Hi All,
I am very confused to say the least!!!
I am looking for a definitive answer to the following :
…for tax purposes what date are you deemed to have purchased the property from. The date of the O&A or the date of settlement.??
I have spoken to both an accountant and the ATO and they both say that for CGT calculations they take the date as from the day the O&A goes unconditional. But this doesnt make sense. It just seems logical that it would be settlement.
I have purchased a property and made the settlement the 1st of July, 2006. Now I am being told it will be taken from the March date.
PLEASE HELP !!!
Thanks
MichelleThere is no confusion for Taxation purposes the dates to consider are the date of the contract for both buying and selling.
The settlement date is irrelevant.
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As an accountant, I agree. Its not fair. I bet it suits the ATO to catch people out on this one, to prevent them claiming the 12 month period discount.
Can save alot to check some items such as that, before selecting dates.safe as
always date of contract – that is by definition when a CGT event occurs
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..thanks for that…..
..so in terms of when you report the profit earned from the sale…lets say you settle the 1st July 2006, am I right in assuming the profit for personal tax purposes would fall in the 2006/2007 financial year – eben though the contract was written in march ?
thanks again
michelleMichelle, agree with the others its the date of the contract not when it settles. So in your case if you signed in March 2006 you’re the legal owner from that date, capital gains is calulated from that date and your insurance cover should also be from the date of the contract.
(Ex Tax Accountant of 15 years)Amanda
“It is better to be inconspicuously wealthy, than to be ostentatiously poor…”I don’t think it is unfair at all. Basing it on settlement date would be unfair as it would allow people to take advantage of the CGT discount when they may not be entitled to it (i.e. they held the property for less than 12 months but had a settlement date to ensure they went over the twelve month period). Or alternatively move the gain into a year when they earn less income or even no income at all.
Remember Australia is the only country that did not retrospectively apply the CGT regime. EVERY OTHER COUNTRY (Canada, UK, US, France) retroespectively applied CGT so we don’t have much to complain about in that respect.
Section 104.10 of the 1997 Income Tax Assessment Act makes it clear and even includes an example. Sorry Michelle your CGT event has occurred when you exchanged contracts which sounds like March.
Disposal of a CGT asset: CGT event A1
(1) CGT event A1 happens if you * dispose of a * CGT asset.
(2) You dispose of a * CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law. However, a change of ownership does not occur:
(a) if you stop being the legal owner of the asset but continue to be its beneficial owner; or
(b) merely because of a change of trustee.(3) The time of the event is:
(a) when you enter into the contract for the * disposal; or
(b) if there is no contract—when the change of ownership occurs.Example: In June 1999 you enter into a contract to sell land. The contract is settled in October 1999. You make a capital gain of $50,000.
The gain is made in the 1998-99 income year (the year you entered into the contract) and not the 1999-2000 income year (the year that settlement takes place).
Note 1: If the contract falls through before completion, this event does not happen because no change in ownership occurs.
Note 2: If the asset was compulsorily acquired from you: see subsection (6).
Hi to all
Can some one answer this question for me.
I received a letter of offer to lease a premises in April 2004. We returned the aggreement with all the lessors requests completed and signed and paid the first months rent, which then executed the agreement to lease between both the lessor and lessee.
The premises did not come available for us to fit out until September 2004. We started trading in November 2004. We then signed a contract on the sale of our store in May 2005. And setteled in Mid July 2005.
Could you please let me know which date would be used as the first date of aquistion?
I have spoken to a few people and keep on getting different opinions.
Thank you
Joanne
If I had a property for 3 years, then built a new house in the backyard, shifted in and then sold this new house 15 months later, this wouldnt attract CGT would it? I can prove shift in date because (a) my old PPR was rented out on that date, and (b) services connected to the new place on same date. Grateful If someone could add their opinion.
Fern
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