taxation question

On 16 September 1985 John Clark purchased a 100 hectare farm for $100,000 approximately one hours drive north of Melbourne. The purpose for purchasing the farm was to give his family the opportunity to grow up in a rural environment. During the week he continued to conduct his Medical Practice in the city. In the weekends ha and the family would drive to the farm, staying in the homestead on the property. In his absence he employed a farm manager to supervise and manage the property.

By 2004 Clarks family had grown up and were losing interest in the farm. At the same time as the city of Melbourne expanded the land was increasingly surrounded by suburban housing developments. Real estate agents informed him that the land alone was worth $1 million. Clark decided it would be easier to sell the land. However he was advised that the best way to get the most profit from the land was to subdivide it. As a result the land was subdivided and sewerage, drainage gas and electricity were installed. He hired contractors to carry out all the subdivision and improvements and borrowed $1million for this purpose. The total cost of the subdivision and improvements was $10,000 per hectare. He engaged a real estate agent to help sell the property. All of the lots were sold during the 2015/2016 income year for a total of $2.5 million realising a profit of $500,000.

REQUIRED:

Advise John if he is assessed on the profit of $500,000.

In your answer please refer to relevant case law and legislation.