• 18 Capital gains 2015

    Danger

    Do not show at this item a 'listed investment company capital gain amount' included in a dividend paid by a listed investment company. See question D8 Dividend deductions.

    End of danger

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

    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

    You may have made a capital gain or capital loss if a capital gains tax (CGT) event happened in 2014–15. Read on for an explanation of a CGT event.

    You may have also made a capital gain for 2014–15 if you were a beneficiary of, or had money invested in, a trust (including a managed investment fund) in 2014–15 and the trust made a capital gain during the year.

    For most CGT events, you make:

    • a capital gain if the amount of money and property you received, or were entitled to receive, from the CGT event was more than the cost base of your asset; you may then have to pay tax on your capital gain
    • a capital loss if the amount of money and property you received, or were entitled to receive, from the CGT event was less than the reduced cost base of your asset.

    You cannot deduct a capital loss from your income, but in most cases it can be used to reduce any capital gain you made in 2014–15. See the note at Completing this item step 3.

    Some capital gains and capital losses are disregarded; see Exceptions and exemptions.

    No

    Print X in the No box at G item 18 on page 14 of your tax return if you did not have a capital gain tax event or your capital gains and losses were disregarded.

    Go to step 4 below.

    Yes

    Print X in the Yes box at G item 18 on page 14 of your tax return if you had a capital gain or a capital loss that was not disregarded. Read on to work out your net capital gain or net capital loss.

    You need to know

    CGT events and CGT assets

    There is a wide range of CGT events. The most common CGT event happens when you sell or give away a CGT asset, such as:

    • real estate, including your family home, a holiday home, investment property, hobby farm or vacant block of land
    • shares
    • units in a unit trust or managed investment fund
    • forestry managed investment scheme interests (as a subsequent participant)
    • collectables, for example, jewellery
    • personal use assets.

    Examples of other CGT events are:

    • an asset you owned was lost or destroyed
    • you received an amount for entering into an agreement, for example, you agreed not to work in a particular industry for a set period of time
    • you entered into a conservation covenant over land that you owned
    • you received a non-assessable payment from a trust or company.
    Further information

    If you are not sure whether a CGT event happened in 2014–15, see Appendix 1: Summary of CGT events in Guide to capital gains tax 2015.

    End of further information

    Exceptions and exemptions

    Generally speaking, you disregard a capital gain or capital loss on:

    • an asset you acquired before 20 September 1985
    • cars, motorcycles and similar vehicles
    • compensation you received for personal injury
    • disposal of your main residence
    • a collectable, for example, an antique or jewellery, which you acquired for $500 or less
    • a personal use asset, for example, boats, furniture, electrical goods and household items used or kept mainly for personal use or enjoyment. If you acquired it for more than $10,000, you disregard only capital losses. If you acquired it for $10,000 or less, you disregard both capital gains and capital losses
    • the exchange of shares or units you owned in a company or trust that was taken over, if certain conditions were met
    • shares in a company or interests in a trust where there had been a demerger and certain conditions had been met
    • disposing of an asset to which the small business 15-year exemption applies
    • the disposal of certain investments by a venture capital limited partnership, an early stage venture capital limited partnership or an Australian venture capital fund of funds
    • disposal of shares in a pooled development fund.

    Also, if you are a foreign resident beneficiary of a trust and 'managed investment trust withholding tax' is payable on an amount that you received from that trust (other than in the capacity of a trustee) then you do not need to include any part of that amount on your tax return.

    Did you dispose of shares, stapled securities or rights acquired under an employee share scheme?

    Employee share schemes enable you to acquire shares or stapled securities, or obtain rights (including options) to acquire shares or stapled securities, in your employer's company at a discount.

    The amount of the capital gain may be reduced if your shares, stapled securities or rights were acquired under an employee share scheme.

    For more information, see Employee share schemes - answers to frequently asked questions by employees (NAT 7366).

    Did you receive, or were you entitled to receive, a share of the income of a trust (including a managed fund)?

    Managed funds (unit trusts) include property trusts, share trusts, equity trusts, growth trusts, imputation trusts and balanced trusts. Other trusts include discretionary trusts, family trusts, hybrid trusts and business trusts.

    Distributions from trusts (including managed funds) can include two components that have CGT consequences:

    • distributions of trust income where the trust's net income for tax purposes includes a net capital gain, and
    • distributions of non-assessable amounts.

    You need to know whether your distribution includes these amounts. To find out, check the distribution, year end or annual statement from the trust. The statement should also show which method the trust used to calculate the capital gains included in the trust's net capital gain. There are three methods of calculating capital gains:

    • indexation
    • discount
    • 'other'.

    You must use the same method as the trust to calculate your own net capital gain.

    If you are an individual (including a beneficiary of a trust) and

    • a foreign or temporary resident, or
    • an Australian resident with a period of non-residency after 8 May 2012,

    and you have a discount capital gain, you may not be entitled to the maximum CGT discount percentage of 50%. For more information go to Capital gains tax (CGT) discount for foreign resident individuals.

