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Edited version of private advice
Authorisation Number: 1051905251057
Date of advice: 30 September 2021
Ruling
Subject: Capital gains tax
Question
Did CGT event A1 occur in the year ended 30 June 20XX in relation to the sale of the business assets by the applicant to the purchaser?
Answer
Yes. The timing of CGT event A1 is when you enter into the contract for the disposal and it is considered you entered into the contract when terms were agreed upon by both parties on DDMMYY.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You operated a business through a separate entity. In 20XX you began negotiations to sell the business and related assets. The purchaser made an offer in 20XX which was rejected. The purchaser made another offer later in 20XX which was also rejected.
In 20XX, the purchaser made another offer for acquisition. This offer set out the key terms of the proposed agreement for the acquisition, including purchase price, settlement date, conditions precedent and warranties. This offer contemplated that the vendor may verbally accept those terms, and following this, a formal Business Asset Sale Agreement would be prepared. This offer was accepted by the vendor the following day. In January 20XX, the acquisition proposal was put to the Board of the purchaser.
In March 20XX, a representative of the purchaser provided verbal confirmation to the vendor that the purchaser's Board had approved the acquisition, on the earlier agreed terms. The vendor accepted that offer on that day, with the intention to be legally bound to it.
In the following months, there was correspondence between the parties regarding the preparation of the formal Agreement, and transition of the business.
In August 20XX, the final Business Asset Sale Agreement was signed and the sale of business assets to the purchaser settled.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 104-10
Income Tax Assessment Act 1997 paragraph 104-10(3)(a)