The tax implications of subdividing land
Published Date: 28 Oct 2024
Proceeds from the sale of subdivided land can be taxed as either ordinary income, CGT, or both. Depending on the circumstances, proceeds may also be subject to GST. In the first scenario discussed in this article, where A and B subdivide land with their primary residence and sell the second lot immediately after subdivision, taxation will be limited to CGT only. In the second scenario, new dwellings are built after demolishing the original dwelling. The sale of the second lot is treated as a profit-making enterprise, subject to GST, ordinary income, and CGT. However, if the second lot is rented out for more than five years before sale, as in scenario 3, taxation will be limited to CGT only. Lastly, if the property was purchased pre-1985 and sold by the estate within two years of the owners’ deaths, only CGT applies. Intent and careful planning are crucial, and consulting a tax accountant is recommended.
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- Published By: Gayathri Krishnan
- Published On:28 Oct 2024
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