CGT consequences for failed home purchase (incidental costs)

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(Initiate)Initiate

30 July 2023

I signed a contract to purchase a home and met all the conditions on my end. The seller had a requirement to provide vacant possession at settlement but was unable to meet this condition so terminated the contract.

I was able to recover my deposit as it was the sellers default but was out of pocket for legal and inspection costs directly related to the purchase.

TR 1999/19 has examples if the contract was terminated due to buyers default and indicates that the the buyer could claim a capital loss of the incidental costs associated with the purchase attempt.

Would there be a capital loss in this situation?

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AriATO

(Community Support)Community Support

7 Aug 2023

Hi @FHSS_Buyer5

After some digging and based on you buying your own home to live in, we can confirm you have a capital loss.

There are a couple of rulings we've referred to and they are TR 1999/19 and TR 94/29. The most relevant asset you acquired is a right to purchase a main residence rather than the purchase of the main residence. The cost base of that right is the deposit plus the incidental costs. When that right was terminated, your capital proceeds was the whole of your deposit. As your capital proceed was less than the cost base of that right, you have a capital loss equal to incidental costs. Does that make sense? CGT is tricky!