| Disclaimer This edited version will be removed from the Database after 30 September 2025. If you believe the issues detailed in this edited version warrant retention in an alternative form, email publicguidance@ato.gov.au This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private ruling
Authorisation Number: 1011564378617
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.
Ruling
Subject: Capital gains tax (CGT) - sale of land
Was a capital gains event triggered when you signed the contract to sell your block of land in the 2009-10 income year?
Yes.
This ruling applies for the following period:
Year ended 30 June 2010
The scheme commenced on:
1 July 2009
Relevant facts and circumstances
You purchased a block of land.
You signed a contract for the sale of this land in one financial year and settlement is due to take place in the following financial year.
You believe you will be subject to CGT as the property has increased in value and you will make a profit on the sale.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-10.
Income Tax Assessment Act 1997 Section 110-25.
Income Tax Assessment Act 1997 Section 102-20.
Income Tax Assessment Act 1997 Section 108-5.
Reasons for decision
You make a capital gain or capital loss as a result of a CGT event happening to a CGT asset in which you have an ownership interest (section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997).
A block of land is a CGT asset and if it is disposed of, the disposal will result in a CGT event A1 happening (section 104-10 of the ITAA 1997). The time of the event is when you enter into the contract for the disposal or if there is no contract when change of ownership occurs (section 104-5 of the ITAA 1997).
Where the contract is settled in a later year of income, you are still required to include your capital gain or capital loss in the year of income in which the contract is made, not in the year of income in which the contract is settled. However, you do not need to include any capital gain in the appropriate year until an actual change of ownership occurs (Taxation Determination TD 94/89).
If a contract is subject to a condition, for example approval of finance, it does not affect the timing of the CGT event unless it is a condition precedent to the formulation of the contract. Most conditions (for example, standard 'subject to finance' clauses) operate as conditions subsequent to formation of the contract and do not affect the time of making of the contract. (Taxation Determination TD 94/89)
If a contract falls through before completion there would not be a CGT event as no change in ownership would have occurred (section 104-10 of the ITAA 1997).
There are no provisions within the legislation that give the Commissioner the discretion to alter the date the capital gain is to be included in your tax return.
In your circumstances, while settlement will occur in the subsequent financial year, for CGT purposes you disposed of your land at the time you entered into the contract for disposal. Accordingly, the capital gain that you made on the sale of your land will need to be included in your assessable income for the financial year the contract was signed.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
