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Edited version of your written advice
Authorisation Number: 1051501530724
Date of advice: 9 April 2019
Ruling
Subject: Land subdivision – income vs capital – GST
Question 1
Will the proceeds from the sale of the subdivided lots be assessable income under section 6-5 of the ITAA 1997?
Answer
No. You do not carry on a business of buying, selling or developing land. You have held the property for substantial period of time, during which it was used for private purposes. The improvements and works including infrastructure and landscaping are being carried out to meet the requirements contained in the conditions required issued in relation to the subdivision.
Question 2
Will the proceeds from the sale of the subdivided lots be subject to the capital gains tax (CGT) provisions in Parts 3-1 and 3-3 of the ITAA 1997?
Answer
Yes. The sale of the subdivided lots is considered to be a mere realisation of a capital asset and the proceeds will be subject to the capital gains tax provisions in Parts 3-1 and 3-3 of the ITAA 1997. Proceeds from the sale of the subdivided lots will not be included in your ordinary income.
Question 3
Will the sale of the land be subject to GST?
Answer
No. Having applied all the principles in Miscellaneous Taxation Ruling MT 2006/1 to the present circumstances, we conclude that the sale of the property will not amount to an enterprise and the sale subdivided lots will not be a taxable supply pursuant to section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). The sale of the lots will be regarded as the mere realisation of a capital asset.
This ruling applies for the following period:
30 June 2017 to 30 June 2020
Relevant facts and circumstances
You and your spouse purchased Property A for the purpose to use as your main residence. A few years later, you became the sole owner of Property A.
A number of years later, you purchased Property B for the purposes of main residence.
You sold your Property A by subdividing the land with the dwelling attached to one of the lots.
You’re GST registration does not relate to the property development or the subdivision.
The development application was approved, configuring one lot into a small number of lots.
The subdivision required minimal works which were completed.
You have provided details of the plan of subdivision and development conditions. You have provided details of the costs incurred and the expected sale proceeds.
You or any related entities have not previously been involved in any subdivision or property development activities.
You or any related entities do not intend to be involved in any future subdivision or property development activities.
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 9-5
A New Tax System (Goods and Services Tax) Act 1999 section 9-20