Tax Tip 143: The sale of a property – Capital or Revenue account?

The sale of a property – Capital or Revenue account?

There has been an interesting recent case concerning a tax payer’s dispute with the ATO concerning the way to tax the profit on the sale of a property. It involved a commercial property purchased for approx $30 million and later sold for $70 million. That is a gain of about $40 million. The tax payer argued that it was sold on capital account and that they should therefore be eligible for the 50% CGT discount. The ATO, naturally, argued that it was actually on revenue account and therefore should not get the 50% CGT discount.


The taxpayer was a family trust with a mixture of properties with some being held for different purposes. The ATO argued that the taxpayer carrying on ‘a business of the acquisition, development and disposal of properties or, alternatively, a business which included investing in property assets’


The Tribunal said that there were multiple activities being conducted at the same time and involving separate properties owned by the trust. Some of the properties where being held for resale at a profit. But this in itself didn’t mean the property in question was being held for that purpose.


The tribunal said that the sale of the property in question was:

- Was not a transaction undertaken in the ordinary course of the group’s business activities, and

- The profit was NOT acquired for the purpose of profit making by sale, and therefore

- The sale of the property was a capital gain


FLZY and Commissioner of Taxation (Taxation) [2016] AATA 348
FLZY and Commissioner of Taxation (Taxation) [2016] AATA 348 (27 May 2016)