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Edited version of private advice
Authorisation Number: 1052405673490
Date of advice: 10 June 2025
Ruling
Subject: Capital gains tax
Question 1
Can you the record a Capital Gains Tax (CGT) A1 event, occurring in the 20XX income year, in the 20XX income yearunder Income Tax Assessment Act 1997 (ITAA 1997) section 104-10?
Answer 1
No.
This ruling applies for the following periods:
Year ended 30 June 20XX
Year ended 30 June 20XX
The scheme commenced on:
XX XX 20XX
Relevant facts and circumstances
On XX XX 20XX you entered into a contract to sell Property A.
The disposal of Property A resulted in a capital gain assessable in the 20XX income year.
On XX XX 20XX you entered into a contract to sell Property B.
The disposal of Property B resulted in a capital loss in the 20XX income year.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 102-10
Income Tax Assessment Act 1997 section 104-10
Reasons for decision
Section 104-10 of the ITAA 1997 states the following:
(1) CGT event A1 happens if you dispose of a CGT asset.
(2) You dispose of a CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law. However, a change of ownership does not occur if you stop being the legal owner of the asset but continue to be its beneficial owner.
(3) The time of the event is:
(a) when you enter into the contract for the disposal; or
(b) if there is no contract--when the change of ownership occurs.
Section 104-10 of the ITAA 1997 provides the following example regarding the timing of the event:
Example: In June 1999 you enter into a contract to sell land. The contract is settled in October 1999. You make a capital gain of $50,000.
The gain is made in the 1998 - 99 income year (the year you entered into the contract) and not the 1999 - 2000 income year (the year that settlement takes place).
The Commissioner does not have discretion under section 104-10 of the ITAA 1997 to alter the timing rules for CGT event A1. Accordingly, the CGT event is taken to have occurred at the time you entered into the contract to dispose of the property. The resulting capital gain must be reported in the income year in which it was incurred.
As with the example above, the contract to dispose of Property A was entered into towards the end of the income year. As the event took place within the 20XX income year any capital gain arising from this transaction must be reported in the 20XX income year.
The capital loss incurred in the 20XX income year cannot be applied retrospectively to offset the capital gain from Property A. If your allowable capital losses are greater than your capital gains, you have a net capital loss. You can carry it forward to later income years to be deducted from future capital gains. You can't deduct capital losses or a net capital loss from your other assessable income. There is no time limit on how long you can carry forward a net capital loss.
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