Small Land Developers Can Have Their Cake and Eat It Too

28 October 2008 Topics: Property and planning law, Planning and environment

Cooper Grace Ward recently acted for a client who lived on rural-residential land on the outskirts of Brisbane.

The client wanted to subdivide the property into 36 allotments.

Initially we submitted a request for a binding private ruling in which we asked the ATO to rule that the profits on the subdivision and sale of the land would not be assessable income under section 6-5, or section 15-15 of the 1997 Tax Act, as the project only amounted to the mere realisation of a capital asset.

Initially the ATO ruled that the project amounted to more than mere realisation and that the profits from the project would be assessable.

The client objected against the ruling and the ATO allowed the objection and determined the profits would not be assessable.

We then sought a GST private ruling from the ATO as to whether the client should pay GST on the proceeds from the sale of the allotments.

The ATO ruled that the project did not constitute an enterprise and therefore the client did not have to pay GST on the sale proceeds.

In making this decision, the ATO was clearly influenced by their earlier decision to allow the objection in which they held that the project only amounted to the mere realisation of a capital asset and also relied on Miscellaneous Taxation Ruling MT 2006/1, and Goods and Services Tax Determination GSTD 2006/6.

While other taxpayers cannot necessarily rely on this private ruling, it does indicate that even significant projects can fall within the “mere realisation” category and this can provide significantly enhanced income tax and GST outcomes for clients.

If you have any queries you can contact a member of our team on (07) 3231 2444.

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This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please let us know.