Commonwealth Consolidated Acts

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INCOME TAX ASSESSMENT ACT 1997 - SECT 104.150

Forfeiture of deposit: CGT event H1

  (1)   CGT event H1 happens if a deposit paid to you is forfeited because a prospective sale or other transaction does not proceed.

The payment can include giving property: see section   103 - 5.

Example:   You decide to sell land. Before entering into a contract of sale, the prospective purchaser pays you a 2 month holding deposit of $1,000.

  The negotiations fail and the deposit is forfeited.

  (1A)   The amount of the deposit is reduced by any part of the deposit that is:

  (a)   repaid by you; or

  (b)   compensation you paid that can reasonably be regarded as a repayment of all or part of the deposit.

The payment can include giving property: see section   103 - 5.

  (1B)   However, the deposit is not reduced by any part of the payment that you can deduct.

  (2)   The time of the event is when the deposit is forfeited.

  (3)   You make a capital gain if the deposit is more than the expenditure you incur in connection with the prospective sale or other transaction. You make a capital loss if the deposit is less .

  (4)   The expenditure can include giving property: see section   103 - 5. However, it does not include an amount you have received as * recoupment of it and that is not included in your assessable income.

Example:   To continue the example: if you gave a lawyer wine worth $400 in connection with the prospective sale, you make a capital gain of:

Start formula $1,000 minus $400 equals $600 end formula


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