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Other CGT events affecting real estate

Last updated 3 March 2016

CGT event B1 happens to real estate if you enter into a terms contract. Generally speaking, a terms contract is one where the purchaser is entitled to possession of the land or the receipt of rents and profits before becoming entitled to a transfer or conveyance of the land (that is, before completing the purchase by paying the balance of the purchase price and receiving the instrument of transfer and title deeds).

CGT event B1 happens when use and enjoyment of the land is first obtained by the purchaser. Use and enjoyment of the land from a practical point of view takes place at the time the purchaser gets possession of the land or the date the purchaser becomes entitled to the receipt of rents and profits.

If the contract falls through before completion and title to the land does not pass to the purchaser, you may be entitled to amend your assessment for the year in which CGT event B1 happened.

CGT event C1 happens if an asset is lost or destroyed. This event may happen if, for example, a building on your land is destroyed by fire. Your capital proceeds for CGT event C1 happening include any insurance proceeds you may receive in relation to the loss or destruction. The market value substitution rule for capital proceeds that generally applies if you receive no capital proceeds does not apply if CGT event C1 happens. For more information, see chapter 7.

CGT event D1 happens if you give someone a right to reside in a dwelling. The capital proceeds include money (but not rent) and the value of any property you receive.

The market value substitution rule for capital proceeds (see Explanation of terms) applies if:

  • the amount of capital proceeds you receive is more or less than the market value of the right, and
  • you and the person you granted the right to were not dealing with each other at arm's length in connection with the event.

CGT event D2 happens if you grant an option to a person or an entity or renew or extend an option that you had granted.

The amount of your capital gain or capital loss from CGT event D2 is the difference between what you receive for granting the right and any expenditure you incurred in relation to it. The CGT discount does not apply to CGT event D2.

Example – Granting of an option

You were approached by Colleen who was interested in buying your land. On 30 June 2003, you granted her an option to purchase your land within 12 months for $200,000. Colleen pays you $10,000 in respect of the grant of the option. You incur legal fees of $500. You made a capital gain in the 2002–03 income year of $9,500.

End of example