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  

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)    

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)    

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