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Edited version of private advice
Authorisation Number: 1051796161082
Date of advice: 14 January 2021
Ruling
Subject: Am I in the business - property development?
Question
Is the trust carrying on a business of property development?
Answer
Yes. The trust meets the relevant factors contained in Taxation Ruling TR 97/11. Further information about carrying on a business can be found by searching 'QC 31733' on ato.gov.au
This ruling applies for the following periods:
Year ended 1 June 20XX
Year ended 1 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The trust has a history of developing residential land either in partnership with other entities or on its own. Developments include:
• In year XX in partnership with related entity built X units
• In year XX in partnership built and sold X units.
• In year XX built on its own and sold X units.
Typical activities of the trust are acquiring residential properties, subdividing land into titles and building dwellings on the subdivided land by contracting builders. The dwellings are sold off the plan under the GST margin scheme. All the sales proceeds were reported as business income of the trust.
The individual is the sole director and shareholder of the company that is the Trustee of the Trust. The individual is the primary beneficiary of the trust.
The individual is an experienced in the property industry and identifies the residential properties acquired by the Trust.
The trust runs one development project at a time due to cash flow reasons. The trust usually holds multiple properties and rents out those which are not being developed. In the holding period of the assets, there is a period of a few years when the trust receives residential rental income on the assets.
The trust currently owns a residential property with the intention to demolish the existing building and subdivide the land into X titles.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 section 8-1
Income Tax Assessment Act 1997 section 995-1