Steps you need to take
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The Capital gain or loss worksheet and the CGT summary worksheet show the steps you need to take to calculate a net capital gain or net capital loss for the 2000-01 income year and to complete the CGT labels on the 2000-01 tax return.
The instructions below form a three-step process (for entities under the threshold of $10 000 capital gains or capital losses) or a four-step process (for entities over these thresholds):
calculate a capital gain or capital loss for each CGT event that happens during the 2000-01 income year using the Capital gain or loss worksheet
calculate the net capital gain or net capital loss for the 2000-01 income year using the CGT summary worksheet
(if required) complete a CGT schedule, and
complete the capital gains item in your entity's tax return.
Step 1-Complete a capital gain or loss worksheet for each CGT event
The Capital gain or loss worksheet calculates a capital gain or capital loss for each, separate CGT event. Do not attach completed worksheets to your entity's 2000-01 tax return-these are your working papers and should be kept with your entity's tax records.
Remember that when you are using the Capital gain or loss worksheet:
- you show the type of CGT asset or CGT event that resulted in the capital gain or capital loss. Organise each of these under one of the following four categories:
- shares and units in unit trusts
- real estate
- other CGT assets (including personal use assets) and any other CGT events, or
- a capital gain or capital loss from plant is disregarded (see note 4 to the worksheet), and
- if a capital gain was made, you calculate it using:
- the indexation method (see note 2 to the worksheet) for capital gains made on CGT assets acquired before a certain time (11.45am by legal time in the ACT on 21 September 1999) and owned for at least 12 months, or
- the discount method (see note 3 to the worksheet) for assets owned for at least 12 months and for which you are not using the indexation method, or
- the 'other' method (if neither the indexation method nor the discount method apply).
These three methods of calculating a capital gain are explained in full in chapter 2 in part A and are also listed in the Explanation of terms in this guide.
When you have calculated your capital gain or capital loss for each CGT event using a Capital gain or loss worksheet or a different tool, transfer any capital gains or capital losses to the CGT summary worksheet.
Step 2-Complete the CGT summary worksheet
The CGT summary worksheet calculates the net capital gain or net capital loss for the 2000-01 income year. It also provides the information you need to complete the capital gains item in your entity's tax return and, if required, the CGT schedule.
You should include in this worksheet any capital gain your entity has received as a distribution from a trust.
The CGT summary worksheet is designed for entities that make a capital gain or capital loss during the income year. However, you may also find it useful if you are an individual (including a partner in a partnership) who has more complex capital gains tax affairs.
Transfer the capital gain or capital loss calculated on each Capital gain or loss worksheet to the CGT summary worksheet. Transfer a capital gain according to the method you used to calculate it and the type of asset that gave rise to it.
The CGT summary worksheet differentiates between capital gains from active assets and non-active assets. Generally, an active asset is a business asset the entity owns, for example, goodwill of a business. A share and an interest in a trust can also be an active asset if certain conditions are met.
There are four CGT small business concessions that may apply to capital gains from active assets, as follows:
- the small business 15 year exemption:
this exemption, subject to certain conditions being satisfied, means a capital gain is totally disregarded if your small business entity has continuously owned the CGT asset for at least 15 years, and:
- you are 55 or over and retiring, or
- you are permanently incapacitated
- the small business 50% active asset reduction:
this concession provides a 50% reduction of a capital gain for an active asset
- the small business retirement exemption:
this allows capital gains for active assets (up to a lifetime limit of $500 000) to be disregarded if the conditions are satisfied. If you are under 55 and are eligible for this exemption, the amount must be paid into a superannuation (or similar) fund, and
- the small business roll-over:
this enables you to defer a capital gain if a replacement asset is acquired and other conditions are satisfied.
To find out if your business is eligible for the CGT small business concessions, obtain a copy of the publication Capital gains tax concessions for small business .
Remember that under 'active assets' in the CGT summary worksheet (and the CGT schedule), you should only include a capital gain from an active asset that qualifies for one or more of the following CGT small business concessions:
- small business 50% active asset reduction, and/ or
- small business retirement exemption, and/ or
- small business roll-over.
If the asset does not qualify for one or more of these concessions, include the capital gain under 'non-active assets'.
Limit on value of assets
When you apply the CGT small business concessions, there is a limit of $5 million on the net value of assets that your business and related entities own just before the CGT event.
Life insurance companies
Life insurance companies, including friendly societies that conduct life insurance business, need to complete two CGT summary worksheets-one for each class of income they derived (superannuation class and ordinary class income). Capital losses from one class of income can only be applied against capital gains from that class of income.
Step 3 (If required)-Complete a CGT schedule
Your entity must complete a CGT schedule for the 2000-01 income year if:
- the total current year capital gains are greater than $10 000, or
- the total current year capital losses are greater than $10 000.
If the $10 000 thresholds do not apply to your entity, go to section 1 in this part of the guide for instructions on how to complete the capital gains item in your entity's tax return using the two worksheets. If you are not sure whether these thresholds apply to your entity, section 1 should give you the information you need.
If the $10 000 thresholds apply to your entity, go to section 2 in this part of the guide for instructions on how to complete the capital gains item in your entity's tax return using the two worksheets and the CGT schedule. This section will also explain how to complete this schedule.
Step 4-Complete the capital gains item in your entity's tax return
In the earlier steps, you calculated your capital gain or capital loss for each CGT event, then worked out your net capital gain or net capital loss. If required, you then complete a CGT schedule.
Transfer the net capital gain to label A in the capital gains item in your entity's tax return.
Last modified: 31 Aug 2010QC 16195