If we decide to re-develop our property that was purchased several years ago (this was not the intention at the time of purchase), given the prevailing case law and scale of the re-development contemplated, this activity could be more than a mere realisation of a capital asset. On this basis (please accept this as is – I understand there are many private binding rulings that can go either way), if the intention is to sell all lots in the re-development: Once the decision has been made to re-develop for sale, the property becomes a revenue asset / trading stock, a CGT event is triggered and CGT is payable; Once the re-developed properties are sold, Income tax would be payable on the development profit Interest on development funding would be deductible However, if the intention is for lots in the re-development to be retained for rental for, say, 10 years Interest on funding during the development would be capitalised; At the time the development for rental decision is made, does the property become a revenue asset/trading stock and trigger the CGT event ? or, Does the land continue to be a capital asset and re-development subject to CGT once a lot(s) is(are) sold in the future? What happens if circumstances change, and some, or all of the development is sold shortly after completion? (Note, the issue of GST on new residential premises is not the subject of this query) Will the development profits be treated as capital gains, or income? If income, would prior income tax returns be amended to reflect a transfer of the land to trading stock, thereby paying the CGT on that transfer, and reducing the development profits that are treated as ordinary income. And would the interest costs during development be included in the amended returns as deduction, rather than be capitalised and add to the cost base? What steps / evidence would be required to ensure that the profits on sale are treated as capital gains, rather than income?