For the duration of the option, no one else can buy or sell the property. The property can then be purchased by exercising the option and the conclusion of a form of contract or option agreed in advance can be cancelled. The ATO considers that the date of the CGT event resulting from the exercise of a call option is that of the exercise of the call option and the signing of the separate sales contract (TD 16). The ATO provides the following example: the ATO`s administrative practice for deferred billings can avoid cash flow problems related to latent accounts without having to use options. An option can be defined as a legally binding right to accept or reject a current offer within a specified time frame. An option is binding under English law only if it is acquired or granted under a counterparty contract. Both options can be accompanied by a sales contract, it is the qualification of the option as a conditional contract or an irrevocable offer that determines the date of the contract. On February 1, 2020, Colleen exercised Barry`s option. Barry will have to ignore the capital gain he made in the 2018/2019 income year, so that an amendment to his income tax is requested to exclude this amount. The $10,000 he received for the grant of the option is considered to be part of the proceeds of capital for the sale of his property in the 2019/20 income year. When considering the tax treatment of options, you should keep in mind that the effect of exercising an option depends on whether the option was a call option or a put option. A call option is an option that binds the Grantor to transfer a resource. A put option binds the Grantor to acquire an asset.
The CGT D2 event occurs when you give someone an option or if you renew or expand an option you have granted. An option agreement is for one person to grant another person the exclusive right to purchase a property at a specified price for a specified period of time. A non-refundable fee is generally charged for this option. You were approached by Smith, who was interested in buying your land. On June 30, 2014, you gave him the opportunity to buy your country for $200,000 within 12 months. Colleen will pay you $10,000 for the option. The legal fee is $500. They realized a capital gain of $9,500 in the 2013/14 income year. Exercise an option If the option you grant is exercised later, you do not know of any capital gain or capital loss you have made from the grant, extension or extension.