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Edited version of your written advice
Authorisation Number: 1051466042752
Date of advice: 20 December 2018
Ruling
Subject: Two lots vacant land subdivision – change of intention from main residence use to a subdivision
Question 1
Will the sale of the subdivided lots be treated as ordinary income?
Answer 1
No. The activities related to the subdivision of the property are not commercial in nature or part of carrying on a business.
Question 2
Will the sale of the lots be subject to capital gain tax?
Answer 2
Yes. The Commissioner considers that proceeds from the sale of the lots will be subject to the CGT provision in Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997.
Question 3
Will the sale of the lots be a taxable supply?
Answer 3
No. Having applied all the principles in MT 2006/1 to the present circumstances, we conclude that the sale of the property will not amount to an enterprise and the sale of the subdivided lots will not be taxable supplies pursuant to section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999. The sale of the lots will be regarded as the mere realisation of a capital asset.
This ruling applies for the following period:
1 July 2018 to 30 June 2019
The scheme commences on:
1 July 2018
Relevant facts and circumstances
You and your spouse (you) run a business not related to property development or property building. You have never been involved in the building trade.
In 20xx, you rented a house in town A with a view of moving from Town B to Town A.
After 20 September 1985, you purchased the block of land (the property) in Town A to build your main residence. You provided the value and the size of the property.
In 20xx, you purchased an established property and settled the same year. This became your main residence and as a result you decided not to build on the land.
In 20xx you decided to lodge an application to subdivide the property in two lots.
You engaged several entities to assist with the subdivision activities.
Approval was granted in 20xx. You provided a copy of Decision Notification letter for the development application and a copy of the allotment subdivision plan.
The property has not been rezoned. You are using your personal funds to develop the property.
You provided the value of the property prior to the subdivision activities, the estimating selling value of the lots and the expected value you will receive from the proceeds of the sale. You will sell the property privately.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 section 10-5
Income Tax Assessment Act 1997 section 102-5
Income Tax Assessment Act 1997 section 104-10
Income Tax Assessment Act 1997 section 112-25
A New Tax System (Goods and Services Tax) Act 1999 section 9-10
A New Tax System (Goods and Services Tax) Act 1999 section 195-1
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