:

1 July 2014

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.

• The Taxpayer acquired the property after 1985 and more than 12 months ago.

• At that stage, the Property consisted of several acres of land on a single tittle. At the time of purchase, the land comprised 3 separate areas I uses, being:

• A small lease to a company that used part of the land.

• At the time of acquisition the residential house was not occupied, and required some initial repairs before it was in a condition to be leased.

• Shortly after purchase you began renovating the house.

• The renovations to the house were completed shortly after. The Taxpayer began advertising the house for rent.

• The residential house has been continually available for rent for residential purposes since that time.

• The entire property was rented to the tenants. Due to the size of the property, and its set up, it was used mainly by tenants who used the land for their personal use.

• At no time has the Taxpayer, their spouse or any associate used the property themselves.

• Some years later, the Taxpayer received a letter from the local council regarding a proposed land resumption

Council Rezoning of the property

• Some years after purchase, the council released a Concept Plan of Development which showed that approximately 60 percent of the Taxpayer's property would be set aside for another purpose.

• Almost immediately after purchase, the Taxpayer received unsolicited letters from developers advising about a planned development.

• Later, the Taxpayer received another unsolicited letter from a different developer offering to purchase the Property for $Z.

• Following the finalisation of the Plan by the council, there had been substantial redevelopment and sub-division works undertaken on other properties in the area.

• As a consequence of the development, the Taxpayer determined that after having owned the property for a period of time, he/she would investigate selling half the property as a single lot:

• The Developer made a verbal offer to the Taxpayer of $A subject to DA approval. The Taxpayer refused this offer as it was below market value.

• The Taxpayer had a meeting with a Town Planner to discuss them obtaining DA approval for the site themselves:

• In early 20XX, the Taxpayer approached another property developer to discuss what they should do with the Property:

• The nature of the proposed arrangement is as follows:


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