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Edited version of your written advice
Authorisation Number: 1012982887350
Date of advice: 10 March 2016
Ruling
Subject: Capital gains tax
Question 1
Will capital gains tax (CGT) event A1, relating to the sale of the property, trigger in the year in which the contract is entered into even if the contract is settled in a later year?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2015
The scheme commences on:
1 July 2014
Relevant facts and circumstances
You owned a rental property.
You signed a contract to sell the property during the relevant financial year.
The settlement of the contract did not occur until the next financial year.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 104-10
Reasons for decision
Under section 104-10 of the Income Tax Assessment Act 1997, a capital gains tax (CGT) event A1 occurs when you dispose of a CGT asset to another entity. The time of the event is when the contract is entered into.
Taxation Determination TD 94/89 provides that where the contract is settled in a later year of income, you are required to include a capital gain or capital loss in the year of income in which the contract was entered into, not in the year of income in which the contract is settled.
In your case, you disposed of the property in the relevant financial year when you entered into a contract of sale. CGT event A1 triggered at this time. Therefore, you are required to include the capital gain from that sale in your relevant income tax return.