Warning: This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.
This information is compiled by the Losses and Capital Gains Tax Centre of Expertise to make you aware of capital gains tax (CGT) developments during the 2008–09 income year.
This update is current as at 30 June 2009.
If you require details of CGT developments during previous income years, refer to:
If you are accessing a Tax Office publication, please ensure you check its status and relevance.
Tax Laws Amendment (2009 Measures No 2) Act 2009 (Act No. 42 of 2009) - received Royal Assent on 23 June 2009. It contains the following CGT related measures:
- Increase access to the small business CGT concessions - Schedule 2 amends the law to increase access to the small business CGT concessions via the $2m turnover test, for taxpayers owning a CGT asset used in a business by an affiliate or entity connected with the taxpayer and for partners owning a CGT asset used in the partnership business, with effect from the 2007-08 income year. Schedule 2 also makes a number of other minor amendments to clarify and refine elements of the small business CGT concessions.
Date of effect: The main amendments apply to CGT events happening in the 2007-08 income year and later income years. The minor amendments have their own particular application dates.
This measure was announced in the 2008-09 Budget on 13 May 2008.
- Tax benefits and capital gains tax - Schedule 3 amends the ITAA 1997 to provide a general exemption from CGT for capital gains arising from a right or entitlement to a tax offset, deduction or similar benefit.
Date of effect: This measure applies to CGT events happening in the 2009-10 income year and later income years.
- Application of the income tax law to financial claims scheme entitlements - Schedule 1 amends various Acts to ensure there are no adverse taxation implications arising from a payment made by the Australian Prudential Regulation Authority, or by a liquidator, under the financial claims scheme (FCS). It achieves this in general by amending the law to treat payments made under the FCS in the same way as if they had been made by the failed institution to which the FCS applies. Specific amendments cover CGT, farm management deposits, retirement savings accounts, first home saver accounts, reporting obligations and withholding obligations.
Date of effect: These amendments generally apply to all payments made, and other things done, under the FCS, whether before or after the amendments commence. Certain obligations and penalties only apply from the time the amendments commence.
The FCS was announced in the Treasurer’s Media Release No. 061 of 2 June 2008 and in the Prime Minister’s Media Release of 12 October 2008.
Tax Laws Amendment (2008 Measures No. 6) Act 2009 (Act No. 14 of 2009) – received Royal Assent on 26 March 2009. It contains the following CGT related measures:
- CGT rollovers for corporate restructures – Schedule 1 modifies the CGT provisions in the Income Tax Assessment Act 1997 (ITAA 1997) to prevent a market value cost base from arising when shares and certain other interests in a company are acquired by another company following a scrip for scrip CGT rollover under an arrangement that is taken to be a restructure.
These amendments apply to arrangements entered into after 7.30 pm, by legal time in the Australian Capital Territory, on 13 May 2008.
This measure was announced in the 2008-09 Budget by the Assistant Treasurer and Minister for Competition Policy and Consumer Affairs in Media Release no. 033 of 13 May 2008.
- Minor amendments – Schedule 4 makes various minor amendments to the taxation laws to deal with issues such as incorrect terminology; grammatical or punctuation errors; missing asterisks from defined terms; inoperative material; ambiguities in the law; and to realign policy with the original policy intent.
Amendments in relation to CGT include giving trustees and beneficiaries of employee share trusts a choice to backdate the application of recently inserted CGT provisions (refer to subsection 130-90(3) of the ITAA 1997) that prevent taxing both trustees and beneficiaries when the employee becomes absolutely entitled to shares held in the trust after exercising rights under an employee share scheme (ESS) [see Item 51, item 14 of Schedule 1 (Table 4.8) in the Explanatory Memorandum to the Bill].
Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 (Act No. 15 of 2009) – received Royal Assent on 26 March 2009. It introduces, via a new Division 230 of the ITAA 1997, taxation of financial arrangements stages 3 and 4 providing a comprehensive framework. The measures contain rules that cover tax timing treatments for financial arrangements, including elective tax timing and character hedging rules that are designed to minimise tax timing and character mismatches. The rules permit eligible taxpayers to elect to have financial arrangements taxed on a fair value or retranslation basis, or to rely on their financial reports for taxation purposes. These elections create compliance cost savings by more closely aligning tax treatment with accounting standards.
The measures apply for income years commencing on or after 1 July 2010. However, taxpayers may elect to have the measures apply for income years commencing on or after 1 July 2009.
