Income Tax Assessment Act 1997



Division 104 - CGT events  

Subdivision 104-D - Bringing into existence a CGT asset  

SECTION 104-35   Creating contractual or other rights: CGT event D1  

CGT event D1 happens if you create a contractual right or other legal or equitable right in another entity.


You enter into a contract with the purchaser of your business not to operate a similar business in the same town. The contract states that $20,000 was paid for this.

You have created a contractual right in favour of the purchaser. If you breach the contract, the purchaser can enforce that right.

The time of the event is when you enter into the contract or create the other right.


You make a capital gain if the *capital proceeds from creating the right are more than the *incidental costs you incurred that relate to the event. You make a capital loss if those capital proceeds are less .

To continue the example: If you paid your lawyer $1,500 to draw up the contract, you make a capital gain of:

$20,000   -   $1,500   =   $18,500

The costs can include giving property: see section 103-5 . However, they do not include an amount you have received as *recoupment of them and that is not included in your assessable income, or an amount to the extent that you have deducted or can deduct it. Exceptions

CGT event D1 does not happen if:

(a) you created the right by borrowing money or obtaining credit from another entity; or

(b) the right requires you to do something that is another *CGT event that happens to you; or

(c) a company issues or allots *equity interests or *non-equity shares in the company; or

(d) the trustee of a unit trust issues units in the trust; or

(e) a company grants an option to acquire equity interests, non-equity shares or *debentures in the company; or

(f) the trustee of a unit trust grants an option to acquire units or debentures in the trust; or

(g) you created the right by creating in another entity a right to receive an *exploration benefit under a *farm-in farm-out arrangement.


You agree to sell land. You have created a contractual right in the buyer to enforce completion of the transaction. The sale results in you disposing of the land, an example of CGT event A1. This means that CGT event D1 does not happen.


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