Tax Tip 214: At what date is CGT Triggered? Part 1

I change my answer because I had cause to look up this legislation just now
section 109-5 ITAA97
an asset is generally ‘acquired’ when an ownership interest is obtained, see section 109-5 ITAA97. and this would usually only happen at settlement when legal ownership is changed. However, the table in the same section shows that for CGT event A1, which would include a sale of a property by contract, the taxpayer ‘acquires’ the asset at the time when the disposal contract is entered into.

 

Yes...This is spelled out here. Acquiring CGT assets

However, when calculating CGT the settlement to settlement dates are when you have a interest in that asset not the contract to contract dates. Why ? Beacuse you cant have a main residence when you have a contract to acquire. That only occurs with actual occupancy with the quaifier you must also have ownership interest. When calcualting the "one year" rule watch for two traps
1. Leap years. The rule is best understood as one year + one day based on the date.
2. Typically test the ownership interest based on settlement to settlement OR contract to contract depending on the manner of sale etc.

Care must be taken and assuming CGT event A1 applies is incorrect. There are around 50 possible CGT events and some are well hidden eg Selling your IP to a existing trust is CGT event E2 which has a rule based on the TRANSFER date. Step one is not actually about whetehr its contract or settlement. Its which CGT applies.

Some rules allow the prior owners period to also count to the present owners eg deceased assets and the decaesed's former main residence.

That brings me to the ways to LOSE the CGT discount (or for a person who ceases to be a tax resident they may lose all past exemptions and discounts if the asset was their former main residence.

Home first used for rental or business in last 12 months
If the asset is your home and you started using it for rental or business less than 12 months before disposing of it, you can't use the CGT discount. You use the indexation method instead.

Foreign residents
The full CGT discount cannot be used for capital gains made by foreign or temporary residents after 8 May 2012. Sale of the former main residence after ceasing the main residence and departing Australia may also lead to loss of past exemptions and any discounts.

Creation of new asset
The CGT discount is not available for a CGT event that creates a new asset and a capital gain. This might happen, for example, with excercisinga share option and acquiring the shares. The clock retstarts.

In these cases the asset has not been acquired at least 12 months before the CGT event.

 

That page has been removed by the ATO. Try this one instead: CGT Events | Can You Spot Them? - My Tax Guy

 

On the rare occasion buyer backs out and sale doesn’t settle but you have already lodged your tax return, do you just send in an amendment for the current return? If you got to pocket the deposit, does tax need to be paid on the deposit?

 

Yes you would amend your tax return. Keeping deposits could be income or capital gains, it depends.

 

CGT event amendment periods are also not limited by time generally. This occurs with a business sale that may have a final price based on a earnout formula that say values the sale in 6 years time. The now 6 year old return may need to be amended. Best done by writing to explain the situation using the explanation ....earnout.

The Commissioner will not impose penalties and interest if it is explained and done promptly. Not uncommon.