    Trustees and fund managers may use different terms to describe the calculation methods they have used and they may refer to capital gains calculated using the indexation and 'other' methods as 'non-discount gains'. If in doubt, check with your trust or fund manager.

    The tax law has been changed to address a number of uncertainties and longstanding problems with the taxation of trusts.

    The changes include new anti-avoidance rules and measures to allow tax-effective streaming of franked distributions and capital gains to beneficiaries. The amendments apply from 1 July 2010.

    For more information, see Guide to capital gains tax 2015 (NAT 4151) and Personal investors guide to capital gains tax 2015 (NAT 4152).

    Did you make a capital gain or capital loss on your shares?

    You may make a capital gain or capital loss by selling or giving away your shares, including by selling them to the company under a share buy-back arrangement. Even if you did not pay for your shares, for example, you received them under a demutualisation, you may make a capital gain or capital loss when you sell or give them away.

    Also, if you use dividends to acquire additional shares in a company, for example, through a dividend reinvestment plan, the additional shares are subject to CGT if you sell them or give them away.

    There are other ways of making a capital gain or capital loss on shares. These include:

    • If you held shares in a company and during 2014–15 a liquidator or administrator declared the shares worthless, you can choose to claim a capital loss equal to the reduced cost base of the shares (otherwise you may have to wait until the company is dissolved to claim the capital loss).
    • If you received a non-assessable payment (also known as a return of capital) you may have to reduce the cost base and reduced cost base of your shares. If the amount of the non-assessable payment is more than the cost base of the shares, the difference is a capital gain.

    There are fact sheets on some major share transactions affecting shareholders at Capital gains tax.

    Did you sell a property you inherited?

    Capital gains tax applies when you dispose of CGT assets that you inherited. However, if you inherited real estate, you may not have to pay CGT if you sold it within two years of the person's death, for example, if the property was the deceased person's main residence just before they died and they were not renting part of it out or using part of it for business purposes.

    For more information, see Guide to capital gains tax 2015.

    Your home may be subject to capital gains tax

    Under the 'main residence' exemption, you generally do not have to pay CGT on the disposal of your main residence. However, you may have to pay tax on some of your capital gain if:

    • the property was not your main residence for the whole period you owned it
    • you used the property, or part of it, to produce assessable income, for example, you rented it out
    • the land area was greater than two hectares.

    For more information, see Guide to capital gains tax 2015.

    Asset transfer on marriage or relationship breakdown

    If you transferred an asset to your spouse as a result of a marriage or relationship breakdown, in certain cases there are no immediate CGT consequences. In these cases there is automatic rollover (you cannot choose whether or not it applies).

    However, the person who receives the asset (the transferee spouse) will usually make a capital gain or capital loss when they dispose of the asset. If you were the transferee spouse and rollover applies, you may need to get cost base information from your former spouse or their tax adviser.

    For more information, see Guide to capital gains tax 2015.

    Your spouse includes another person (whether of the same sex or opposite sex) who:

    • you were in a relationship with that was registered under a prescribed state or territory law,
    • although not legally married to you, lived with you on a genuine domestic basis in a relationship as a couple.

    Foreign residents

    Foreign residents who are individuals are subject to CGT on:

    • direct interests in real estate located in Australia
    • an interest in an entity where they and their associates hold 10% or more of the entity and the value of their interest is principally attributable to Australian real estate
    • an asset they have used in carrying on a business through a permanent establishment in Australia
    • an option or right to acquire one of the above.

    For more information, see Guide to capital gains tax 2015.

    Temporary residents

    Temporary residents are subject to CGT in the same way as foreign residents.

    See Tax-free income for temporary residents in Amounts that you do not pay tax on for the definition of a temporary resident and details of the exemption.

    There are special rules for shares and rights acquired under an employee share scheme.

    For more information, see Guide to capital gains tax 2015.

    What you may need

    • Details of the amount of any unapplied net capital losses from earlier years; this is the amount at V at the capital gains item on your last year's tax return
    • Documents showing the date you acquired any asset to which a CGT event happened, the date of the CGT event, and the date and amounts of any expenditure you incurred that form part of the cost base and reduced cost base of the asset or are taken into account in working out your capital gain or capital loss
    • Year-end, annual or distribution statements from trusts with net capital gains from which you received or were entitled to receive  
      • distributions of income, or
      • distributions of non-assessable amounts
       

    You may also need one or more of the following publications to complete this item. They explain the three methods that are used to calculate a capital gain, the indexation method, the discount method and 'other' method.

