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  • 2 Completing your individual tax return

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    Working out your net capital gain or loss

    The steps below explain how to calculate your net capital gain or loss for 1999-2000 and complete item 14 of the 2000 tax return for individuals (supplementary section).

    Step 1

    Separate your CGT assets to which a CGT event has happened into the following 3 categories:

    • collectables – for example, jewellery
    • personal use assets – for example, a boat
    • other CGT assets – for example, shares.

    Step 2

    Work out your capital gain or loss for each asset. Refer to If capital gains tax affects you, how do you work it out? for further information on how to work out your capital gain or loss.

    Important: As from 11.45 am on 21 September 1999 the way you calculate your capital gain has changed. Certain capital gains may be eligible to be reduced by 50 per cent (the CGT discount). These are called 'discount capital gains'. In addition, you should note that indexation of the cost base of a CGT asset has been frozen as at 30 September 1999.

    For a CGT event that happens after 11.45 am on 21 September 1999 to a CGT asset that you acquired at or before that time, you have a choice between the CGT discount and indexation of the cost base frozen as at 30 September 1999. You must have owned the asset for at least 12 months to claim either the CGT discount or indexation. For more information refer to The CGT discount.

    Step 3

    Add up all your capital gains for each asset category and make a note of each total amount.

    You will also need to keep a record of capital gains which are discount capital gains or re eligible for any of the small business capital gains tax concessions. Do not include any capital gain to which an exemption or exception applies, except any amounts rolled over under the capital gains tax small business roll-over provisions or which are exempt under the small business retirement provisions.

    You should include capital gains at this step before applying the CGT discount (see step 10) and the small business 50 per cent active asset reduction (see step 12).

    If you received, or are entitled to receive, distribution from a trust which includes a net capital gain, you need to include this amount in your total capital gains. Do not include this amount as a distribution from the trust at item 11 on your 2000 tax return.

    There are special rules if the trust's net capital gain was reduced by the CGT discount or by applying the small business 50 per cent active asset reduction or both. The trustee of the trust should advise you if the trust has claimed the CGT discount or small business 50 per cent active asset reduction. These rules require you to adjust the amount of the net capital gain to be included in your total capital gains. Refer to Capital gains, trusts and the CGT concession for further information.

    Write the total of your current year capital gains at H item 14 on your tax return.

    Example

    In July 1998 Lyn bought 800 Co A shares at $3 per share. In December 1999, she sold all 800 shares for $4 per share. Lyn chooses not to index the cost base of the shares. She therefore has a discount capital gain (other CGT assets) of $800. In August 1999, Lyn received $1,700 when she sold jewellery that she acquired in July 1996 for $1,000. She calculates her capital gain on the jewellery by indexing the cost base.

    Capital proceeds

    $1,700

    Less cost base (indexation factor 1.027 (123.4 ÷ 120.1)

    $1,027

    Capital gain made on the jewellery

    $673

    Lyn shows $1,473 at H, being $800 capital gain from the sale of the shares and $673 from the jewellery.

    End of example

    Step 4

    Select from the following list the code letter that best describes the CGT asset from which you made the capital gain and print it in the TYPE box at the right of H.

    If you made capital gains from more than one CGT event, select the code letter which best describes the type of CGT asset that produced the largest amount of capital gain. Print the code in the TYPE box at the right of H.

    CGT asset codes
    S Shares

    U

    Units in unit trust

    R

    Real estate

    A

    Collectables

    P

    Personal uses assets

    T

    Trust distributions

    E

    Equipment and plant including trucks (applicable only to a capital gain or loss made in relation to a CGT event involving plant which occurred between 1 July 1999 and 11.45am on 21 September 1999)

    G

    Goodwill on the sale of a business

    I

    Instalment receipts

    O

    Other CGT assets not listed above or where the CGT event does not involve a CGT asset

    Step 5

    From your capital gains tax worksheets, add up all your capital losses for 1999-2000 from collectables and other CGT assets.

    Remember that you disregard capital losses from personal uses assets and any capital losses which are exempt. Capital losses from collectables can be applied only to reduce capital gains from collectables.

