Most transactions whether for the sale of property or a business include at least two or three important dates. These dates are:
1. The date that the contract is signed by the parties to that contract
2. The date that special conditions are satisfied
3. The date that the contract reaches settlement or completion. The completion date and the settlement date are different words, used to describe the same thing.
Which of these dates do authorities rely upon when determining the date of the sale?
The short answer is that it will often be the date on which the contract is signed that is the relevant date used by authorities such as the Office of State Revenue in Queensland and the ATO in order to calculate the date for payment of Duty or Capital Gains Tax. In other words the date of settlement is sometimes ignored. However this is not always the case and every contract needs to be examined to make this determination. This is because sometimes the contract conditions can alter the situation. One way of altering the norm is by the creation of what lawyers call “conditions precedent”
It is sometimes the case that a contract is signed in one financial year but then settles in another financial year. If this happens the parties need to know what dates will be relevant.
A buyer or seller may wish to sign a contract before 30 June but have the tax consequence fall in the following financial year.
Lawyers have tools that can be used to achieve this. The most common way of achieving this result is with an agreement called a Put and Call Option agreement which will be explained in a separate article on this website.
If you want to ensure that your transaction is effective in a particular financial year please contact us.