Edited version of private advice

Authorisation Number: 1051986701154

Date of advice:

Ruling

Subject: CGT and subdivision of land

Question

Will the proposed subdivision activities being undertaken by the Taxpayers be a mere realisation of a capital asset?

Answer

Yes.

This ruling applies for the following period:

Period End 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You and your three siblings inherited land from your father's estate at XX.

Your father and mother purchased the house and land at XX.

In XX, your father purchased your mothers XX% share of the property. The property remained your father's principal residence until XX, at which time your father was moved into a nursing home.

The property was the sole residence of your family and then after your father. Since the death of your father the property has been rented at market rate through a licenced agent.

The property is a main residence on a residential block. There is no farming or other business generating income.

Your father passed away on XX. The property at XX was bequeathed to you and your three siblings. Your father's intention was that the four siblings would inherit the estate.

From the date of death of your father, the estate beneficiaries have derived a passive rental income from the property.

Recently, adjoining neighbours to the property at XX have approached you and your siblings. The neighbours have suggested the subdivision of the property at XX be undertaken in conjunction withadjoining properties at XX.

The adjoining neighbours approached you to build a pre council planned roadway through the property which would then allow the subdivision of one block into four. This roadway has appeared on council plans for over 20 years.

You and your siblings are contributing your share of the subdivision costs.

The land at XX will be subdivided into four (4) suburban blocks of land. One block of land will contain the existing residence.

The neighbours have held meetings with council and design and infrastructure drawings completed. Final DA drawings will be submitted to council within weeks with roadworks to commence in XX.

The owner of XX is the owner of XX, a specialist property development and construction company. The owner of XX has also completed numerous land developments.

The owner of XX is undertaking all civil design, employing all consultants, sub-contracting earth works contractors, etc. He then invoices the applicant for 1/3 of common costs.

You state that the properties are not pooled however for the southern neighbour the council roadway had to be built through the property. The overall boundaries of the property have not changed, that is, one lot into four with no change in boundaries. The land title remains unchanged.

No rezoning has occurred or been sought by you.

The total land size area of XX. This area will reduce as a council road will be constructed.

The land will be subdivided into four lots: Two blocks of 500m2 and two blocks of 2000m2. The estimated sale price of the land is:

•                     500m2 - $XXX per block

•                     2000m2 (land only) - $XXX

•                     2000m2 (existing house and land) - $XXXX

The four lots when sold, will be sold on market and you and your siblings will oversee the sale. Sales will be independent of the other neighbours. No decision has been made for how sales will be made.

The land title will remain the same after the subdivision process and the subdivided blocks will remain in the control of you and your siblings.

XX is not being 'pooled' with the adjoining neighbours and will not be sold in conjunction with the adjoining neighbours.

You are just a party to the process in conjunction with the other neighbours. You have no direct involvement in the subdivision process.

You and your siblings will be responsible for the sale of the land and proceeds will be shared equally between the four siblings. The subdivision costs will be funded through personal assets of the 4 siblings.

There is no written agreement between the parties and/or any third parties in relation to the subdivision and any future

There is no written agreement between the parties and or any third parties in relation to the subdivision and any future development. Theverbal agreement is that only 1/3rd of the common construction costs, compliance costs, consultants' costs, infrastructure costs, council fees, etc will be paid by the taxpayers named on the land title.

Relevant legislative provisions

Income Tax Assessment Act 1997

Section 6-5

Section 15-15

Parts 3-1

Parts 3-3

Subsection 104-10(1)

Paragraph 104-10(3)(a)

Subsection 112-25(2)