Taxation Determination

TD 92/126

Income tax: property development: if in an isolated commercial transaction land is acquired for the purpose of development, subdivision and sale but the development and subdivision do not proceed, how is a profit on a sale of the land treated for income tax purposes?

  • Please note that the PDF version is the authorised version of this ruling.

FOI status:

may be releasedFOI number: I 1212956

This Determination, to the extent that it is capable of being a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953, is a public ruling for the purposes of that Part. Taxation Ruling TR 92/1 explains when a Determination is a public ruling and how it is binding on the Commissioner. Unless otherwise stated, the Determination applies to transactions entered into both before and after its date of issue.

1. Net profit made on the sale of the land is assessable income under subsection 25(1) of the Income Tax Assessment Act 1936.

2. The land is not treated as trading stock because a business of trading in land was not commenced.

3. In calculating the profit on the sale of the land the cost of the land is deducted from the proceeds of sale.

Example: A taxpayer purchases broadacres of land with the intention of development and subdivision into residential blocks for sale. After purchase, the property market suffers a downturn and the taxpayer's expected source of finance fails to materialise. The land lies idle until it is eventually sold some years later.The net profit on the sale of land is assessable income under subsection 25(1).

Commissioner of Taxation


ATO references:

ISSN 1038 - 3158

Related Rulings/Determinations:

TD 92/124
TD 92/125
TD 92/127
TD 92/128

Subject References:
land development
development does not proceed

Legislative References:
ITAA 25(1)

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