Capital Gains Tax

[Roosters]

I have been given two conflicting pieces of advice on when a 'CGT event' is triggered upon purchase of a property in reference to the 50% CGT discount for holding a property for 12 months.

Does the 12 months commence for the acquisition:

a) Upon you signing the contract to purchase or;

b) Upon settlement and taking possession of the property?

The accountant who gave me the advice that the 12 months does not commence until the settlement date was adamant this was correct whereas the 'Property Tax Specialist' who gave the alternate advice ie it commences upon signing of the contract was also adamant.

I have also been told that the 12 months ceases upon you signing the contract of sale to sell the property and not the settlement date is this correct?

Example:

Purchase a unit 'off the plan' and sign contract in January 2014. Settlement takes place in November, 2016. Am I eligible for the 50% CGT discount if I sell the unit upon settlement?

 

[Terry_w]

Generally it is the signing of the contract.

 

[Cash Flows]

It is when the contract is signed.

Cheers

Cash Flows

 

[Terry_w]

It is when the contract is signed.

Cheers

Cash Flows

Such a bold statement! What about CGT event E2?

 

[Roosters]

What is E2 Terry?

 

[Terry_w]

CGT event E2 may happen if an asset is transferred to an existing trust. The timing here for CGT purposes is not the date of the contract but the date of the transfer.

May not apply in this situation, but I thought I would put it out to show it is not always the date of the contract.

Another situation where it may not be the date of the contract is when the contract is contingent on something else happening, so as if that event doesn't occur there is no contract. Generally not the case for subject to finance type conditions though.

 

[Roosters]

Thanks Terry - so for a 'bread and butter' residential contract (no trust/no other variables) it is the date the contract is signed.

Is this still the case when you are knocking down an old house to develop a duplex?

ie Contract signed March 2015 - knocked down December 2015 with construction contract dated December 2015 and sold off the plan in September 2015.

Does the 12 mths CGT 50% discount still start from the date of purchase of the original land (March 2015) or from the date of the building contract (December, 2015)? I have read an article from Margaret Lomas which I think she states it from the date of the building contract?

 

[Terry_w]

Thanks Terry - so for a 'bread and butter' residential contract (no trust/no other variables) it is the date the contract is signed.

Is this still the case when you are knocking down an old house to develop a duplex?

ie Contract signed March 2015 - knocked down December 2015 with construction contract dated December 2015 and sold off the plan in September 2015.

Does the 12 mths CGT 50% discount still start from the date of purchase of the original land (March 2015) or from the date of the building contract (December, 2015)? I have read an article from Margaret Lomas which I think she states it from the date of the building contract?

Unlikely that CGT will apply in this situation.

 

[Cash Flows]

Such a bold statement! What about CGT event E2?

Bold, but just had a similar situation at work and clarified with the ATO. Personally held property which was sold less than 12 months from settlement but date of contract was over 12 months.

 

[GreyGhost]

Unlikely that CGT will apply in this situation.

Possibly argue if its first time development could be on capital account rather than on income account.

 

[SUNNYBILL]

Possibly argue if its first time development could be on capital account rather than on income account.

Based on the circumstances in this case, even if it was a first development it would be hard to argue it is not on income account. Also GST would apply.