Edited version of private advice

Authorisation Number: 1051787273980

Date of advice: 08 December 2020

Ruling

Subject: Capital gains tax - subdivision - mere realisation

Question

Will the proceeds from the sale of the subdivided lots be treated as statutory income under the capital gains tax provisions in Parts 3-1 and 3-3 of the ITAA 1997?

Answer

Yes, the disposal of the subdivided lots will be considered capital transactions subject to the capital gains tax provisions in Part 3-1 and 3-3 of the ITAA 1997.

As the Property was acquired prior to 20 September 1985 any capital gain that arises from the disposal of the subdivided lots will be disregarded from the date of purchase until the date the deceased passed away.

This ruling applies for the following period(s)

Year ended 30 June 2021.

The scheme commences on

1 July 2020.

Relevant facts and circumstances

The Deceased purchased the Property prior to 20 September 1985.

The Deceased passed away after a number of years.

The Property is approximately XX,XXX square metres and contains a dwelling.

The Property was initially zoned RU4 farm.

The Property was not operated as a farm. It has been continuously utilised for residential purposes only.

The Property was occupied by the Deceased as their main residence.

Approximately XX years ago the Deceased moved into a nursing home.

The Property was leased after the Deceased moved into a nursing home and the rental income was used to pay their nursing home fees.

Approximately six years ago the Deceased passed away.

The Executor was named as the sole executor of the Deceased's estate.

The Property continued to be leased after the death of the Deceased.

A while after the Deceased passed away, the Property was rezoned a mixture of:

•   R2 - low density residential; and

•   R3 - medium density residential; and

•   RE1 - public recreation.

The Property was listed for sale in 201X.

Approximately five years after the Deceased passed away The Executor entered into a Deed of Put & Call Option to sell the Property.

Under clause 11 of the Deed the purchaser is authorised to act as your representative with respect to rights granted under that clause. The purchaser applied to the relevant authority to subdivide the Property into a number of lots. Approval has been given to subdivide the Property into a number of lots. The purchaser has not done anything else other than obtain the said approval.

The dwelling will be located on the proposed Lot 1.

All lots will be transferred to the purchaser if subdivision occurs before settlement.

The Property is still leased and will continue to be let until settlement.

The Purchaser wants to register the approved subdivision plan and obtain separate land title for the lots.

No physical works has been or will be carried out on the Property until after settlement.

Settlement is expected to take place sometime in the future.

You have not previously participated in property development or subdivision activities and have no intention of undertaking any similar project in the future.

You are not registered for GST.

You obtained a GST private ruling that concluded that the sale of the property was not a taxable supply.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Section 15-15

Income Tax Assessment Act 1997 Section 102-20

Income Tax Assessment Act 1997 Section 104-10

Income Tax Assessment Act 1997 Subsection 104-10(3)

Income Tax Assessment Act 1997 Section 112-25

Income Tax Assessment Act 1997 Section 995-1

Income Tax Assessment Act 1997 Part 3-1

Income Tax Assessment Act 1997 Part 3-3