CLWM4100 Taxation Law Assessment 3: CGT Event Timing & Capital Gains

This report addresses a taxation law case study concerning CGT event timing and capital gains calculations for Harrison Carter. It begins by explaining the timing of a CGT event, referencing "sec 104-10 (3) ITAA 1997" and the "FCT v Sara Lee Household & Body Care P/L (2000)" case. The report then analyzes the sale of an investment property acquired in 2001 and sold in 2018, calculating capital gains and applying "section 116-20 ITAA 1997" and "section 102-5 ITAA 1997". It also considers the sale of shares acquired in 1985, classifying them as post-CGT assets and referencing "section 108-5 ITAA 1997". The report highlights relevant factors in determining CGT events and provides a detailed analysis of the tax implications for Harrison Carter, including the inclusion of capital gains in his taxable income. The report uses relevant case laws and sections to support the findings.

TAXATION LAW

TIME OF CGT EVENT
• As per the “sec 104-10 (3) ITAA 1997” for a “CGT event A1”, the time of
CGT event upon the transfer of CGT represents when the taxpayer enters in
the contract for transferring the asset or if there is no contract.
• It mostly includes when the change of ownership happens on settlement.
• The law court in “FCT v Sara Lee Household & Body Care P/L (2000)”
established relevant factors in determining the time of CGT event.

SALE OF INVESTMENT
PROPERTY
• Harrison states that he acquired an investment property during the year
2001 by paying an acquisition price of $80,000.
• During the year 2018 the property was actually sold by Harrison and
fetched $1.3 million for the same.
• A “CGT event A1” within “section 104-10 (1)” took place when the
property was sold by Harrison.
• Referring to the decision made in “FCT v Sara Lee Household (2002)” in
the factual case of Harrison a “CGT event A1” occurred when an
agreement for selling the investment property was entered into by Harrison.

SALE OF INVESTMENT
PROPERTY
• A change in ownership happened when Harrison disposed the investment
property.
• Mentioning “section 116-20 ITAA 1997” the sales proceeds of $1.3
million received by Harrison on selling the investment property is a capital
proceeds because it presents the market worth of asset arising from CGT
event.
• Under “section 102-5 ITAA 1997” the net value of capital gains derived
from selling the asset by Harrison should be counted in his taxable income.

RELEVANT FACTORS IN CGT
EVENT
• The relevant contract happens when the obligation to execute the transfer
the asset results in relevant sale.
• The date of asset sale and the date of purchase of CGT asset may be
different and does not requires to be contemporaneous.
• The relevant time when the contract is made and not when the contract
became specifically enforceable or unconditional (Evans, Minas and LiM
2015).
• The sale may happen under the agreement despite the fact that the
transferee is not the party to the contract.

SALE OF SHARES
• Under “section 108-5 ITAA 1997” the shares must be held as CGT asset.
• Harrison bought the shares in October 1985 so it should be classified as
post-CGT asset and it will attract CGT liability.
• A “CGT event A1” happened under “section 104-10 (1)” when the
shares were sold by Harrison.
• Citing the case of “FCT v Sara Lee Household (2002)” on 20th June 2018
Harrison signed the contract to transfer the document.

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