When it comes to Capital Gains Tax (CGT) in Australia, the timing of a sale contract is crucial. The ATO considers the date you enter into the contract to sell an asset—not the settlement date—as the key point for CGT purposes. This means any capital gain or capital loss is counted in the income year the contract is signed.
Why Timing Matters
This rule has important tax implications. For instance:
Tax Planning vs. Tax Avoidance
Managing the timing of your sale can be a valid tax planning strategy, but be cautious. Some practices—like “wash sales” (selling shares for a tax loss and then buying them back shortly after)—may be seen as tax avoidance by the ATO and fall under anti-avoidance rules.
Simply choosing when to sell is not illegal, but trying to create artificial losses or shift ownership without real economic change can get you into trouble.
Conditional Contracts and CGT
In real estate and similar transactions, contracts often have conditions (like “subject to finance”). The ATO distinguishes between:
Getting this distinction wrong could mean misreporting the timing of your CGT event. When in doubt, seek professional advice.
Contracts That Don’t Settle
If a contract is cancelled before settlement, CGT doesn’t apply because there’s been no change of ownership. However, forfeited deposits or damages paid may still have CGT consequences.
Buying Assets and the 12-Month Rule
The timing of when you acquire an asset also matters—especially if you want to qualify for the 50% CGT discount. To get this discount, you need to have owned the asset for at least 12 months. If you acquire an asset through exercising an option, the ATO says the asset is considered acquired when the sale contract is entered into—not when the option was signed.
Need help with CGT timing or tax planning?
Whether you're buying, selling, or transferring assets, it’s essential to get advice on when a CGT event occurs. Contact us before entering
into a contract to ensure you're making the most tax-effective decisions.
Tommy Li, CA
Director, Verity Advisory | Registered Tax Agent | Authorised Financial Adviser (ASIC Rep No. 1261831) | Member, Chartered Accountants Australia & New Zealand
Tommy is a Chartered Accountant with 20+ years advising medical professionals on tax, financial structure and practice decisions. He founded Verity Advisory to provide integrated advice for doctors at career-defining financial inflection points — combining tax, lending and financial planning into a single structured approach.
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