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, a 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 the Guide to capital gains tax concessions for small business.
To find out when a 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 Real estate and main residence for more information).
Capital gains and capital losses that are also disregarded include those you make from:
- a car (that is, a motor vehicle designed to carry a load of less than one tonne and fewer than nine passengers) or motorcycle 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 (that is , tax-free income)
- a CGT asset that is your trading stock at the time of a CGT event
- certain profits, gains or losses resulting from the disposal of shares in a pooled development fund (see appendix 4 of the Company tax return instructions 2010 NAT 0669)
- 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 (but not for the loss, destruction or transfer of an asset) under a scheme established
- by an Australian government agency, a local government body or foreign government agency
- under an Act or legislative instrument (for example, regulations or local government by-laws)
- a reimbursement or payment of expenses under the Unlawful Termination Assistance Scheme or the Alternative Dispute Resolution Assistance Scheme
- 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 sugar industry exit grant paid under the Sugar Industry Reform program
- tobacco industry exit grant paid under the Tobacco Growers Adjustment Assistance Programme 2006 if you undertook to not become the owner or operator of an agricultural enterprise within five years after receiving the grant
- a right or entitlement to a tax offset, deduction or a similar benefit under an Australian law, under the law of a foreign country or part of a foreign country
- payments made under the German Forced Labour Compensation Programme (GFLCP), and certain payments or property received by Australian residents as a result of persecution during the Second World War
- some types of testamentary gifts
- assignment of a right under, or in relation to, a general insurance policy held with an HIH company, to the Commonwealth, the trustee of the HIH trust or a prescribed entity
- your rights being created 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
- the ending of rights that directly relate to the breakdown of your marriage or relationship, including cash you receive as part of your marriage or relationship breakdown settlement
- a CGT event happening in relation to a segregated current pension asset (made by a complying superannuation entity)
- in certain circumstances, a general insurance policy, a life insurance policy or an annuity instrument
- your share of certain profits , gains or losses arising from disposal of investments by a venture capital limited partnership (VCLP), an early stage venture capital limited partnership (ESVCLP) or an Australian venture capital fund of funds (AFOF)
- a financial arrangement where gains and losses are calculated under the TOFA rules (see section 118-27 of ITAA 1997).
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 is 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 the publication Capital gains tax (CGT) concessions for small business - overview.
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 rollovers available are listed below. Only the first four types are covered in detail in this guide. If you would like information on the others, contact us.
Marriage or relationship breakdown
In certain cases where an asset or a share of an asset is transferred from one spouse to another after their marriage or relationship breaks down, any CGT is automatically deferred until a later CGT event happens (for example, until the former spouse sells the asset to someone else). For more examples of how CGT obligations are affected by marriage or relationship breakdown, see chapter 9.
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 8).
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 Investments in shares and units ).
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 Investments in shares and units).
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:
- 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 ends and is replaced with another statutory licence or licences which authorises substantially similar activity to the original licence or licences
- 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
- a membership interest in a medical defence organisation (MDO) is replaced with a similar membership interest in another MDO and both MDOs are companies limited by guarantee.
If you would like information on these rollovers, contact us or your recognised tax adviser.
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:
- 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 CGT asset is transferred from one small superannuation fund to another complying superannuation fund because of a marriage or relationship breakdown
- a trustee of a trust creates a trust over a CGT asset or transfers a CGT asset to another trust where both the transferring and receiving trusts meet certain requirements.
If you would like information on these rollovers, contact us or your recognised tax adviser.