Contract 2014, settlement 2015

My understanding is that the contract date on a resi sale is the impt date so if settlement occurs in the first week of July do you declare that sale in 2014 tax year if that is when the contract was signed. I have made a concessional super contribution June 2014 to offset the income from the sale but settlement was unavoidably delayed.

 

Generally the date of the contract but this can vary so seek specific advice.

 

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 (subsection 104-10(3) of the ITAA 1997).

The circumstances which may change the timing of the contract include the contract being subject to certain types of conditions. Conditions to contracts are generally divided into two categories: conditions precedent and conditions subsequent. Although the distinction between conditions precedent and conditions subsequent have been described as 'largely a matter of words', conditions precedent can be broken up into two further categories and the distinction between these categories can be critical for CGT purposes.

The categories are conditions precedent to the performance of a contract and conditions precedent to the formation of a contract. A condition precedent to the performance of a contract still sees an operative contract come into existence at the date of the acceptance of an offer (and therefore that date is the date 'you enter' into the contract). On the other hand, a condition precedent to the formation of a contract means that no contract comes into existence until the condition is fulfilled. This makes the time of the contract the time the condition (which is precedent to the formation of the contract) is fulfilled.

Where there are conditions subsequent and conditions precedent to the performance of the contract there is a binding contract from the outset which creates rights capable of enforcement, though the obligation of a party, or perhaps of both parties, to perform depends on fulfilment of the condition and a non-fulfilment entitles the party, or both parties, as the case may be, to terminate. In such a case the time when the contract was entered into, for the purposes of CGT event A1, would be the time when the agreement containing the condition was entered into.