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Edited version of your written advice
Authorisation Number: 1051179908518
Date of advice: 11 January 2017
Ruling
Subject: CGT - disposal - extended settlement period
Question 1
Is the capital gain from the sale of the land assessable in the income year in which the contract was entered into?
Answer
Yes
Question 2
Are you required to include the capital gain from the sale of the property in your assessable income for the relevant income year before settlement occurs?
Answer
No
This ruling applies for the following period:
Year ended 30 June 20ZZ
The scheme commences on:
1 July 20YY
Relevant facts and circumstances
You purchased a property in 20XX.
You entered into a contract of sale for the property in late 20YY.
You received a deposit of X% of the sale price from the purchaser in early 20ZZ.
The contract settlement date is early 20AB.
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 (ITAA 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.
Although you must include your capital gain or capital loss in the income year in which the contract was made, you are not required to do this until settlement occurs (Taxation Determination TD 94/89).
In your case, you entered into a contract of sale of the property in the 20YY-ZZ year, triggering the CGT event A1.
Settlement is expected to occur in the 20AA-AB financial year, when you receive the remaining proceeds from the sale. It will be at this time that you will be required to include the capital gain from the sale in the year in which the CGT event occurred, the 20YY-ZZ financial year.
If the 20YY-ZZ assessment has already been made for that financial year, you may need to have the assessment amended.