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INCOME TAX ASSESSMENT ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-1 - CAPITAL GAINS AND LOSSES: GENERAL TOPICS  

Division 104 - CGT events  

Subdivision 104-H - Special capital receipts  

SECTION 104-150  Forfeiture of deposit: CGT event H1  

 ITAA 36

104-150(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.

104-150(1A)  

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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.

104-150(1B)  

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

104-150(2)  

The time of the event is when the deposit is forfeited.

104-150(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.

104-150(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:
$1,000 - $400 = $600


 



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