| Disclaimer This edited version has been archived due to the length of time since original publication.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 your private ruling
Authorisation Number: 1012495011755
Ruling
Subject: Am I in business of property development?
Question
Are you carrying on a business of property development?
Answer
No.
This ruling applies for the following periods:
Year ended 30 June 2009
Year ended 30 June 2010
Year ended 30 June 2011
Year ended 30 June 2012
Year ended 30 June 2013
The scheme commences on:
1 July 2008
Relevant facts and circumstances
You are employed full time under salary and wages.
You purchased a block of land on which you intended to build a dwelling and sell at a profit.
There was never the intention to treat the completed property as a rental property.
You have only purchased one property with the intention of building a dwelling on it and on selling at a profit.
You do not intend on purchasing another block of land on which to build a dwelling and sell at a profit in the near future. You may consider it again in a few years time.
You have other properties which you have kept as rentals.
You do not rent a space to conduct your property development activity.
You do not intend on conducting a property development business.
You have a home office from which you conducted your property development activities and activities relating to your occupation.
You believe that the income from the sale of the property is assessable.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Reasons for decision
Section 6-5 of the Income Tax Assessment Act 1997 provides that a taxpayer's assessable income includes income according to ordinary concepts derived by the taxpayer during an income year. Income according to ordinary concepts includes income derived from a business.
Are you carrying on business?
The question of whether you are carrying on a business is a question of fact. Over the years the courts have developed a series of indicators that assist in establishing if a business exists. These indicators are summarised in Taxation Ruling TR 97/11 at paragraph 13:
The relevant indicators of whether you are carrying on a business are:
§ whether the activity has a significant commercial purpose or character
§ whether the taxpayer has more than just an intention to engage in business
§ whether the taxpayer has a purpose of profit as well as a prospect of profit from the activity
§ whether there is regularity and repetition of the activity
§ whether the activity is of the same kind, and carried on in a similar manner, to that of ordinary trade in that line of business
§ whether the activity is planned, organised and carried on in a businesslike manner such that it is described as making a profit
§ the size, scale and permanency of the activity, and
§ whether the activity is better described as a hobby, a form of recreation or sporting activity.
No one indicator is decisive. The indicators must be considered in combination and as a whole.
We consider that you are not carrying on a business of property development, as your activity is small in scale, is a one-off exercise, it is not carried on in a businesslike manner, nor is it carried on in a similar manner to that of ordinary trade in that line of business.