    Make a note of each capital loss, then:

    • If you have a current year capital loss from collectables or from other CGT assets, go to step 6.
    • If you have only prior year net capital losses, go to step 8.
    • If you have no current year capital losses or prior year net capital losses, go to step 10.

    Step 6

    Work out your total current year capital losses applied using the following example as a guide. The amount includes current year capital losses applied in calculating a small business roll-over amount where the capital was made from a CGT event that happened on or before 11.45 am on 21 September 1999.

    Disregard any capital loss in 1999-2000 on:

    • assets you acquired before 20 September 1985
    • all personal use assets.

    The following example uses the facts from the earlier example in step 3.

    Example

    In 1999-2000, Lyn also sold jewellery from which she made a capital loss of $500 and other shares on which she made a capital loss of $200.

    Non-discount capital gains

    Discount capital gains

    Current year capital gains from collectables
    (a) 673

    Current year discount capital gains from collectables
    (e) 0

    Current year capital losses from collectables applied from collectables applied – cannot exceed (a)
    (b) 500

    Current year capital losses from collectables applied against discount capital gains – cannot exceed (e)
    (f) 0

    Current year capital gains from other CGT assets
    (c) 0

    Current year discount capital gains from other CGT assets
    (g) 800

    Current year capital losses from other CGT assets applied – cannot exceed the total of (a) and (c)
    (d) 173

    Current year capital losses from other CGT assets applied against discount capital gains – cannot exceed the total of (e) and (g)
    (h) 27

    Non-discount capital gains after applying current year capital losses 0

    Discount capital gains after applying current year capital losses 773

    You may choose the order in which you reduce your capital gains. In the example, Lyn uses $173 of the capital losses from other CGT assets ($200) to first reduce her non-discount capital gains to zero. The remaining $27 reduces the discount capital gains.

    Add the amounts at (b), (d), (f ) and (h). The total is your current year capital losses applied. Write this amount at G item 14 on your tax return. Lyn would write $700 at this label.

    Keep a record of any excess current year capital losses from collectables and other CGT assets which were not applied to reduce your capital gains. These amounts can be carried forward and used to reduce your capital gains in future years.

    End of example

    Step 7

    From the list at step 4, select the code letter that best describes the CGT asset on which you made the capital loss when the CGT event happened . Write it in the TYPE box at the right of G. Note: You cannot use codes P or T at this label.

    If you made capital losses from more than one CGT event, select the code letter which best describes the type of CGT asset that produced the largest amount of capital.

    If you do not have any prior year net capital losses, go to step 9. Otherwise, read on.

    Step 8

    You can further reduce your total current year capital gains by applying your prior year net capital losses.

    The amount includes prior year net capital losses applied in calculating a small business roll-over amount or retirement exemption where the capital gain is made from a CGT event that happened on or before 11.45 am on 21 September 1999.

    You may choose the order in which you reduce your capital gains - see step 6.

    However, you must apply prior year net capital losses in the order in which you made them. For example, use net capital loss from 1997-98 before you use any net capital loss made in 1998-99.

    Work out your prior year net capital losses applied using the following example as a guide.

    Example

    In addition to the capital gains and losses made in 1999-2000, Lyn has prior year net capital losses of $400 from other CGT assets. She did not use these in previous years to reduce a capital gain.

    Non-discount capital gains

    Discount capital gains

    Current year capital gains from collectables
    (a) 673

    Current year capital gains from collectables
    (l) 0

    Current year capital losses from collectables applied – cannot exceed (a)
    (b) 500
    (a) − (b) = (c)
    (c) 173

    Current year capital losses from collectables applied – cannot exceed (l)
    (m) 0
    (l) − (m) = (n)
    (n) 0

    If (c) is positive you can further reduce it by prior year net capital losses.

    Prior year net capital losses from collectables applied
    (d) 0
    (c) − (d) = (e)
    (e) 173

    If (n) is positive you can further reduce it by prior year net capital losses.

