Private ruling: CGT - event D1
Date of advice: 15 October 2025
Published: 1 December 2025
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: XX XXXX 20XX

Ruling: Q1: Did you trigger capital gains tax (CGT) event D1 under section 104-35 of the Income Tax Assessment Act 1997 (ITAA 1997),by receiving a cash payment during your lifetime in connection with a future intention to transfer real property under your Will? | A1: Yes. | Q2: In the alternative, did you trigger CGT event H2 under section 104-155 of the ITAA 1997, by receiving a cash payment during your lifetime in connection with a future intention to transfer real property under your Will? | A2: Not applicable.

Relevant facts and circumstances: Prior to 20 September 1985, you received sole ownership of a dwelling located in Country A (the property). Since 20XX, you have been an Australian citizen and tax resident. On XX XXXX 20XX, you updated your final Will and Testament to bequeath the property to Person A. On XX XXXX 20XX, you made a verbal agreement with Person A, which included a future promise to transfer the property to them under your Will in consideration for the payment of $XX. In XXXX 20XX, members of your family signed statutory declarations confirming they would not challenge the disposal to Person A. Person A has taken possession of the property and will retain possession until your passing. The ownership of the property is unable to be transferred to Person A prior to your death, due to restrictions under Country A law. On XX XXXX 20XX, Person A transferred to you $XX. On XX XXXX 20XX, Person A transferred to you the remaining $XX. Person A is an Australian citizen and tax resident.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-25 | Income Tax Assessment Act 1997 section 104-35 | Income Tax Assessment Act 1997 section 104-155 | Income Tax Assessment Act 1997 subsection 115-25(3)

Reasons for decision: Summary: The creation of this contractual right triggered a capital gains tax (CGT) event D1. Even though the underlying property is a pre-CGT asset, the right created by you is a separate CGT asset and CGT Event D1 applies to that right, not the property itself. | Detailed Reasoning - Taxable Australian Property: Section 855-15 of the Income Tax Assessment Act 1997 (ITAA 1997) sets out the 5 categories of CGT assets that are Taxable Australian Property (TAP) in a table. Item 1 in the table at section 855-15 states that taxable Australian property as defined in section 855-20 of the ITAA 1997 is considered CGT assets that are TAP. Subsection 855-20(a) of the ITAA 1997 states that taxable Australian real property is real property situated in Australia (including a lease of land, if the land is situated in Australia). The property is not considered TAP. | Detailed Reasoning - Creation of a right: The payments you received from Person A were in consideration for you to bequeath the property to Person A under your Will. The creation of this contractual right triggered a CGT event D1. Even though the underlying property is a pre-CGT asset, the right created by you is a separate CGT asset and CGT Event D1 applies to that right, not the property itself. The CGT discount is not available for a CGT event that creates a new asset and a capital gain. Subsection 115-25(3) of the ITAA 1997 excludes the CGT general discount from applying to capital gains arising from a number of CGT events including, (a) CGT event D1-creating contractual or other rights. Capital gains from the CGT events mentioned in paragraphs (3)(a) to (f) are not discount capital gains because the CGT asset involved in the CGT event comes into existence at the time of the event, so it is impossible to meet the requirement in this section that the asset has been acquired at least 12 months before the event. | Detailed Reasoning - Question 2: Section 102-25 of the ITAA 1997, provides ordering rules for CGT events. If another CGT event applies, such as D1 (creation of a right), then H2 is disregarded. The payment is contractual or conditional, creating a right to receive the property. CGT event D1 occurred. Not applicable.