Contract Fails to Complete - CGT loss ?

Discussion in 'Accounting & Tax' started by Paul@PAS, 25th Nov, 2016.

Join Australia's most dynamic and respected property investment community
  1. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    23,319
    Location:
    Sydney
    A issue rarely occurs when one of the parties cannot complete a contract. The contract is terminated and purchase / sale does not complete.

    What is the CGT outcome ??

    Tax law defines a range of circumstances which lead to a CGT gain or a CGT loss. These are called CGT events - One of these is the ending of a contract (Event C2). The ending of the contract ends contractual rights and this often leaves one or both parties in a different financial position. It is then necessary to consider if a benefit (a CGT gain) or a loss occurs. This may be taxable or may carry forward to offset future gains.

    However incurring costs which do not lead to a contract are not acceptable eg a pre-purchase inspection finds termites. The key issue is that a contract is made...ie offer, acceptance, deposit paid etc etc....

    Personal tax advice is recommended.

    A good example of this issue is found in a Binding Private Ruling which explains the details.
     

Buy Property Interstate WITHOUT Dropping $15k On Buyers Agents Each Time! Helping People Achieve PASSIVE INCOME Using Our Unique Data-Driven System, So You Can Confidently Buy Top 5% Growth & Cashflow Property, Anywhere In Australia