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Clarifying the acquisition date of land: Certainty please

Author: Jamie Abela and Brad Bowman

As part of the Budget 2013 focus on property, an Issues Paper proposes to clarify the date of acquisition of land for tax purposes.

Under current tax rules the sale of land will be taxable if it was acquired for the purpose of or the intention of disposal. The intention or purpose is tested at the date the land is acquired. However, due to the broad definition of land for tax purposes (which includes an estate or interest in land) there is a question as to how to identify the acquisition date. This has been particularly problematic where an interest in property may have been purchased off the plans and resold before title was issued to the original purchaser.

Officials favour taking a “first interest” interpretation when determining the acquisition date of land. Under the “first interest” interpretation, the date of acquisition is the date when the first interest (equitable or legal) in land arises under an agreement for the sale and purchase of land. Under this interpretation the date of acquisition is likely to be either the date the sale and purchase agreement is entered into, or the date when the conditions of the agreement are fulfilled (that is, the purchaser is able to enforce the agreement).

The proposed solution to deem land to be acquired from the date an agreement is entered into seems to us to be a sensible one.

It is proposed that any clarification of the acquisition date will apply prospectively from the date the legislation is enacted (i.e. to land acquired on or after that date). Submissions on the proposals in the Issues Paper are due by 28 June 2013. If you wish to either make a submission or discuss the proposal, please contact your usual Deloitte adviser.

Tax Alert June 2013 contents:

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