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Edited version of private advice
Authorisation Number: 1052254282803
Date of advice: 22 May 2024
Ruling
Subject: Property subdivision
Question 1
Will the subdivision and sale of the subdivided properties be treated as ordinary income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
No. Based on the information provided, the transfer of the subdivided property will not be ordinary income and not assessable income under section 6-5 of the ITAA 1997 as either:
• the carrying on of a business in accordance with the factors listed in Taxation Ruling 97/11; or
• a profit-making or commercial transaction in accordance with the principles contained in Taxation Ruling TR 92/3.
Question 2
Will the transfer of your property be a mere realisation of a capital asset and therefore subject to the capital gains tax provisions?
Answer
Yes. Based on the information you have provided to the Commissioner, the transfer of the property is the mere realisation of a capital asset and subject to capital gains tax pursuant to subsection 104-10(4) of the ITAA 1997 and assessable as statutory income under section 102-5 of the ITAA 1997.
This ruling applies for the following periods:
Year ending 30 June 20XX
Year ending 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
You purchased a XX acre property in 19XX.
You have used this property as your principal place of residence.
At the time the property was acquired the zoning effectively prevented the subdivision of properties of less than 44 acres (18 hectares).
You have never undertaken any farming or primary production activities on the property.
Your original and continuing intent for the property was to use it as your main residence.
In 19XX, there were changes to the local planning code which changed the zoning of your property which now allowed for subdivision.
You have taken no steps to subdivide the property since the rezoning event in 19XX.
You no longer wish to maintain a XX acre property and now seek to subdivide the land into separate titles.
You will retain the lot which contains your house and continue to live in your home.
You will sell the other lots as vacant land. No additional land has been acquired for this purpose.
You have obtained a permit from the shire council to subdivide the property in preparation for sale.
You intend to do no more than is required by the permit to achieve the subdivision.
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 102-5
Income Tax Assessment Act 1997 section 104-10