Taxation Determination

TD 92/186

Income tax: property development: can a construction contract which runs for less than twelve months be regarded as a long-term construction contract for the purposes of Taxation Ruling IT 2450?

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This Determination, to the extent that it is capable of being a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953, is a public ruling for the purposes of that Part. Taxation Ruling TR 92/1 explains when a Determination is a public ruling and how it is binding on the Commissioner. Unless otherwise stated, this Determination applies to years commencing both before and after its date of issue.

1. Yes. Paragraph 11 of Taxation Ruling IT 2450 clearly states that long-term construction contracts are contracts relating to construction work where construction extends beyond a year of income. Accordingly, the Ruling applies to any construction contract which straddles two or more years of income, and contractors can adopt either of the methods specified in the Ruling for returning income derived from those contracts, provided that the method is applied consistently to all similar contracts.

Examples:

Contractor A (the taxpayer) generally enters into construction contracts which run for several years and uses the estimated profits basis for returning income from those contracts. If the taxpayer commences work under a construction contract in May 19X1 and completes the work in April 19X2, the taxpayer must treat that contract as a long-term construction contract for the purposes of IT 2450 and return income from that contract on the same basis that is adopted for all of their other construction contracts, that is, the estimated profits basis.

Contractor B (the taxpayer) generally enters into construction contracts which run for less than 12 months, some of which are completed within a year of income and some of which extend beyond a year of income. If the taxpayer commences work under a construction contract in May 19X1 and completes the work in September 19X1, the taxpayer can treat that contract as a long-term construction contract for the purposes of IT 2450 and can adopt either of the methods specified in that Ruling, provided that the same method is used for all similar contracts, that is, construction contracts which extend beyond a year of income.

Commissioner of Taxation
12/11/92

Previously issued as Draft TD 92/D120

References

ATO references:
NO PD/17A

ISSN 1038 - 8982

Related Rulings/Determinations:

IT 2450

TD 92/186 history

	Date:	Version:	Change:
You are here	12 November 1992	Original ruling
	18 October 2017	Withdrawn

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