Taxation Determination

TD 93/45

Income tax: capital gains: if the parties to a contract for the sale of an asset renegotiate prior to settlement a lesser sum than the consideration originally agreed to, what is the consideration in respect of the resulting disposal and acquisition?

  • Please note that the PDF version is the authorised version of this ruling.
    This document has changed over time. View its history.

FOI status:

may be releasedFOI number: I 1214422

This Determination, to the extent that it is capable of being a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953 , is a public ruling for the purposes of that Part. Taxation Ruling TR 92/1 explains when a Determination is a public ruling and how it is binding on the Commissioner. Unless otherwise stated, this Determination applies to years commencing both before and after its date of issue. However, this Determination does not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of the Determination (see paragraphs 21 and 22 of Taxation Ruling TR 92/20).

1. The consideration in respect of the disposal is the renegotiated amount. This is the amount which, in fact, the vendor has received or is entitled to receive (subsection 160ZD(1) of the Income Tax Assessment Act 1936 ).

2. The cost base to the purchaser includes, as consideration in respect of the acquisition, the renegotiated amount the purchaser is required to pay.

It has been suggested that section 160ZF applies in this situation. This section does not apply because it is confined to situations where the whole or part of the consideration has not been and is not likely to be received.

Example: William enters into a contract to dispose of a vacant block of land for $1 million. The purchaser proposes to build a factory on the site but prior to settlement, discovers that the land had been used as a contaminated fill site.William and the purchaser agree to reduce the consideration for the land by $250,000 to $750,000.The consideration received by William under the contract is $750,000 and not the $1million originally agreed to.

Commissioner of Taxation


ATO references:

ISSN 1038 - 8982

Related Rulings/Determinations:

TD 93/43
TD 93/44

Subject References:
Acquisition of an asset
contract for sale of asset
disposal of asset
renegotiated amounts

Legislative References:
ITAA 160ZD(1)

TD 93/45 history
  Date: Version: Change:
You are here 25 March 1993 Original ruling  
  29 November 2006 Original ruling + note Repeal provision note
  19 May 2010 Withdrawn