Hi Bob,
This is a tricky question but I'll have a stab at it.
Let's say the current market value of your property is $100,000. You agree to sell it in two years for $120,000. You grant an option to the buyer for a fee of $10,000. If the option is not exercised you keep the $10,000. If the option is exercised the property is sold and the balance of $110,000 is paid to you.
If the option is granted and subsequently exercised and the property sold to the grantee two CGT events occur.
The first CGT event ( D2 ) occurred by granting the option. The capital gain is $10,000 minus legal costs and other expenditure for making the grant. The second CGT event ( A1 ) occurred when the property is sold. Now comes the tricky part. When calculating the capital gain for the property when sold do you take the sale price as $110,000 or $120,000?
If you said $110,000 because you already paid CGT two years earlier on $10,000 you'd actually be wrong. What happens is you have to get the ATO to ammend your earlier return and remove any reference to the $10,000 capital gain, then they will recalculate your return for that year. In the year of the sale you calculate your capital gain based on the figure of $120,000.
If the option is not exercised and it expires then you keep the $10,000 and your earlier tax return stands. If I'm wrong please correct me.
As far as the buyer is concerned the cost base figure is $120,000 plus legals.
Regards, Mike