Timing of a real estate CGT event
When you sell or otherwise dispose of real estate, the time of the event (when you make a capital gain or capital loss) is usually:
- when you enter into the contract (generally the date on the contract), not when you settle – the fact that a contract is subject to a condition, such as finance approval, generally doesn't affect this date
- when the change of ownership occurs if there is no contract (such as when a property passes to a beneficiary), or
- if the real estate is compulsorily acquired – the earliest of
- when you receive compensation from the acquiring entity
- when the entity became the property's owner
- when the entity enters the property under a power of compulsory acquisition, or
- when the entity takes possession under that power.
Although you report your capital gain or loss in the tax return for the income year in which the contract is entered into, you're not required to do this until settlement occurs. If settlement occurs after you've lodged your tax return and been assessed for the relevant income year, you'll have to request an amendment.
A liability for shortfall interest charge (SIC) can arise due to an amended assessment for a capital gain. We generally remit it in full if the request for amendment is lodged within a reasonable time after settlement (considered to be one month in most cases). However, remission is not automatic; you must request it and we consider each request on a case-by-case basis. If you consider that the SIC should be remitted, you should provide your reasons when you request the amendment to your assessment.
When you sell or otherwise dispose of real estate, the time of the CGT event is generally when you enter into the contract, not when you settle. If there’s no contract, the CGT event is generally when the change of ownership occurs.
Example: Sale contract
Sue enters into a contract to sell land in June, the last month of the income year. The contract is settled in October, in the next income year.
Sue makes the capital gain in the income year she enters into the contract, not the next income year when settlement takes place.
End of example