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Edited version of your written advice
Authorisation Number: 1012737442252
Ruling
Subject: capital gains tax
Question
Are you liable for capital gains tax (CGT) in relation to the disposal of several blocks of land?
Answer
No.
This ruling applies for the following period
Year ending 30 June 2015
The scheme commences on
1 July 2014
Relevant facts and circumstances
You purchased a house prior to 1985.
The land size was less than 2 hectares.
You demolished the house and subdivided the land into several blocks.
No buildings were erected on the land and no improvements have been made to the land.
You intend to sell both blocks.
Relevant legislative provisions
Income Tax Assessment Act 1997 paragraph 104-10(5)(a)
Income Tax Assessment Act 1997 section 120-20
Reasons for decision
Under section 120-20 of the Income Tax Assessment Act 1997 (ITAA 1997), an entity will make a capital gain or a capital loss if a CGT event happens to a CGT asset. A capital gain on the disposal of an asset can be disregarded under paragraph 104-10(5)(a) of the ITAA 1997 if it was acquired prior to 20 September 1985.
If you subdivide a block of land, each block that results is registered with a separate title. For CGT purposes, the original land parcel is divided into two or more separate assets. Subdividing land does not result in a CGT event if you retain ownership of the subdivided blocks.
In this case, you acquired a property prior to 20 September 1985. The subdivision of this property into several blocks did not result in a CGT event. Therefore, the blocks are considered pre CGT assets. A capital gain on the disposal of the blocks can be disregarded under paragraph 104-10(5)(a) of the ITAA 1997.