I know this is a common question but I think my situation may be slightly different. I bought a property 10 years ago and immediately set about re-zoning and getting some development potential. The property has a small house which I have rented out for the whole time I have owned it. The property should allow around 5 - 7 new separately titled lots. The plan was to slowly subdivide each lot and build a house and granny flat or each new title that I would rent out. Definitely a buy, develop and hold strategy with the plan to create ongoing cashflow to provide for early retirement. Anyway, things have changed over the last few years, the approval process has taken far longer than I had hoped and no development has occurred. I am now looking to sell the property and expect to make a profit on the sale partly due to the development potential it now has. Would the gain be capital or ordinary income?
I have the view 10 years is NOT sufficient and is not in itself any measure of revenue v capital. The intention when acquired and subsequent to that is what the ATO considers. It is well described in the 2017 ATO discussion paper. Also enterprise, GST and other issues. I would seek personal tax advice. seems fatal to the view of the asset being on capital account but thats just based on the post you made
I have the view 10 years is NOT sufficient and is not in itself any measure of revenue v capital. The intention when acquired and subsequent to that is what the ATO considers. It is well described in the 2017 ATO discussion paper. Also enterprise, GST and other issues. I would seek personal tax advice. seems fatal to the view of the asset being on capital account but thats just based on the post you made
The purpose of the rezoning was to allow the other properties to be built and rented. It is difficult as the word 'development' is generally associated with creating and selling lots. My intention has always been to create 5 new lots each with a standard home and separate granny flat. The end goal was 10 rented properties to hold into retirement.
I have a developer video where I explain why use of the word "develop" can be misleading. Often to a detriment. develop to sell develop land to keep and develop and build for sale mixed use developmnet eg renovate a old dwelling and build new dwelling/s to keep Construct for purposes of a business through scale eg retirement village housing. develop land to keep and sell vacant develop land and change its use ie farm land to residential develop but zero intention to sell. Really you are just constructing. Best not to call yourself a developer. You are an investor. Chasing rezoning can be a element of a development activity where you seek enrichment in use and completed value. The ATO discussion paper correctly recommends a private ruling as far too many issues can affect the matter. Also what is important is that your intentions are noted (early) and a matter of record with a tax adviser. And the issue of landbanking with associated activities can cloud the picture and is reflected in TR 2018/3 which may consider that the activity spans a long period of time and must be recognised progressively not when a sale occurs. Unfortunately the material is not accessable and the final papers havent been released but were meant to be ; ATO Draft Property & Construction Website
