Income tax: property development: in what circumstances is land treated as 'trading stock'?

Land is treated as trading stock for income tax purposes if: • it is held for the purpose of resale; and • A business activity which involves dealing in land has commenced.

Both the required purpose and the business activity must be present before land is treated as trading stock. The business activity is taken to have commenced when a taxpayer embarks on a definite and continuous cycle of operations designed to lead to the sale of the land.

It is not necessary that the acquisition of land be repetitive. A single acquisition of land for the purpose of development, subdivision and sale by a business commenced for that purpose would lead to the land being treated as trading stock. Note: the Addendum to this Determination that issued on 7 April 2004 applies on and from 1 July 1997.