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  • Budget announcements

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    Blackhole expenditure

    On 10 May 2005, as part of the Budget, the Government announced proposed changes that will allow a deduction over five years for certain capital expenditure, known as 'blackhole' expenditure, incurred by businesses carried on for a taxable purpose. The new provisions will apply as a last resort if the expenditure does not have tax treatment or is denied a deduction. Blackhole expenditure will also be recognised by increasing the range of expenditure that forms the cost base of an asset for CGT purposes. The Government's intention is that the changes will apply to certain blackhole expenditure incurred on or after 1 July 2005.

    Marriage breakdown rollover

    On 10 May 2005, as part of the Budget, the Government announced proposed changes that will extend the scope of the marriage breakdown CGT rollover. The rollover will also apply to:

    • assets transferred to a spouse or former spouse under a binding financial agreement or arbitral award under the Family Law Act 1975 or a similar agreement or award under a corresponding foreign law
    • assets transferred under a written agreement under a state, territory or foreign law relating to de facto marriage breakdowns where the agreement is similar to a binding financial agreement.

    Amendments will also be made to ensure that the main residence exemption interacts more appropriately with the marriage breakdown rollover relief and ensure that marriage breakdown cash settlements do not give rise to CGT liabilities.

    The Government's intention is that the changes will apply to CGT events that happen after the date of Royal Assent of the amending legislation.

    International tax reform

    On 10 May 2005, as part of the Budget, the Government announced that it proposes to provide further reforms to Australia's international tax arrangements. These include:

    • a reintroduction of the foreign income exemption for temporary residents. This will ensure no capital gain or capital loss arises on the disposal of foreign assets by a person who is a resident for four years or less. The Government's intention is for the change to generally have effect for the first income year after the date of Royal Assent of the amending legislation
    • amending the CGT rules as they apply to non-residents by narrowing the range of assets on which a non-resident is subject to Australian CGT to real property and the business assets of Australian branches of a non-resident. Also the integrity of the measure will be protected by applying CGT to non-portfolio interests in interposed entities, where the value of such an interest is wholly or principally attributable to Australian real property. The Government's intention is to introduce this legislation before the end of the 2005-06 income year and for the changes to apply to CGT events happening after the date of Royal Assent of the amending legislation.
    Last modified: 09 Apr 2020QC 27596