Private ruling: CGT event timing
Published: July 2014
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Is the time of the capital gains tax (CGT) event when the contract for disposal is entered into? | A1: Yes.

Relevant facts and circumstances: You sold shares in a private company. You have a sales agreement. The sale was subject to specific clauses in the sale agreement which states payment is to be made in instalments over a number of years.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10

Reasons for decision: Summary: Division 104 sets out all the CGT events for which you can make a capital gain or loss and the time of each event. Section 104-10 provides for the disposal of a CGT event A1. Subsection 104-10(1) states a CGT event A1 happens if you dispose of a CGT asset. Subsection 104-10(3) states the time of the event is when you enter into the contract for the disposal; or if there is no contract when the change of ownership occurs. In your case, you sold your shares which gives rise to a CGT A1 event. The timing of the event is the date the contract/agreement was signed for the sale of the shares. You have advised that you are to receive the capital proceeds by way of instalments over multiple income years. You have a sale agreement. Although the capital proceeds are to be received over multiple income years, the CGT event will occur on the agreement date and the capital gain is to be declared in that income year.