i looked into this about 2 years ago for a similar situation.

firstly i checked the ato website.

just spent the last half hour trying to locate the exact determination, without much luck.

i would not bet my life on it but i will recall my investigations from 2 years ago.

The purchase price of your property is taken into account.

Lets say it cost $500,000 3 years ago. Land was valued at $400,000 and house at $100,000

If you subdivide today! into 2 equal sized lots
and retain the house at the front the cost of the land at the back is $200,000 plus any subdivision costs, lets say $10,000.

If you netted $300,000 on the sale of that block your capital gain would be worked on $90,000.

I am interested to know if the proportionate interest component for a mortgage held on the pre-divided block can be included in the cost base.

check out the ato website though!