Home Improvements Pty Ltd (“HIPL”) has been in the business of home renovation for over 30 years. Following the disruption to its business caused by the Covid-19 pandemic, HIPL sought out new sources of income. In early 2020 the articles of association of HIPL were amended to allow it to purchase land and improve any existing dwellings on the land and/or construct new dwellings on the land and either rent them out or sell them at a profit. In May 2020, HIPL used funds from its own account and took out an additional loan to purchase land on which an old house stood. Rather than renovate the existing dwelling, HIPL decided to demolish the existing dwelling and construct two townhouses on the land. Prior to completion in late 2020, the townhouses were advertised for sale, but this did not eventuate in any sales. The two brothers, Tom and Tim, who owned all the shares in HIPL equally and were also its directors decided to rent out the two townhouses. However, they were unsuccessful in finding suitable tenants for the properties. In the end, Tom and Tim moved into each of the townhouses with their respective families. Wishing to return to their core business activity of home renovations and to capitalize on the phenomenal growth in the property market, Tom and Tim re-advertised the two townhouses for sale in late 2021. Both townhouses were eventually sold in February 2022 for a large profit. 

With reference to relevant legislation, case law, and/or tax rulings, advise HIPL whether the large profits it made from the sale of townhouses in 2022 during the current tax year ending 30 June 2022 could be taxed as ordinary income. (SLO1 and SLO2) 

NOTE: Please ignore any capital gains tax implications arising from the above facts.