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That's it. You've taken a big chunk of cost base out of the original $300,000 because the land had a very high value compared with the original house

I'd split the subdivision costs between the two equelly as it affects both anyway. The $300,000 = purchase of original house is the issue. You have to get a valuation of the total land cost in 2009 purchase date, then divide this cost 60%-40%. Then the original house cost becomes $300,000...

The cost base of each subdivision is the cost of the land divided between the two. So the land should be valued at the time you purchased and apportioned. Plus the cost of subdividing apportioned. Then add the balance of the original purchase price of the old house plus any further...