Capital gains – item 21

Instructions to complete item 21 in the tax return relating to capital gains for the trust.

Did you have a CGT event during the year or did the trust have an amount of capital gains from another trust?

If the trust had a CGT event happen during the income year, or if the trust's share of the net income of another trust included an amount attributable to a capital gain made by that other trust, print X in the Yes box at the right of label G Did you have a CGT event during the year. Otherwise, print X in the No box at the right of label G.

Generally, a trust makes a capital gain or capital loss if certain events or transactions, called CGT events, happen. Most commonly, CGT events happen to a trust’s CGT assets (for example, the disposal of a CGT asset) while other CGT events relate directly to capital receipts (capital proceeds).

If the trust ceases to hold or use a depreciating asset which was used for both taxable and non-taxable purposes, a CGT event may happen to the asset. A capital gain or capital loss attributable to that non-taxable use may arise. For more information, see Guide to depreciating assets 2023.

An Australian resident makes a capital gain or capital loss if a CGT event happens to any of its worldwide CGT assets.

The CGT discount rules generally don’t apply to foreign resident individuals. This may affect trusts with foreign-resident individual beneficiaries. For more information, see CGT discount for foreign residents.

CGT worksheets and schedules

For more information on CGT events, see Guide to capital gains tax 2023 which includes:

• a capital gain or loss worksheet for calculating a capital gain or capital loss for each CGT event
• a CGT summary worksheet for calculating the trust’s net capital gain or capital loss
• a CGT schedule.

The worksheets will help you calculate a trust’s net capital gain or capital loss for the income year and complete the CGT entries on the trust tax return. You do not have to complete the worksheets. However, if you do, do not attach them to the trust tax return, but keep them with the trust’s tax records.

Complete a CGT schedule 2023 and attach it to the trust tax return if the trust had:

• total current year capital gains greater than $10,000, or
• total current year capital losses greater than $10,000.

Have you applied an exemption or rollover?

If the trust has capital gains disregarded or deferred as a result of an application of a CGT exemption or rollover, print X in the Yes box at label M Have you applied an exemption or rollover?

If you recorded X for Yes, you may need to provide details of certain CGT exemptions and rollovers, if you are required to lodge a CGT schedule.

Print in the CODE box at label M the codes from the list below that describe the CGT exemptions and rollovers from which the trust has applied to disregard or defer a capital gain or capital loss made. If the trust applied more than one CGT exemption or rollover, select all of the codes that apply. If you are lodging by paper, write the code that represents the CGT exemption or rollover that produced the largest amount of capital gain or capital loss deferred or disregarded.

CGT exemption or rollover codes

• A – Small business active asset reduction (Subdivision 152-C)
• B – Small business retirement exemption (Subdivision 152-D)
• C – Small business rollover (Subdivision 152-E)
• D – Small business 15-year exemption (Subdivision 152-B)
• E – Non-resident CGT exemption (Division 855)
• F – Scrip for scrip rollover (Subdivision 124-M)
• H – Demerger exemption (Subdivision 125-C)
• 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 rollovers (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)
• Q – Disposal of assets by a trust to a company (Subdivision 124-N)
• R – Demerger rollover (Subdivision 125-B)
• S – Same asset rollovers (Division 126)
• T – Small business restructure rollover (Subdivision 328-G)
• U – Early stage investor (Subdivision 360-A)
• V – Venture capital investment (Subdivision 118-F)
• X – Other exemptions and rollovers.

Use code T if you have either received or disposed of an asset under the Small business restructure rollover provisions.

For more information, see Guide to capital gains tax 2023.

If the trust is required to lodge a CGT schedule, you may need to provide details of the capital gains deferred or disregarded as a result of applying certain CGT exemptions and rollovers.

Net capital gain

The trust’s net capital gain is the total capital gains it made for the income year, less its current year capital losses, unapplied prior year net capital losses, CGT discount and any other relevant concessions. Relevant concessions are the small business:

• CGT 50% active asset reduction
• CGT 15-year asset exemption
• CGT retirement exemption
• CGT rollover.

Print at label A Net capital gain the amount of the trust’s net capital gain. If you have used the CGT summary worksheet or CGT schedule, this is the amount at:

• part 6 – label A of the CGT summary worksheet in Guide to capital gains tax 2023, or
• label A Net capital gain of the CGT schedule.

If you include an amount at item 32 Non-concessional MIT income (NCMI) – labels X NCMI and Z Excluded from NCMI then those amounts must be included in the calculation of the amount at label A.

For more information, see:

• Guide to capital gains tax 2023
• Losses schedule instructions 2023
• Non-concessional MIT income – item 32.

Excepted net capital gain of a minor

Include the amount of any excepted net capital gain of a minor at label A and provide a statement on a separate sheet of paper:

• detailing the distribution of excepted net capital gains to each beneficiary, and
• listing each beneficiary who is considered to be an excepted person, giving supporting reasons.

Attach this statement to the tax return and print X in the Yes box at Have you attached any ‘other attachments’? at the top of page one of the tax return.

For an explanation of excepted income and excepted person, see Appendix 9.

Foreign entities and CGT events

Include at label A Net capital gain amounts subject to the foreign resident capital gains withholding.

A capital gain or capital loss from a CGT event may be disregarded if the trust is a foreign trust just before the CGT event happens, if it happens in relation to a CGT asset that is not taxable Australian property; see section 855-10 of the ITAA 1997.

A CGT event in relation to an interest in a fixed trust held by a beneficiary who is a foreign resident may not be subject to CGT if at least 90% of the assets of the fixed trust directly or indirectly through a chain of fixed trusts in which the fixed trust has an indirect or direct interest are not taxable Australian property at the time of the CGT event (see section 855-40). If you are the trustee of such a fixed trust, you may need to attach sufficient additional information to the statement of distribution provided to the beneficiaries, to enable them to work out their CGT position.

Credit for foreign resident capital gains withholding amounts

Include the amount of foreign resident capital gains withholding at label B Credit for foreign resident capital gains withholding amounts.

For transactions entered into on or after 1 July 2017, a 12.5% withholding obligation will apply to the disposal of:

• taxable Australian real property with a market value of $750,000 or more
• an indirect Australian real property interest
• an option or right to acquire such property or interest.

Where the vendor of these Australian assets is a foreign resident, the purchaser must pay 12.5% of the purchase price to us as a foreign resident capital gains withholding payment.

The relevant foreign resident claims a credit for the foreign resident capital gains withholding amount except where the net income of the trust is less than the withholding amount. In these circumstances the trustee is entitled to the credit for the withholding amount on their running balance account.

The previous market value exemption threshold of $2 million for real property and 10% withholding rate will apply for any contracts that were entered into before 1 July 2017 (even if settlement is after that date).

For more information, see Capital gains withholding: Impacts on foreign and Australian residents.

Continue to: Foreign income – items 22 to 24