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  • How do I treat the capital gain?

    If you made a capital gain on this CGT event, you must include it in your calculations when completing item 17 on your Tax return 2004-05 (supplementary section).

    The method you use to work out the amount to include in your item 17 calculations depends on when you acquired the shares. The following tables sets out what method you can use.

    If you acquired your AGL shares:

    You calculate your capital gain using the:

    before 21 September 1999

    indexed cost base or discount method, whichever gives you the better result.*

    on or after 21 September 1999 and before 29 April 2004

    discount method (after applying any capital losses - including unapplied capital losses from previous years).

    on or after 29 April 2004

    other method.

    * If you choose to index the cost base of shares you acquired before 21 September 1999, you cannot apply the CGT discount when you dispose of them.

    For information on the different methods you can use to work out your capital gain, see the Guide to capital gains tax 2004-05.

    Note

    If you did not make a capital gain on the return of capital, there is nothing you need to include on your 2004-05 tax return regarding this CGT event.

    Example 1

    Norman purchased 200 AGL shares in September 1999. At the time of the capital return on 29 April 2005, the cost base of these shares (includes the cost of the shares and brokerage and stamp duty) was $1,950, or $9.75 per share.

    Norman received a total of $100 (200 x $0.50) in the return of capital.

    Norman must adjust the cost base and reduced cost base of his AGL shares by subtracting the amount of the capital return. The new cost base for his share parcel is $1,850 ($1,950 - $100), or $9.25 per share.

    Norman has not made a capital gain on his shares as a result of the capital return so he does not have to put anything on his tax return to reflect this event.

    Example 2

    Sarah sold 500 AGL shares on 20 April 2005; Sarah acquired these shares in March 2004. Sarah made a $1,250 capital gain on the sale. As a consequence of this sale, she held no AGL shares at the time of the capital return on 29 April 2005.

    As Sarah held the shares for more than 12 months, she is able to use the discount method to work out her net capital gain on their sale.

    Because she held AGL shares on the record date (13 April 2005), Sarah is eligible to receive the capital return. Sarah received $250 ($500 x $0.50) in the return of capital.

    Calculating the capital gain

    Sarah made a capital gain from the return of capital as follows:

    Capital proceeds (500 x $0.50)

    $250

    less total cost base (500 x $0.00)

       $0

    Capital gain

    $250

    Because Sarah had held the shares she sold and for which the capital return was paid for more than 12 months, she applies the CGT discount to her capital gains on both the capital return and the disposal (if she had capital losses she would offset them against her capital gain before applying the discount). If Sarah applies the CGT discount, she will include a $750 ($1250 + $250) x 50%) net capital gain on her tax return for the year ended 30 June 2005.

    Recording the capital gain on the tax return

    Assuming that these were her only CGT events for the 2004-05 year, Sarah would complete item 17 on her 2005 tax return (supplementary section) showing:

    Did you have a capital gains tax event during the year? Yes

    Net capital gain: $750

    Total current year capital gains: $1,500 ($1,250 on sale of shares + $250 for capital return)

      Last modified: 06 Oct 2009QC 18162