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'Capital proceeds' is the term used to describe the amount of money or the value of any property you receive or are entitled to receive as a result of a CGT event happening. In some cases, if you receive nothing in exchange for the CGT asset - for example, you give a CGT asset as a gift - you are taken to have received the market value of the asset at the time of the CGT event.
You may also be taken to have received the market value of a CGT asset that is the subject of a CGT event if your capital proceeds are more or less than the market value of the CGT asset and you and the purchaser were not dealing with each other at arm's length in connection with the event. You are said to be dealing at arm's length with someone if each party acts independently and neither party exercises influence or control over the other in connection with the transaction. The law looks at not only the relationship between the parties but also the quality of the bargaining between them.
Capital proceeds from a CGT event are reduced if:
- you are not likely to receive some or all of those proceeds
- the non-receipt is not due to anything you have done or failed to do and
- you took all reasonable steps to obtain payment.
Capital proceeds are reduced by:
- any part of them that you repay or
- any compensation you pay that can reasonably be regarded as a repayment of them
provided you are not entitled to a tax deduction for the amount you repaid.
If you are registered for GST purposes and the capital proceeds from a CGT event also constitute the consideration for a taxable supply, any GST payable is not part of the capital proceeds.
Last modified: 18 Sep 2009QC 18323