Preamble
We consider that the option is disposed of in terms of paragraph 160ZZC(3)(a) when the grant of the option took effect, namely, at the time of the forfeiture of the deposit.
Subsection 160ZZC(12) applies if a deposit of money or other consideration: (a) was made in respect of a prospective purchase or other transaction and the purchase or the other transaction is cancelled or otherwise abandoned; and (b) the deposit is forfeited.
When the deposit is forfeited, paragraph 160ZZC(12)(a) deems the deposit to have been paid or given as consideration in respect of the grant, by the person who received the benefit of the forfeiture, of an option that bound the grantor to dispose of an asset and was not exercised. A paragraph 160ZZC(12)(a) option is an asset in accordance with subparagraph (a)(i) of the definition of 'asset' in section 160A.
By paragraph 160ZZC(3)(a), the grant of a paragraph 160ZZC(12)(a) option is deemed to have constituted the disposal of that option when the grant took effect.
The grant of a paragraph 160ZZC(12)(a) option takes effect when the deposit is forfeited: Case 32/94 94 ATC 298; AAT Case 9538 28 ATC 1230. A forfeited deposit will therefore give rise to a capital gain or capital loss to the grantor in the year in which the deposit is forfeited.
When finalised, this Taxation Determination will overrule Taxation Determination TD 92/116 in which we took the view that the grant of a paragraph 160ZZC(12)(a) option takes effect when the prospective purchase or other transaction was entered into. Taxation Determination TD 92/116 will accordingly be withdrawn. We now agree, for the reasons given by the Administrative Appeals Tribunal in Case 32/94; AAT Case 9538, that TD 92/116 is not correct.
This Taxation Determination is considered to be more favourable to taxpayers than Taxation Determination TD 92/116. This Taxation Determination therefore has both a past and future application in accordance with the guidelines in Taxation Ruling TR 92/20, subject to the statutory time limits in section 170 for the amendment of assessments.