Tax Implications of Sub-dividing Block

I purchased a house some years ago which I rented out. My intention was to eventually demolish the house, sub-divide the block and build two courtyard homes.

The house was demolished about 5 years ago but due to other issues the redevelopment has been delayed.

I'm now thinking about sub-dividing the block and selling one lot.

Say the land is currently worth $420k - I pay about $30k for sub-division and have 2 blocks worth around $280k and I sell one.

What are the tax implications in terms of CGT?
 
Hi Terry. How come no CGT and 50% discount? I ask because I am in similar position except I have rented out house for whole period since purchasing 5 years ago. Am also intending to sell one block soonish and keep one in which I will build a new house and rent out again. Mind you, my property is slightly different as it is already on double lots. I thought 50% discount would be applicable as it was an investment / income producing venture from the very begining up to point of sale.

Would like to hear your thoughts and reasonings before I put forward this question again to my accountant during end of year tax returns meeting.
 
Your first post explains why. "Intention"....If your intention is to produce income from a trade, vocation, venture in commerce etc its ordinary income. If you acquire land for the purpose of producing assessable investment income (ie rents) then the byproduct of that may include a capital gain. Since 20 Sept 1985 taxation law in Australia has also then taxed that gain under the CGT provisions. You cant apply CGT rules to ordinary income. Just because land can be a CGT asset doesnt mean it is.

Your intention was : "My intention was to eventually demolish the house, sub-divide the block and build two courtyard homes". That smells and looks like ordinary income. It is also supported by initial facts such as : The house was demolished about 5 years ago but due to other issues the redevelopment has been delayed.

The demolition of the house may pose the concern. At the time you did that the land became trading stock. Div 70 operates to remove the land as a CGT asset and to make it trading stock and held on revenue account. The process is well described in this good paper. Your consideration of now recommencing that venture hasnt changed. Sure that land may have ceased and has recommenced as trading stock perhaps but your proposed plans clearly puts it back as trading stock once again. And trading stock is acquired at cost in such cases.
 
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