Over $1.8 million turned on whether a deed signed in May 1985 was the construction contract.
The Brisbane Club bought its Adelaide Street land in 1963. In 1985, it signed a Deed to demolish the old building and construct the Brisbane Club Tower. The ATO said the Tower was a post-CGT asset. Over $1.8 million in tax was at stake.
Brisbane Club v Commissioner of Taxation [2026] FCA 220 (Wheatley J, 6 March 2026).
The facts
The Club entered a Deed with F.A. Pidgeon & Sons on 8 May 1985, before the 20 September 1985 CGT start date. That Deed contemplated a Building Agreement, which was later executed on 10 January 1986. The Tower was completed in 1988.
In 2021, the Club sold the Tower and two subleases for $32 million. The Commissioner assessed CGT on all three, arguing each was a post-CGT asset. The Club objected, lost at the objection stage and appealed.
The building: Club wins
The critical question: was the Deed a “contract for the construction” under s 108-55(2)(a) ITAA97? That section deems a building on pre-CGT land to be a separate CGT asset if you entered a construction contract on or after 20 September 1985. The Commissioner argued the Building Agreement (January 1986) was that contract.
Wheatley J disagreed.
- The Deed and Building Agreement were not standalone contracts. They operated together as one, with the Deed prevailing in any conflict.
- The Building Agreement was in the Sixth Schedule of the Deed. It was a condition precedent to performance, not formation.
- The legislation looks at when the contract was entered, not when it became unconditional.
Deed entered 8 May 1985. Building not a separate CGT asset. Capital gain disregarded.
The subleases: Commissioner wins
The Club also claimed two subleases were pre-CGT. The Deed contemplated the Developer granting subleases to the Club. But the actual subleases executed on 18 June 1986 were between the Club and CML, a third party.
The Court held that the CGT event F1 provisions focus on the grant of the lease. Any earlier contract must relate to the actual lease granted. There was no evidence of any assignment from the Developer to CML. The parties to the Deed and the subleases were different. No earlier contract between CML and the Club existed. The subleases were post-CGT assets. Capital gain not disregarded.
Why it matters
Contract characterisation is everything. Where multiple documents form part of a development, the Court will look at how they interact, not just the document labelled “building contract”.
Conditional contracts still count. Section 108-55(2) looks at when the contract was entered, not when conditions were fulfilled. A pre-CGT conditional contract can still protect a building from being split off.
Party identity matters for leases. The F1 timing rule requires the contract to relate to the actual grant between the actual parties. Different parties, different result.
General information only. This note was accurate when written. The law may have changed since and the note is not updated. It is not legal or tax advice, does not take account of your circumstances and must not be relied upon as a substitute for advice on your own matter. If the issue is live for you or your client, email arda@nortonquaytaxlaw.com.au for advice on the current position.