Business Land - Subdivision of land

Discussion in 'Accounting & Tax' started by Paul@PAS, 5th Mar, 2021.

Join Australia's most dynamic and respected property investment community
  1. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    23,319
    Location:
    Sydney
    A business that owns its land may consider subdivision and sale of that land. Can the small business CGT concessions be used for that income ? After all the land is a element of the active assets of the small business. Why not ?

    The ATO do not consider that the land is an active asset WHEN SOLD. The subdivided land is a new CGT asset due to subdivision and the active asset connection may be severed. The cost of the newly subdivided land will be based on a apportionmnet of the original land plus other costs. Sure the land may have been a element of the factory site and met the active asset test at some time eg storage for scaffolding that is hired out or used in the scaffolding business. However, when used as a element of a isolated profit making venture or even a mere realisation of the CGT asset then a new CGT asset is created. Its lack the active asset connection.

    This is basically the same issue that applies when someone subdivides their main residence as sells off the new lot OR builds a new dwelling on it. The section of land being sold or developed is not subject to the main residence exemption at the time of sale and is treated as it was NEVER an exempt element of the home.

    Good example is provided here
     
    Last edited: 5th Mar, 2021
    lixas4 likes this.