    • Capital gains tax explains what a capital gain is, how it applies, what assets are included and the exceptions and exemptions.
    • Guide to capital gains tax 2015 explains how CGT works and will help you to calculate your net capital gain or net capital loss. It covers CGT issues such as the sale of a rental property, vacant land, a holiday home, collectables (for example, jewellery), personal use assets (for example, a boat you use for recreation), and real estate, shares and units you inherited or got from the breakdown of your marriage or relationship.
    • Personal investors guide to capital gains tax 2015 is shorter and simpler than Guide to capital gains tax 2015. It covers
      • the sale, gift or other disposal of shares and units
      • distribution of capital gains from managed funds
      • non-assessable payments from companies and managed funds.
       

    It does not cover other CGT events, nor the CGT consequences for bonus shares, shares acquired under an employee share scheme, bonus units, rights and options, and shares and units where a takeover or demerger has occurred; for those see Guide to capital gains tax 2015.

    Capital gains tax (CGT) concessions for small business - overview explains what concessions are available to small businesses.

    Completing this item

    Step 1

    Read the publication that is relevant to your circumstances and work out the amount of your capital gain or capital loss for each CGT event that occurred, and the amount of your capital gains from a trust (including a managed fund) for the 2014–15 income year.

    Step 2

    Add up all your capital gains for the 2014–15 income year (except the ones that are disregarded) to work out your total current year capital gains. Do not apply capital losses, any CGT discounts or the small business concessions (other than the 15-year exemption) yet. Write this amount at H item 18 on page 14 of your tax return.

    Step 3

    Work out your net capital gain or net capital loss. This is the amount remaining after applying to your current year capital gains whichever of the following items are relevant to you (in the order listed):

    • capital losses from this year
    • unapplied net capital losses from earlier years
    • any CGT discounts
    • the small business 50% active asset reduction
    • the small business retirement exemption or rollover.

    If you have capital losses to apply, you will find it to your advantage to apply them first to any capital gains that do not qualify for the CGT discount.

    If you are an individual (including a beneficiary of a trust) and

    • a foreign or temporary resident, or
    • an Australian resident with a period of non-residency after 8 May 2012

    and you have a discount capital gain, then you may not be entitled to the maximum CGT discount percentage of 50%. For more information go to Capital gains tax (CGT) discount for foreign resident individuals.

    If the total amount remaining is positive or zero, write it at A item 18.

    If you have a negative amount, do not put anything at A. You have net capital losses to carry forward to later income years. Write the amount at V item 18.

    You can only use capital losses from collectables to reduce capital gains from collectables. You must disregard capital losses from personal use assets.

    Step 4

    Have you applied any exemption or rollover?

    For more information about CGT exemptions and roll-overs, read Guide to capital gains tax 2015 (NAT 4151).

    No

    Go to step 5.

    Yes

    Print X in the Yes box at M item 18. Read on.

    Using the table below, choose the exemption or rollover code that best describes your circumstances. If more than one code applies, choose the code that applies to the largest amount of capital gain.

    CGT exemption and roll-over codes

    A

    Small business active asset reduction (Subdivision 152-C)

    B

    Small business retirement exemption (Subdivision 152-D)

    C

    Small business roll-over (Subdivision 152-E)

    D

    Small business 15 year exemption (Subdivision152-B)

    E

    Foreign resident CGT exemption (Division 855)

    F

    Scrip for scrip roll-over (Subdivision 124-M)

    I

    Main residence exemption (Subdivision 118-B)

    J

    Capital gains disregarded as a result of the sale of a pre-CGT asset

    K

    Disposal or creation of assets in a wholly-owned company (Division 122)

    L

    Replacement asset roll-overs (Division 124):

    M

    Exchange of shares or units (Subdivision 124-E)

    N

    Exchange of rights or options (Subdivision 124-F)

    O

    Exchange of shares in one company for shares in another company (Division 615)

    P

    Exchange of units in a unit trust for shares in a company (Division 615)

    R

    Demerger roll-over (Subdivision 125-B)

    S

    Same asset roll-overs (Division 126):

    X

    Other exemptions and rollovers

    Write the code in the CODE box at M item 18.

    Step 5

    Did you have any unapplied net capital losses from earlier years?

    You can use net capital losses from earlier years that you have not yet used to reduce a capital gain in later years.

    No

     

    Yes

    Read on.

    You have net capital losses from earlier years that are carried forward to later income years. Write the amount at V item 18 on your tax return.

    If foreign tax was paid on a foreign gain of a capital nature, you need to read part H in question 20 Foreign source income and foreign assets or property to work out the amount of foreign income tax offset you can claim. You show the foreign income tax offset at O item 20.

    Keeping records from the start

    You must keep records of every act, transaction, event or circumstance that may be relevant to working out your capital gain or capital loss, regardless of whether the CGT event has already happened, is about to happen or may happen in the future.

    You must keep these records for five years from the time when no CGT event or further CGT event can happen. The records for these CGT events may be relevant to working out whether you have made a capital gain or capital loss from the event.

    Where to go next

      Last modified: 16 Jun 2015QC 44135