Edited version of private advice

Authorisation Number: 1052039007819

Date of advice: 28 September 2022

Ruling

Subject: Capital gains tax - subdivision - 50% discount

Question 1

Will the profit from the subdivision and sale of one unit be assessable under the capital gains tax provisions contained in Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 (ITAA 1997) as a mere realisation of a capital gains tax asset?

Answer

Yes. The Commissioner is satisfied that the subdivision of the property and subsequent sale of a single unit was not in the course of carrying on a business of property development or as a result of a profit-making undertaking or plan. The sale is a mere realisation of a capital asset and will not be assessable income under section 6-5 or 15-15 of theITAA 1997.

The proceeds from the sale will be assessed under the capital gains tax provisions contained in Parts 3-1 and 3-3 of the ITAA 1997.

This ruling applies for the following period:

Year ended 30 June 2021

Year ended 30 June 2022

The scheme commences on:

1 July 2019

Relevant facts and circumstances

This private ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are different from these facts, this private ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You and your spouse purchased a block of land with a 50 / 50 ownership split over 12 months ago.

You were first home buyers and you had never owned or built any kind of residential or commercial properties before.

You both planned the project and engaged the builder and met your GST obligations.

A designer prepared the plans and applications for the planning authority / council for the development.

The property was purchased with the sole intention of residential use and capital growth over a long period. You intended to live in a unit and lease the other units for rental income.

A few months after you purchased the land your personal circumstances changed. Then, a few months after that you found you had other costs and debts which meant your circumstances drastically changed. The change of personal circumstances led to the decision to sell one unit to settle the joint debt.

You reside in one unit and the remaining unit is leased and managed by a property manager as planned.

You have no history of land development and no intentions to do further land development.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Section 6-10

Income Tax Assessment Act 1997 Section 70-10

Income Tax Assessment Act 1997 Section 102-5

Income Tax Assessment Act 1997 Section 102-20

Income Tax Assessment Act 1997 Section 104-10

Income Tax Assessment Act 1997 Section 108-5

Income Tax Assessment Act 1997 Section 118-20

Income Tax Assessment Act 1997 Section 995-1