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  • Definitions

    Attention

    Warning:

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

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    Active asset
    A CGT asset is an active asset if it is owned by you and is:

    • used or held ready for use by you, a small business CGT affiliate, or an entity connected with you, in the course of carrying on a business, or
    • an intangible asset inherently connected with a business you carry on, for example, goodwill.

    Active asset test
    This test requires the CGT asset to be an active asset at a particular time and for half a particular period. It is one of the tests you must pass to satisfy the basic conditions for the small business CGT concessions.

    Assessable income
    This is all the income you have received that should be included in your income tax return. Generally, it doesn't include non-assessable payments from a unit trust, including a managed fund.

    Capital gain
    You may make a capital gain (or profit) as a result of a CGT event, for example, when you sell an asset for more than you paid for it. You can also make a capital gain if a managed fund or other unit trust distributes a capital gain to you.

    Capital gains tax
    Capital gains tax (CGT) is the tax you pay on any capital gain you make and include in your annual income tax return. For example, when you sell (or otherwise dispose of) an asset, you may be subject to CGT.

    Capital loss
    Generally, you make a capital loss as a result of a CGT event if you sell an asset for less than you paid for it (including incidental costs).

    Capital proceeds
    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. For shares or units, capital proceeds may be:

    • the amount you receive from the purchaser
    • the amount you receive from a liquidator
    • the amount you receive on a merger/takeover, or
    • their market value if you give them away.

    CGT asset
    CGT assets include shares, units in a unit trust, collectables (such as jewellery), assets for personal use (such as furniture or a boat) and other assets (such as an investment property).

    CGT asset register
    This is a register of information about your CGT assets that you've transferred from your CGT records (for example, invoices, receipts and contracts).

    CGT concession stakeholder
    A CGT concession stakeholder of a company or trust means:

    • a controlling individual of the company or trust, or
    • a spouse of a controlling individual where:  
      • for a company, the spouse holds legal and equitable interests in any amount of shares in the company
      • for a fixed trust, the spouse is beneficially entitled to any of the income or capital of the fixed trust, or
      • for a discretionary trust, during the income year the discretionary trust made a distribution of income or capital to which the spouse was beneficially entitled.
       

    CGT discount
    The CGT discount allows eligible individuals (including partners in partnerships) and trusts to reduce their capital gain by 50%. There are further rules for beneficiaries who are entitled to a share of a trust capital gain. Companies can't use the CGT discount.

    CGT event
    A CGT event happens when a transaction takes place, such as the sale or purchase of a CGT asset. The result is usually a capital gain or capital loss.

    Controlling individual
    An individual is a controlling individual of a company if the individual holds legal and equitable interests in shares (apart from redeemable shares) that carry between them:

    • the right to exercise at least 50% of the voting power in the company, and
    • the right to receive at least 50% of any distribution of income and capital that the company may make.

    Depreciating asset
    A depreciating asset is an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used. Depreciating assets include computers, electric tools, furniture and motor vehicles.

    Maximum net asset value test
    To pass this test, you and your related entities mustn't own assets with a total net value of more than $5 million just before the CGT event that results in the capital gain. It is one of the tests you must pass to satisfy the basic conditions for the small business CGT concessions.

    NAT number
    Most of our publications have a NAT number (our catalogue number), which we generally show in brackets after the title of the publication, for example, Tax basics for small business (NAT 1908).

    Net capital gain
    The net capital gain is the difference between your total capital gains for the year and your total capital losses (including net capital losses from prior years), less any CGT discount or other concessions which you are entitled to.

    Net value
    The net value of the CGT assets of an entity is the total market value of its assets, less any liabilities relating to those assets.

    Related entity
    Related entities include:

    • any of your small business CGT affiliates
    • any entities connected with you, and
    • any entities connected with a small business CGT affiliate.

    Small business CGT affiliate
    A small business CGT affiliate includes your spouse or child under 18 years, or any person who acts or could reasonably be expected to act:

    • in accordance with your directions or wishes, or
    • in concert with you.

    Small business entity
    A small business entity can be a sole trader, partnership, company or trust.

    Small business 15-year exemption
    This is one of the CGT concessions available to small business. Generally, it allows you to disregard the capital gain made on an asset you have owned for 15 years if you satisfy all the conditions.

    Small business 50% reduction
    This is one of the CGT concessions available to small business. Generally, it allows you to reduce your capital gain by 50% if you satisfy the basic conditions.

    Small business retirement exemption
    This is one of the CGT concessions available to small business. Generally, it provides an exemption of capital gains up to a lifetime limit of $500,000 if you satisfy all the conditions. If you are under 55, the amount must be paid into a superannuation (or similar) fund.

    Small business rollover
    This is one of the CGT concessions available to small business. Generally, it allows you to defer making a capital gain from a CGT event that happens in relation to a small business asset if you acquire a replacement asset and meet certain conditions.

    Last modified: 14 Jul 2020QC 17086