Understanding Land Development Tax Treatment
When selling land after dividing it into smaller plots, it's important to know if it's seen as just selling property or part of a business scheme. Though each case varies, there are some general rules.
Large-Scale Subdivisions: If the land was originally meant for something other than profit (like farming or inheritance), you can structure the subdivision to seem like just selling property. This is crucial for reducing capital gains tax. Following the approach from cases like Statham can help. Here's what you should aim for:
(a) Non-Profit Purpose: Make sure the land wasn't bought with the intention to make money. It should be held for a while and used for farming or personal use before subdividing. If it's held for a short time, it might seem like it was bought for profit.
(b) Limited Subdivision Involvement: Keep the subdivision work minimal, only doing what's needed for council approval. Avoid building anything. Also, limit your direct involvement. Let a third party handle contracts with workers, although you can approve payments.
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