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Has the taxpayer, an individual who entered into an 'off the plan' purchase contract after 21 September 1999 and disposed of the interest in that contract over 12 months later, made a discount capital gain under Subdivision 115-A of the Income Tax Assessment Act 1997 (ITAA 1997)?

Yes. The taxpayer has made a discount capital gain under Subdivision 115-A of the ITAA 1997.

The taxpayer entered into an 'off the plan' contract after 21 September 1999 for the purchase of a town house that was under construction. The taxpayer paid a deposit at that time. Settlement of the contract was to occur after the completion of the town house and the final payment was to be made then.

Over 12 months later but before the completion of the town house, the taxpayer sold their interest in the contract to another person. The taxpayer made a capital gain under CGT event A1, section 104-10 of the ITAA 1997.

A capital gain is a discount capital gain if it results from a CGT event happening to a CGT asset that was acquired at least 12 months before the CGT event (subsection 115-25(1) of the ITAA 1997) and satisfies the other conditions in Subdivision 115-A of the ITAA 1997. Taxation Determination TD 2002/10 discusses what is meant by the phrase 'at least 12 months before'.

The bundle of contractual rights a purchaser acquires under a contract of sale is a CGT asset for the purposes of the CGT provisions (subsection 108-5(1) of the ITAA 1997). The explanatory memorandum relating to the Taxation Laws Amendment Bill (No 4) 1992, recognises that rights under a contract are an example of an incorporeal asset (Taxation Ruling TR 1999/19, paragraph 69).

In this case, the taxpayer acquired the bundle of contractual rights at the time when the contract was entered into (paragraph 109-5(2) of the ITAA 1997).

As the taxpayer entered into the contract more than 12 months before the CGT event happened and satisfied the other conditions for a discount capital gain, the taxpayer is eligible for the 50% CGT discount on the capital gain made from the sale of the interest in the contract.