How is this scenario taxed?

Buy house and land $290,000
Subdivide into four $40,000
Total costs $330,000

Sell two blocks 115k ea $230,000

Total loan left $100,000

(I will retainin two blocks, one with house on it)

Because I haven't actually realised a profit, do I pay any tax?
When you subdivide the happy friendly people at the ATO make you partition up the original purchase price for capital gains purposes. So if you started with a blank bit of land and divided it into 4, 25% of your purchase price and 25% of the costs to subdivide go into each of the new properties. If you think the bit with the house on is worth more, break it up differently. Your profit on each is $115k-62.5k on those figures.

Been there, done that, asked the questions, moved into the damn house instead to avoid the capital gains tax bill.

Oh, when you subdivide the bank needs to know and will do weird things with the mortgage depending on how much equity you have. In your case you might wind up with your original mortgage secured by 4 titles for a while.

So in short, yes you've realised a profit, yes you have to pay tax.

The funny thing is we looked this ruling up because we thought it was the other way around - we bought our place for $65k, spending $10k on subdividing, can sell off the other half for around $50k. We thought we'd be taxed on $40k.

Turns out we get taxed on $15k. I'm still trying to work out if we get the 1 year 50% reduction because we've held the original block for over a year but the new block will be 5 minutes old.