    Prior year net capital losses from collectables applied
    (o) 0
    (n) − (o) = (p)
    (p) 0

    Current year capital gains from other assets
    (f) 0
    (e) + (f) = (g)
    (g) 173

    Current year capital gains from other assets
    (q) 800
    (p) + (q) = (r)
    (r) 800

    Current year capital losses from other assets applied – cannot exceed (g)
    (h) 173
    (g) − (h) = (i)
    (i) 0

    Current year capital losses from other assets applied – cannot exceed (r)
    (s) 27
    (r) − (s) = (t)
    (t) 773

    If (i) is positive it can be further reduced by prior year net capital losses.

    Prior year net capital losses from other assets applied
    (j) 0
    (i) − (j) = (k)
    (k) 0

    If (t) is positive it can be further reduced by prior year net capital losses.

    Prior year net capital losses from other assets applied
    (u) 400
    (t) − (u) = (v)
    (v) 373

    The total of the amounts at (d), (j), (o) and (u) is your prior year net capital losses applied. Write this amount at X item 14 on your tax return.

    If H is blank or equals G do not complete X.

    Lyn would write $400 at X item 14.

    End of example

    Step 9

    Your net capital losses to be carried forward are any unapplied current year net capital loss from step 6 and any unapplied prior year net capital losses from step 8. You can offset these losses against capital gains in future years. Write this amount at R item 14 on your tax return. You will need to keep a separate record of unapplied net capital losses from collectables because these can only be used to reduce capital gains from collectables.

    Step 10

    Reduce your discount capital gains remaining after completing step 6 or step 8 - if applicable - by the discount percentage (50 per cent).

    Lyn would reduce (v) to $186 (50% × $373).

    Step 11

    Add together your remaining capital gains from step 6 or step 8 that are not discount capital gains and the amount of discount capital gains remaining after step 10. If you are not eligible for any of the small business capital gains tax concessions this is your net capital gain for 1999-2000. Write this amount at W.

    Lyn would write $186 at W.

    If you are eligible for any of the small business capital gains tax concessions go to step 12.

    Step 12

    If any of your capital gains qualify for the small business 50 per cent active asset reduction, small business roll-over relief or small business retirement exemption, apply these now. The small business 50 per cent active asset reduction applies first. You may apply the concessions to both discount capital gains and other capital gains. If both the CGT discount and the small business active asset reduction apply, the capital gain - after being reduced by any losses applied against it - is reduced by 75 per cent in total. For more information refer to the publication Capital gains tax concessions for small business.

    The amount remaining after applying the small business capital gains tax concessions is your net capital gain. Write this amount at W.

    Note: The amount at W will not equal H − (G + X) if you have capital gains for which the CGT discount is chosen or you qualify for the small business capital gains tax concessions.

    Step 13

    Capital gains tax small business roll-over amount - label S

    Show at this label the amount that has been rolled over in respect of the small business capital gains tax roll-over relief. Include at S amounts that have been rolled over in respect of capital gains made from CGT events both before and after 11.45am on 21 September 1999.

    Capital gains tax small business retirement exemption amount - label T

    If you claimed the capital gains tax small business retirement exemption, write the amount at T.

    If you received an eligible termination payment (ETP) from a company or trust which claimed the capital gains tax small business retirement exemption and all or part of that ETP included a CGT component, you must show the amount of that CGT component at T.

    Include at T amounts for which the capital gains tax small business retirement exemption has been claimed in relation to capital gains made from CGT events both before and after 11.45 am on 21 September 1999.

    Step 14

    Completing labels V (pre-announcement net capital gain) and Z (modified net capital gain amount)

    For 1999-2000 only, the law provides for a basic reduction in income tax for capital gains made up until 11.45 am on 21 September 1999. The amount of tax payable on the gain is the same as it would have been if the CGT averaging concession still applied.

    The ATO will calculate the amount of the reduction for you provided that you complete V and Z.

    You will need to complete V (pre-announcement net capital gain amount) and Z (modified net capital gain amount) only if:

    • your taxable income includes a net capital gain
    • you made a capital gain from a CGT event on or before 11.45am on 21 September 1999 or you received, or are entitled to receive, a distribution from a trust which includes a capital gain that was made at or before 11.45am on 21 September 1999.

    For more information on whether you are eligible for the CGT averaging reduction and on completing these labels refer to Removal of CGT averaging.

    Last modified: 18 Sep 2009QC 18323