There are exemptions and rollovers that may allow you to reduce, defer or disregard your capital gain or capital loss.
There is no rollover or exemption for a capital gain you make when you sell an asset and put the proceeds into a superannuation fund, use the proceeds to purchase an identical or similar asset or you transfer an asset into a superannuation fund. For example, if you sell a rental property and put the proceeds into a superannuation fund or use the proceeds to purchase another rental property, rollover is not available. However, an asset or the capital proceeds from the sale of an asset may be transferred into a superannuation fund in order to satisfy certain conditions under the small business retirement exemption. For more information about the CGT concessions for small business, see Guide to capital gains tax concessions for small business 2005–06.
To find out when rollover is available - see Rollovers.
Generally, capital gains and capital losses from pre-CGT assets (that is, an asset you acquired before 20 September 1985) are exempt. However, CGT event K6 can result in capital gains if certain CGT events happen to pre-CGT shares in a company or to pre-CGT interests in a trust - see Taxation Ruling TR 2004/18 - Capital gains: application of CGT event K6 (about pre-CGT shares and pre-CGT trust interests) in section 104-230 of the Income Tax Assessment Act 1997.
Another important exemption is for a capital gain or capital loss you make from a CGT event relating to a dwelling that was your main residence. This rule can change, however, depending on how you came to own the dwelling and what you have done with it - for example, if you rented it out (see chapter 6 for more information).
The following capital gains and capital losses are also disregarded:
- a car (that is, a motor vehicle designed to carry a load of less than one tonne and fewer than nine passengers) or motor cycle or similar vehicle
- a decoration awarded for valour or brave conduct unless you paid money or gave any other property for it
- collectables acquired for $500 or less
- a capital gain from a personal use asset acquired for $10,000 or less
- any capital loss from a personal use asset
- CGT assets used solely to produce exempt income or some amounts of non-assessable non-exempt income
- a CGT asset that is your trading stock at the time of a CGT event
- shares in a pooled development fund
- compensation or damages you receive for any:
- wrong or injury you suffer in your occupation
- wrong, injury or illness you or your relatives suffer
- compensation you receive under the firearms surrender arrangements
- winnings or losses from gambling, a game or a competition with prizes
- a reimbursement or payment of your expenses under the General Practice Rural Incentives Program or the Sydney Aircraft Noise Insulation Project
- a reimbursement or payment made under the M4/M5 Cashback Scheme
- a re-establishment grant made under section 52A of the Farm Household Support Act 1992
- a dairy exit payment under the Farm Household Support Act 1992
- a sugar industry exit grant paid under the Sugar Industry Reform Program
- payments made under the German Forced Labour Compensation Programme (GFLCP), and certain payments or property received by Australian residents after 30 June 2001 as a result of persecution during the Second World War
- some types of testamentary gifts
- any capital gain or capital loss that would otherwise arise from the assignment to the Commonwealth of a right in relation to a general insurance policy held with an HIH company, the trustee of the HIH trust or a prescribed entity
- any capital gain or capital loss you make from rights being created in you or your rights ending in relation to the making of a superannuation agreement (as defined in the Family Law Act 1975), the termination or setting aside of such an agreement or such an agreement otherwise coming to an end
- any capital gain or capital loss that a complying superannuation entity makes from a CGT event happening in relation to a segregated current pension asset
- in certain circumstances, a general insurance policy, a life insurance policy or an annuity instrument
- the transfer of a superannuation interest in a small superannuation fund to another small superannuation fund on the breakdown of a legal (but not a de facto) marriage
- your gain on disposal of eligible venture capital investments, if you are a qualifying investor - see Venture capital concessions (capital gains tax) - overview
Other exemptions: capital gains
You may reduce your capital gain if, because of a CGT event, you have included an amount in your assessable income other than as a capital gain. For example, if you make a profit on the sale of land that is included in your assessable income as ordinary income, you don't also include that profit as a capital gain.
There are a range of concessions that allow you to disregard part or all of a capital gain made from an active asset you use in your small business. For more information, see Guide to capital gains tax concessions for small business 2005–06.
Other exemptions: capital losses
You disregard any capital loss you make:
- from the expiry, forfeiture, surrender or assignment of a lease if the lease is not used solely or mainly for the purpose of producing assessable income
- from a payment to any entity of personal services income that is included in an individual's assessable income under the alienation of personal services income provisions, or any other amount attributable to that income
- as an exempt entity.
You may defer or disregard - that is, rollover - a capital gain or capital loss until a later CGT event happens. The types of rollover available are listed here but only the following four types are covered in this guide. If you would like information on the others, please contact the Tax Office.
In certain cases where an asset or a share of an asset is transferred from one spouse to another after their marriage breaks down, any CGT is automatically deferred until a later CGT event happens (for example, when the former spouse sells the asset to someone else). For more examples of how CGT obligations are affected by marriage breakdown, see chapter 8.
Loss, destruction or compulsory acquisition of an asset
You may defer a capital gain in some cases where a CGT asset has been lost or destroyed or is compulsorily acquired (see chapter 7).
You may be able to defer a capital gain if you dispose of your shares in a company or interest in a trust as a result of a takeover (see chapter 5).
You may be able to defer a capital gain or capital loss if a CGT event happens to your shares in a company or interest in a trust as a result of a demerger (see chapter 5).
Other replacement asset rollovers
You may be able to defer a capital gain or capital loss when you replace an asset in the following circumstances (if you would like information on these rollovers, contact the Tax Office or your recognised tax adviser):
- an individual or trustee disposes of assets to, or creates assets in, a wholly owned company
- partners dispose of assets to, or create assets in, a wholly owned company
- a CGT event happens to small business assets and you acquire replacement assets
- your statutory licence is renewed or extended
- you are a financial service provider who had assets - for example, licences - replaced on transition to the financial services reform (FSR) regime
- your property is converted to strata title
- you exchange shares in the same company or units in the same unit trust
- you exchange rights or options to acquire shares in a company or units in a unit trust
- you exchange shares in one company for shares in an interposed company
- you exchange units in a unit trust for shares in a company
- a body is converted to an incorporated company
- you acquire a Crown lease
- you acquire a depreciating asset
- you acquire prospecting and mining entitlements
- you dispose of a security under a securities lending arrangement
- a trust restructure ends your ownership of units or interests.
Other same asset rollovers
You may be able to defer a capital gain or capital loss when you transfer or dispose of assets in the following circumstances (if you would like information on these rollovers, contact the Tax Office or your recognised tax adviser):
- an individual or trustee transfers a CGT asset to a wholly owned company
- a partner transfers their interest in a CGT asset to a wholly owned company
- a CGT asset is transferred between related companies
- a trust disposes of a CGT asset to a company under a trust restructure
- a CGT event happens because of a change to a trust deed of a complying approved deposit fund, a complying superannuation fund or a fund that accepts worker entitlement contributions
- a superannuation entity that merges with another superannuation entity between 1 July 2004 and 30 June 2006 inclusive because it does not satisfy requirements under the new superannuation safety arrangements, and
- a transfer of a CGT asset from one small superannuation fund to another because of a marriage breakdown.