| Disclaimer This edited version has been archived due to the length of time since original publication.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 private ruling
Authorisation Number: 1011642785107
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.
Ruling
Subject: Capital gains tax (CGT) and subdivision of land
Did a CGT event occur upon the subdivision of your block of land?
No.
This ruling applies for the following period
Year ended 30 June 2011
The scheme commenced on
1 July 2010
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.
You approached your local Council in the early 1990s to explore a proposal to construct two separate retirement homes on a block of land.
You and your spouse would occupy one dwelling and the second couple would occupy the dwelling located the other dwelling.
The Council indicated the proposal was viable and the block of land was purchased.
The block was surveyed, purchased and an agreement reached as to which half of the block of land was to have each party's dwelling located on it.
Separate building and construction contracts were entered into by each of the two parties. The contracts differed in building and cost details for each dwelling. Each party paid for their own construction costs. Each unit had separate electricity and water supply and garbage service.
You and your spouse moved into the dwelling in after 20 September 1985 prior to the completion of the second couple's dwelling.
The dwelling is your main residence since for several years and the address is registered with the Government agencies.
The plan for formal subdivision of the land was lodged and approved by Council.
In order to bring your affairs into order, you and your spouse are investigating the implications of registering the approved subdivision.
No money has changed hands between the two parties during the transaction.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 102-20
Income Tax Assessment Act 1997 Subsection 104-10(1)
Income Tax Assessment Act 1997 Subsection 104-10(2).
Reasons for decision
There are several components in the process of converting land from being a multiple occupancy owned by various co-owners as tenants in common into two separate properties.
Each of these components must be separately analysed to determine whether there is a taxing point and the consequences and/or options that then present themselves.
Immediately prior to the commencement of the process, there was essentially one asset being the overall property with each of you owning various interests in the whole of it. From an individual perspective, each of the interests that each owner held in the whole property is a separate CGT asset.
Subdivision
The first component of the conversion process is the subdivision. The original property is subdivided into two separate lots, being block A and block B.
After the subdivision, each of you continues to own the same interest in the whole property that you owned immediately before the subdivision, this being 1/4th of each property. As a consequence, there is no disposal of a CGT asset as there has been no transfer of ownership and no CGT event happens due to the subdivision.
Note:
While the mere subdivision does not result in a CGT event happening, if you register the ownership of block A and lock B in each couple's name, a CGT event will happen.