Source: Assistant Treasurer's media release no. 103 of 4 December 2008.
Tax Laws Amendment (2008 Measures No 5) Act 2008 (Act No. 145 of 2008) – received Royal Assent on 9 December 2008. Among other things, it contains the following measure:
- Managed funds – changes to the eligible investment business rule – Schedule 5 amends Division 6C of the Income Tax Assessment Act 1936 (ITAA 1936) to streamline and modernise the eligible investment business rules for managed funds. The amendments will:
- clarify the scope and meaning of investing in land for the purpose of deriving rent
- introduce a 25% safe harbour allowance for non-rental, non-trading income from investments in land
- expand the range of financial instruments that a managed fund may invest in or trade, and
- provide a 2% safe harbour allowance at the whole of trust level for non-trading income.
Date of effect: This measure will apply to the income year of Royal Assent and later income years.
Proposal announced: This measure was announced in the 2008-09 Budget.
Same-Sex Relationships (Equal Treatment in Commonwealth Laws – General Law Reform) Act 2008 (Act No. 144 of 2008) – received Royal Assent on 9 December 2008. It eliminates discrimination against same-sex couples and the children of same-sex relationships in a wide range of Commonwealth laws including tax laws from 1 July 2009.
Schedule 14, Part 1 contains amendments to tax laws. Items 7 - 58 are amendments to Schedule 2F of the ITAA 1936. Items 59 - 89 are CGT related amendments to the ITAA 1997.
National Rental Affordability Scheme Act 2008 (Act No. 121 of 2008) – received Royal Assent on 25 November 2008.
National Rental Affordability Scheme (Consequential Amendments) Act 2008 (Act No. 130 of 2008) – received Royal Assent on 28 November 2008.
Both Acts introduce a National Rental Affordability Scheme (NRAS) which includes a refundable tax offset or payment to the value of $6,000 per dwelling per year.
The aim of the NRAS is to encourage large-scale investment in housing by offering an incentive to participate in the NRAS so as to increase the supply of affordable rental dwellings and reduce rental costs for low and moderate income households.
The Consequential Amendments Act amends the ITAA 1997 by inserting a new Division 380 to enable entities participating in the NRAS to claim the refundable tax offset in their annual tax return, or through lodgement of a short form application by not-for-profit entities who would not ordinarily lodge a tax return. In addition, it amends the ITAA 1997 to ensure that State and Territory contributions to entities participating in the NRAS, whether in cash or in-kind, are non-assessable and non-exempt income for taxation purposes, and to ensure that there are no CGT consequences from the receipt of incentives under the NRAS.
The NRAS was announced in August 2007 and was confirmed in the 2008-09 Federal Budget.
Date of effect: The legislation is retrospective to allow for eligibility for incentives to date from as early as 1 July 2008.
Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2008 (Act No. 115 of 2008) – received Royal Assent on 21 November 2008. It includes the Senate amendments relating to the definition of 'child of de facto relationship' contained in section 90RB and the parenting presumptions in section 60H of the Family Law Act 1975 to allow children of same sex relationships to be recognised as a child of the relationship for the purposes of the entire Family Law Act 1975.
The Bill as originally introduced provides for de facto couples (including same sex couples) to access the financial settlement regime under Family Law Act 1975. It extends the superannuation splitting arrangements to parties to a de facto relationship, and also extends the CGT rollover relief on the transfer of assets on marriage breakdown under Subdivision 126-A of the ITAA 1997 to cover binding financial agreements made between parties to a de facto relationship.
International Tax Agreements Amendment Act (No 2) 2008 (Act No. 111 of 2008) – received Royal Assent on 31 October 2008. It amends the International Tax Agreements Act 1953 to give the force of law in Australia to a Protocol amending the Agreement between Australia and the Republic of South Africa for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (Protocol), which was signed in South Africa on 31 March 2008. The Protocol updates the tax agreement to assist trade and investment flows which will enhance Australia’s relationship with South Africa.
In relation to CGT, it modifies Article 13 (Alienation of Property) to provide that gains of a capital nature from the alienation of property not otherwise dealt with in Article 13 are taxable only in the Contracting State of which the alienator is a resident.
Date of effect: The provisions of the Protocol become law from the date of Royal Assent. The Protocol enters into force after the date of the last notification by diplomatic notes and once the domestic processes to give this protocol the force of law in the respective countries have been completed. In Australia, enactment of the Bill giving the force of law to this Protocol is the prerequisite to such notification.
