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Edited version of private advice
Authorisation Number: 1051523965705
Date of advice: 31 May 2019
Ruling
Subject: Land Subdivision
Question
Will the sale of the two subdivided lots be deemed a mere realisation of a capital asset?
Answer
Yes. On balance, it is considered that the proceeds from the sale of the lots will be subject to the CGT provisions in Parts 3-1 and 3-3 of the Income Assessment Act 1997 (ITAA 1997).The sale of the lots will be regarded as a mere realisation of a capital asset.
Question 2
Is the sale of the two vacant lots a taxable supply?
Answer
No. Having applied all the principles in Miscellaneous Taxation Ruling MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number to the present circumstances, we conclude that the sale of the 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).
This ruling applies for the following periods:
Year ended 30 June 2018
Year ending 30 June 2019
Year ending 30 June 2020
The scheme commences on:
1 July 2017
Relevant facts and circumstances
In the 2018 financial year, you purchased a property.
The property was purchased for the location as it was situated in the preferred zoning for your children.
From the time of purchase it was available for rent with the intention to use for main resident purposes after this period.
The council has made adjustments to the zoning areas and your property has been affected by this change.
As the property now has no purpose and is not feasible to keep as an investment property you have decided to sell and buy a property situated in the zoning area.
The land value has significantly dropped to sell the property as it stands you would make a significant loss. You decided the best outcome was to subdivide and recover the value of the land.
The amount of work undertaken for the subdivision is minimal to secure approval by council, all associated activities with the subdivision have been conducted by you and the costs have been provided by you.
You and your spouse have never been involved in property development and do not look to do this in the future. Your spouse works as a professional, which is not in line with property development.
Relevant legislative provisions
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 subsection 9-5
A New Tax System (Goods and Services Tax) Act 1999 section 195-1