Determining the CGT date
The purchase of an investment property by a superannuation fund implies a future capital gains liability.
It is vitally important to correctly identify the Capital Gains Tax Date, as the legal acquisition date can impact substantially on your tax liability. For example, you will be eligible for a CGT discount of 50% if you hold the asset for more than 12 months. That time is calculated from the CGT Date, which is not always the same as the Purchase Date.
There may also be alternate legal methods of tax calculation that reduce your liability depending on the CGT Date.
Generally speaking, the ATO takes the view that you acquired the asset for CGT purposes when you became the owner of the asset. That is, on the date the title transferred to you.
There are two exceptions to this rule.
- If you inherit a CGT asset
- If you buy a CGT asset under contract but do not take immediate possession.
If you acquire an asset by inheritance, the CGT date is the date of death of the person who bequeathed the asset to you.
If you buy property via a contract of purchase, the acquisition date is the date the contract becomes unconditional, rather than the date you took possession or the date of settlement. This applies even if you purchase property ”off the plan” and therefore don’t actually own any viable asset until land subdivision or construction work is complete. You may not actually pay for the property until months later, and you may deem the payment date to be your Purchase Date, but the CGT date is still the date the contract became unconditional.
(It’s worth keeping in mind, when you purchase property, that if you sell via a contract dated 29th June, capital gains tax will be due on the gain a whole year earlier than if the contract was dated July 1.)