In addition to what we've discussed earlier, here are some more things to consider:
(c) Avoid borrowing too much money. If you do borrow, keep it minimal and for a short time only. In past cases like Statham and McCorkell, taxpayers had minimal borrowing or provided a bank bond.
(d) Let a real estate agent handle advertising and selling the subdivided blocks. Don't get directly involved in these tasks.
(e) Other key points to keep in mind:
- Have a good reason for selling the land, like health issues or financial difficulties.
- Try to sell the land as a whole before considering subdivision.
- Stick to your usual job; don't start land subdivision if it's not your regular work.
- Avoid previous experience in land subdivision or working in real estate or construction industries.
Consistency is vital. If you treat land acquisition and development as trading stock during the process, it's hard to argue later that the land sale is not a business activity. Refer to the case R & D Holdings Pty Ltd v FCT [2006] FCA 981 for more on this.
Remember, certain situations suggest a land subdivision is not just selling property:
- Land bought with the intention to subdivide and sell will likely be taxed as part of a land development business or profit scheme.
- Be cautious if you've bought farmland in chunks and sold them systematically; this might hint at a business or profit-making scheme, especially if the land wasn't farmed for long. Refer to the Crow case for more insight.
For any further questions, feel free to contact Tax Ideas Accountants & Advisers
at +61 2 83181545 or book an appointment using our live calendar.
