When Does a CGT Event Occur In the Sale of Real Estate?

The most common Capital Gains Tax (CGT) event that happens to real estate is its sale or disposal. The time of the event is:

• when you enter into the contract for the disposal
• if there is no contract – when the change of ownership occurs, or
  if the asset is compulsorily acquired by an entity; the earliest of :
• when you received compensation from the entity
• when the entity became the asset's owner
• when the entity entered it under a power of
  compulsory acquisition, or
• when the entity took possession under that power

If land is disposed of under a contract, it is taken to have been disposed of when the contract is entered into – that is, not the settlement date. The fact that a contract is subject to a condition, such as finance approval, will generally not affect this date.

You are not required to include any capital gain or capital loss on your tax return for the relevant year until settlement occurs. When settlement occurs, you are required to include any capital gain or capital loss in the year of income in which the contract was made. If an assessment has already been made for that year of income, you may need to have that assessment amended.

For example: Pam signed a contract for the sale of a block of land on 25 May 2010. When she lodged her tax return in July 2010, she did not include the capital gain, as settlement had not yet occurred. When the change of ownership was completed, Pam requested an amendment to include the capital gain in her return.

Source: Australian Tax Office: Buying and Selling Real Estate

For assistance with or further information on Capital Gains Tax, please call us on 02 43 650 377.