International Tax Agreements Amendment Act (No 1) 2008 (Act No. 102 of 2008) – received Royal Assent on 3 October 2008. It amends the International Tax Agreements Act 1953 to give the force of law in Australia to the Convention between Australia and Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and its associated Protocol and Exchange of Notes, (together referred to as ‘this Convention’) that were signed in Tokyo on 31 January 2008.
This Convention is Australia’s second comprehensive tax treaty with Japan. The new double tax treaty updates taxation arrangements for both countries, which include aligning CGT treatment with Organisation for Economic Cooperation and Development (OECD) practice and providing for improved integrity measures.
Date of effect: This Convention becomes law from the date of Royal Assent.
Tax Laws Amendment (2008 Measures No 4) Act 2008 (Act No. 97 of 2008) – received Royal Assent on 3 October 2008. It contains amendments concerning CGT and health fund demutualisations, and other minor amendments such as correcting grammatical and punctuation errors.
- Demutualisation of private health insurers – Schedule 1 amends the ITAA 1997 to provide relief from CGT to private health insurance policy holders when their insurer converts, by demutualising, from being a 'not for profit' to a 'for profit' insurer. New Division 315 disregards capital gains or losses that arise from various transactions that occur when a private health insurer demutualises under subsection 126-42(5) of the Private Health Insurance Act 2007.
Date of effect: These amendments apply to demutualisations that occur on or after 1 July 2007. This ensures that private health insurers that demutualise prior to the amendments receiving Royal Assent may qualify for the relief.
This measure was announced by The Assistant Treasurer and Minister for Competition Policy and Consumer Affairs’ in Press Release No. 013 of 26 February 2008.
- Minor amendments – Schedule 3 makes various minor amendments to the taxation laws in relation to incorrect terminology, grammatical or punctuation errors, missing asterisks from defined terms, inoperative material, ambiguities and the addition of non-operative notes to assist in navigation of the tax law.
Date of effect: These amendments apply from the date of Royal Assent unless otherwise stated. Where a retrospective date is stated such retrospectivity does not disadvantage taxpayers.
Tax Laws Amendment (2008 Measures No 3) Act 2008 (Act No. 91 of 2008) – received Royal Assent on 20 September 2008. It contains amendments concerning shareholder and unit holder rights. The amendments restore the original tax treatment of rights issued by companies to shareholders to acquire additional shares to overcome the impact of the High Court decision in FCT v McNeil (2007) 64 ATR 431. In McNeil, the High Court held that the market value of sell-back rights issued to a taxpayer under a share-buyback arrangement involving St George Bank Ltd was assessable as ordinary income in the taxpayer's hands.
- Shareholder and unit holder rights – Schedule 1 amends the ITAA 1997 to:
- ensure that no amount is included in the assessable income of a shareholder in a company or a unitholder in a unit trust as a result of acquiring certain rights issued by the company to acquire further shares or by the trustee of the unit trust to acquire further units, and
- ensure that an amount that is included in the assessable income of a shareholder as a result of acquiring rights issued by the company to dispose of shares, is appropriately reflected in the cost base of the rights.
These amendments will apply to rights issued on or after 1 July 2001. The retrospective application of these amendments will not disadvantage taxpayers. This measure was announced in the Treasurer’s Press Release No. 019 of 8 April 2008.
Tax Laws Amendment (Budget Measures) Act 2008 (Act No. 59 of 2008) – received Royal Assent on 30 June 2008. It contains two CGT related measures concerning changes to the taxation treatment of shares or rights acquired under an ESS as announced in the 2008 Budget.
- Election mechanism – Schedule 1 amends Division 13A of the ITAA 1936 so that an employee who wishes to be assessed on discounts on shares or rights received in the year of acquisition must make the election in the income tax return for the income year in which the shares or rights are acquired. These amendments apply to assessments for the 2008-09 income year and later income years.
- Removal of double taxation – Schedule 1 also amends the CGT provisions in the ITAA 1997 to ensure a trustee or beneficiary of an employee share trust is not subject to CGT where an employee who exercises employee share scheme rights becomes absolutely entitled to the shares in the trust. These amendments apply to CGT events occurring from 7.30 pm (Australian Eastern Standard Time), 13 May 2008.
Both measures were announced in the 2008-09 Budget and in the Treasurer’s press release no. 044 of 13 May 2008.
Last Modified: Monday, 20 July 2009
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