Private ruling: CGT - disposal - extended settlement period
Date of advice: 11 January 2017
Published: June 2017
Ruling period: Year ended 30 June 20ZZ
Date scheme commenced: 1 July 20YY

Ruling: Q1: Is the capital gain from the sale of the land assessable in the income year in which the contract was entered into? | A1: Yes | Q2: 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? | A2: No

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: Summary: 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.