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This edited version has been archived due to the length of time since original publication.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 your written advice

Authorisation Number: 1051420537449

Date of advice: 29 August 2018

Ruling

Subject: CGT – Forfeited deposit

Question 1

Are you entitled to an immediate deduction for the amount of the deposit forfeited?

Answer

No.

Question 2

Are you entitled to a capital loss for the amount of the deposit forfeited plus incidental costs?

Answer

Yes.

Having applied your circumstances to the principles held in Taxation Ruling TR 1999/19 Income tax capital gains: treatment of forfeited deposits the Commissioner accepts that a capital gains tax event C1 as described under section 104-20 of the Income Tax Assessment Act 1997 happened when the sale contract was terminated by the vendor and your deposit forfeited.

Therefore, you are entitled to a capital loss of the amount of the deposit forfeited plus incidental costs. This capital loss is not an immediate deduction but may be offset against future capital gains.

This ruling applies for the following period:

Year ended 30 June 2018

The scheme commences on:

1 July 2017

Relevant facts and circumstances

You entered into a sale contract for the purchase of an off-the-plan unit.

You paid a deposit representing X% of the contract price.

You were advised by your mortgage broker, that your application for finance had been declined.

You contacted the sellers’ legal representative and advised that you were unable to obtain finance and effect settlement.

The Seller provided notification that they had terminated the Contract, in accordance with clause 55.1 of the Contract Terms, which states:

The notification also provided that the Seller had exercised their right to forfeit the Deposit and any Interest in accordance with clause 55.3 of the Contract Terms, which states:

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-20


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