Guide to capital gains tax 2003-04

Table Of Contents

• Copies of this publication
• Our commitment to you
• Your rights
• How self-assessment affects you
• What are your responsibilities?
• What if you lodge an incorrect tax return?
• Initiatives to complement self-assessment
• Do you need to ask for a private ruling?
• About this guide
• Introduction
• Consolidated income taxation of corporate groups
• Your tax return
• Worksheets
• Capital gains tax schedule
• What’s new
• Convertible notes
• Foreign exchange gains and losses
• GST input tax credits
• Rollover for financial service providers
• Exemption for certain Second World War payments
• Sugar exit grants
• Foreign hybrids
• Shares in foreign companies
• Budget announcements
• Part A - About capital gains tax
• Do you need to read this part of the guide?
• Chapter 1 - Does capital gains tax apply to you?
• What is capital gains tax and what rate of tax do you pay?
• What is a CGT event?
• Order in which CGT events apply
• Time of the CGT event
• What is a CGT asset?
• Collectables
• Personal use assets
• Other assets
• Partnerships
• Joint tenants
• Separate assets
• What are capital proceeds?
• What is the cost base?
• Elements of the cost base
• Assets acquired after 13 May 1997
• Reversal of deduction: effect on cost base
• Indexation of the cost base
• What is the reduced cost base?
• Elements of the reduced cost base
• Modifications to the cost base and reduced cost base
• Consolidated groups
• General value shifting regime
• Other special rules
• Debt forgiveness
• Acquiring CGT assets
• Time of acquisition
• Becoming a resident and ceasing to be a resident
• Becoming a resident
• Ceasing to be a resident
• Necessary connection with Australia
• Choices
• Exemptions and rollovers
• Exemptions
• Rollovers
• Other replacement asset rollovers
• Other same asset rollovers
• CGT and depreciating assets
• Calculating capital gain or capital loss for a depreciating asset
• Application of CGT concessions
• Do any CGT exemptions apply to a depreciating asset?
• Changed treatment of intellectual property
• Need more information?
• Where to now?
• Chapter 2 - How to work out your capital gain or capital loss
• Three methods of calculating capital gain
• The ‘other’ method
• The indexation method
• The discount method
• Certain capital gains are excluded
• Discount percentage
• Choosing the indexation or discount method
• Capital gain calculation methods
• How to calculate a capital loss
• Chapter 3 - Keeping records
• What records do you need to keep?
• Records relating to real estate
• Records relating to shares in companies and units in unit trusts
• Records relating to bonus shares
• Records relating to inheriting an asset
• Inheriting a main residence
• Asset registers
• Exceptions
• It is never too late
• Chapter 4 - Trust distributions
• Capital gains made by trust
• Step 1 Exclude net capital gains from trust income item
• Step 2 Capital gain you are taken to have made
• Non-assessable payments from a trust
• Chapter 5 - Investments in shares and units
• How capital gains tax affects shares and units
• Identifying shares or units sold
• Demutualisation of insurance companies
• Share buy-backs
• Shares in a company in liquidation
• Takeovers and mergers
• Scrip-for-scrip rollover
• Demergers
• New rules for demergers
• Demergers that happen on or after 1 July 2002
• Rollover relief available
• Cost base calculations
• Cost base calculations where you do not have pre-CGT interests
• Cost base calculations where you have pre-CGT interests
• Where you choose rollover
• Where you do not or cannot choose rollover
• Using the discount method if you sell your shares after the demerger
• Dividend reinvestment plans
• Bonus shares
• Bonus shares issued where no amount is assessed as a dividend
• Bonus shares issued where the paid-up value is assessed as a dividend
• Bonus units
• Bonus units issued where no amount is included in assessable income
• Bonus units issued where an amount is included in assessable income
• Rights or options to acquire shares or units
• Rights and options issued directly to you from a company or trust for no cost
• Rights and options you paid to acquire from a company or trust – or that you acquired from another person
• Exercising rights or options to acquire shares or units
• Rights or options issued directly to you from a company or trust for no cost
• Rights or options issued directly to you from a company or trust that you paid to acquire
• Rights or options you acquired from an entity other than the company or trust that issued them
• CGT discount on shares or units acquired from exercise of rights or options
• Convertible interests
• Convertible notes
• Conversion of notes to shares
• Convertible notes issued after 14 May 2002
• Conversion of notes to units
• Employee share schemes
• Non-assessable payments
• Non-assessable payments from a company (CGT event G1)
• Non-assessable payments from a unit trust (CGT event E4)
• Investments in foreign hybrids
• General value shifting regime (GVSR)
• Using the capital gain or capital loss worksheet for shares
• If a LIC pays a dividend to you that includes a LIC capital gain amount, you may be entitled to an income tax deduction.
• Chapter 6 - Real estate and main residence
• Rules to keep in mind
• Non-capital costs of ownership
• Cost base adjustments for capital works deductions
• Reduced cost base
• Rollover
• Keeping records
• Sale of a rental property
• Other CGT events affecting real estate
• Exercise of an option
• CGT events involving leases
• Subdivision of land
• Amalgamation of title
• Examples of CGT calculations affecting real estate
• Main residence
• Special rules
• What is a dwelling?
