Edited version of private advice

Authorisation Number: 1052159483699

Date of advice: 25 October 2023

Ruling

Subject: CGT - subdivision - sale of property

Question 1

Will the proceeds from the sale of the property be assessable income of the individual or the Estate (the taxpayers) under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No. In this case the facts indicate that the taxpayers had no intention or purpose to make a profit or gain from developing the property at the time the property was acquired and the intended disposal of the property with the approved development application does not have the character of a business operations or commercial transaction. Accordingly, the proceeds from the sale of the property is not ordinary income and not assessable under sections 6-5 of the ITAA 1997.

Question 2

Will the proceeds from the sale of the property by the taxpayers be subject to capital gains tax (CGT) under Parts 3-1 and Part 3-3 of the ITAA 1997?

Answer

Yes, the proceeds from the sale of the property represent the mere realisation of a capital asset and the capital gains are taxable under Parts 3-1 and 3-3 of the ITAA 1997.

Question 3

Will the sale of the property by the individual be a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No. The individual is currently not registered and will not be required to be registered for GST at the time of sale. Therefore, the individual will not meet all the requirements of section 9-5 of GST Act and the sale of the property will not be a taxable supply. GST is payable on taxable supplies. As the sale will not be a taxable supply, the individual will not be liable to pay GST on the sale.

Question 4

Will the sale of the property by the Estate be a taxable supply under section 9-5 of the GST Act?

Answer

No. The Trustee for the Estate is currently not registered and will not be required to be registered for GST at the time of sale. Therefore, the Estate will not meet all the requirements of section 9-5 of GST Act and the sale of the property will not be a taxable supply. GST is payable on taxable supplies. As the sale will not be a taxable supply, the Estate will not be liable to pay GST on the sale.

This ruling applies for the following periods:

Year ending 30 June 2023

Year ending 30 June 2024

Year ending 30 June 2025

The scheme commenced on:

1 July 20221 July 2022

Relevant facts and circumstances

The deceased passed away, leaving his share of the property to the executors and trustees of his Will (the Estate).

The current ownership of the property is as follows:

•         X% - the individual

•         X% - the Trustee of the Estate

The property has been held by the family for a significant period of time.

The property consists of vacant land which is not currently being used for any business activities.

Neither taxpayer is registered for GST.

The only property costs currently are general holding costs (e.g. rates).

For ease of sale of the property (due to its vacant nature, ability to be subdivided) and to maximise value, the Trustee of the Estate intends to apply for a development application over the property.

The development application is to allow for the land to be subdivided and developed as residential property.

The property is intended to then be sold with an approved development application. No actual physical development works are to be undertaken.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 Part 3-1

Income Tax Assessment Act 1997 Part 3-3

A New Tax System (Goods and Services Tax) Act 1999 section 9-5