• What is an ownership interest?
• When do you acquire an ownership interest?
• Is the dwelling your main residence?
• Moving into a dwelling
• Land adjacent to the dwelling
• Other structures associated with the dwelling
• Part exemption
• Main residence for only part of the period you owned it
• Dwelling used to produce income
• Home first used to produce income
• Moving from one main residence to another
• Continuing main residence status after dwelling ceases to be your main residence
• Home used to produce income and then you cease living in it
• Constructing, renovating or repairing a dwelling on land you already own
• Destruction of dwelling and sale of land
• Having a different home from your spouse or dependent child
• Major capital improvements to a dwelling acquired before 20 September 1985
• Buildings or structures constructed on land acquired before 20 September 1985
• Inherited main residence
• Full exemption
• Part exemption
• Cost to you of acquiring the dwelling
• Continuing main residence status
• Death during construction
• Acquisition of a dwelling from a company or trust upon marriage breakdown
• Chapter 7 Loss, destruction or compulsory acquisition of an asset
• Time of the CGT event
• If you receive money
• Consequences of receiving money
• If you receive an asset
• Consequences of receiving an asset
• If you receive both money and an asset
• Consequences of receiving both money and an asset
• Indexation or CGT discount
• Chapter 8 Marriage breakdown
• Conditions for marriage breakdown rollover
• Relevant CGT events
• Consequences of rollover
• Where the asset is transferred to you
• CGT assets transferred by a company or trust
• Superannuation interests
• Main residence
• Where there is no court approval
• Chapter 9 Deceased estates
• Capital gain or capital loss on death is disregarded
• Exceptions to this rule
• Tax-advantaged entity
• Non-resident beneficiary
• Assets which pass to the beneficiary or legal personal representative
• Main residence
• Other assets
• Choosing the indexation method or the discount method
• Collectables and personal use assets
• Joint tenants
• Part B - Completing the capital gains section of your tax return
• Are you an individual?
• Is your entity a company, trust or fund?
• Introduction
• Step 1 - Types of CGT assets and CGT events
• Step 2 - Calculating your current year capital gain or capital loss for each CGT asset or CGT event
• Step 3 - Total current year capital gains
• Step 4 - Capital losses
• Step 5 - Applying current year capital losses
• Step 6 - Applying prior year net capital losses
• Step 7 - Applying the CGT discount
• Step 8 - Applying the small business CGT concessions
• Step 9 - working out your net capital gain
• Step 10 - Capital losses carried forward to later income years
• Instructions for companies, trusts and funds (entities)
• Part C
• Are you an individual?
• Is your entity a company, trust or fund?
• Do you expect your entity’s total capital gains or total capital losses for the 2003- 04 income year to be $10,000 or less?
• Introduction
• Worksheets
• CGT schedule
• Steps you need to take
• Step 1 - How to complete the capital gain or capital loss worksheet for each CGT event
• Step 2 - How to complete the CGT summary worksheet
• Part A: Total current year capital gains
• Part A2: Capital gains and capital losses from collectables
• Step A2.1: Deduct any current year capital losses (CYCL) from collectables from current year capital gains (CYCG) from collectables
• Step A2.2: Apply any prior year net capital losses (PYNCL) from collectables
• Part A3: Total current year capital gains (CYCG)
• Part B: Current year capital losses (CYCL), other than from collectables
• Part D: Applying capital losses against current year capital gains
• Step D1: Apply current year capital losses, other than capital losses from collectables
• Step D2: Apply any prior year net capital losses, other than PYNCL from collectables
• Step D3: Apply any capital losses transferred in
• Part E: Current year capital gains after applying capital losses
• Part F: CGT discount on capital gains
• Part G: Small business CGT concessions (other than the small business 15-year exemption)
• Part H: Net capital gain calculation
• Part I: Unapplied net capital losses carried forward to later income years
• Step 3 - how to complete the capital gains item on your entity’s tax return
• Step 4 - how to complete the CGT schedule
• Part A
• Part B
• Part C
• Part D
• Part E
• Part F
• Part G
• Part H
• Part I
• Part J
• Part K
• Part L (for companies and trusts only)
• Part M (for companies only)
• Part N (for companies only)
• Part O (for companies only)
• Part P (for companies only)
• Appendixes
• Appendix 1 - Summary of CGT events
• Disposal
• Hire purchase and similar agreements
• End of a CGT asset
• Bringing a CGT asset into existence
• Trusts
• Leases
• Shares
• Special capital receipts
• Cessation of residency
• Reversal of rollover
• Other CGT events
• Consolidations
• Appendix 2
• Consumer price index (CPI)
• Appendix 3
• Flowchart 1: Treatment of bonus shares issued on or after 20 September 1985
• Flowchart 2: Treatment of bonus units issued on or after 20 September 1985
• Flowchart 3: Treatment of rights or options to acquire shares or units issued directly to you from a company or trust for no payment
• Flowchart 4: Treatment of rights or options to acquire shares or units that you paid to acquire either directly from a company or trust or from another person
• Appendix 4
• Some major share transactions
• Appendix 5 - Explanation of terms
• More information
• Further assistance
• Publications
• Feedback
• Lodge online with e-tax

Last Modified: Friday, 22 October 2004