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Changes and proposed changes to the law

There are a number of recent and proposed CGT changes to bear in mind when calculating your net capital gain for the income year or your net capital losses carried forward to later income years.

To see if the proposed changes below are now law, visit our website and select 'For Tax Professionals', then click on 'Tax Professionals homepage'. From the menu on the left, under 'Rulings, legislation & law', select 'New legislation', then select 'New legislation' and click on 'Capital gains tax'.

Australian property trusts and stapled securities

Changes to the law provide holders of ownership interests in certain stapled entities, for example Australian listed property trusts, with a CGT rollover where, under a scheme for reorganising the stapled entities' affairs, they dispose of their ownership interests in the stapled entity in exchange for an interest in an interposed public unit trust.

Stapled entities are a group of entities that may consist of two or more trusts, or one or more companies and one or more trusts, whose ownership interests are stapled together to form stapled securities.

For more information regarding the CGT consequences of stapled securities see Stapled securities.

This change applies to CGT events that happen on or after 1 July 2006.

CGT rollover for medical defence organisations

Changes to the law provide a CGT rollover when a membership interest in a medical defence organisation (MDO) is replaced with a similar membership interest in another MDO and both MDOs were companies limited by guarantee. The rollover ensures that any capital gain made on the exchange of the membership interests is deferred until a CGT event happens to the replacement membership interests. A member of an MDO can choose whether or not to obtain the rollover.

The amendments apply to CGT events that happened on or after 14 February 2007. See Rollovers for more information.

Gifts of shares listed on an approved Australian Stock Exchange valued at $5,000 or less to an eligible deductible gift recipient (DGR)

Changes to the law mean that from 1 July 2007, you could be eligible to claim a deduction if you make a gift to a DGR of Australian-listed public company shares valued at $5,000 or less that you acquired at least 12 months earlier.

If you choose to donate shares the disposal of the shares is a CGT event and the gain or loss is still subject to the CGT provisions.

Marriage breakdown rollover

Changes to the law extend the scope of a CGT rollover on marriage breakdown. The rollover now also defers the making of a capital gain or loss from a transfer of any asset reflecting the entire personal interest of one of the spouses from a small superannuation fund to another complying superannuation fund for the benefit of the transferor spouse. The CGT marriage breakdown rollover is available to the trustee of the small superannuation fund who made the transfer of the superannuation interest.

The changes apply to CGT events that happen on or after 1 July 2007, regardless of when the award, order or agreement is made.

For more information, see Marriage breakdown.

Partial CGT rollover for statutory licences

Changes to the law extend the statutory licence CGT rollover. Previously the rollover was only available where the statutory licence expired or was surrendered and a new licence was issued which renewed or extended the original licence. The law has been changed to provide for a rollover to apply:

  • in a broader range of endings of the original licence, such as cancellation
  • where a licence or licences may be issued to take the place of one or more original licences
  • where the new licence or licences authorises activity which is substantially similar to the activity authorised by the original licence(s).

Partial rollover is available where one or more statutory licences end and are replaced by one or more new licences and the licensee also receives non-licence capital proceeds, such as money.

The changes apply to CGT events that happen in the 2006-07 and later income years.

For further information, see our fact sheet Capital gains tax concession for cash payments and statutory licences.

Testamentary trusts

Changes now allow the trustee of a resident testamentary trust to choose to be assessed on the capital gains that would otherwise be assessed to a presently entitled income beneficiary of the trust (or the trustee on their behalf) where that beneficiary is not entitled under the terms of the trust to benefit from the gain.

This will ensure that if the choice is made by the trustee, tax is in effect borne by the capital beneficiaries of the trust who will ultimately benefit from the capital gain.

A trustee can make the choice in respect of capital gains included in the trust's net income for the 2005-06 and later income years.

For more information, see Deceased estates.

Small business CGT concessions

There is a change in the eligibility conditions for the small business CGT concessions. To qualify for any of the small business CGT concessions the following basic conditions must now be satisfied:

  • you are a small business entity
  • you satisfy the maximum net asset value test, or
  • you are a partner in a partnership that is a small business entity, and the CGT asset is an asset of the partnership.

You are a small business entity if you are carrying on business and one or both of the following applies:

  • the aggregated turnover for the previous year income year was less than $2 million
  • the aggregated turnover for the current year is estimated to be less than $2 million. You cannot estimate your current year turnover if your aggregated turnover for the two previous income years was $2 million or more.

If you are unable to satisfy either of the above conditions then you may still be a small business entity if your actual aggregated turnover for the current year is less than $2 million.

Aggregated turnover is the annual turnover of the business plus the annual turnovers of any businesses that are connected or are affiliates.

A business with a turnover of more than $2 million may still be eligible for the small business CGT concessions if it satisfies the maximum net asset value test.

The maximum net asset value threshold is now $6 million instead of $5 million.

These changes apply to CGT events that happen in the 2007-08 income year and later years.

For further information, see our fact sheet Changes to the capital gains tax (CGT) concessions for small business 2007-08.

Forestry managed investment scheme interests

The law now provides specific CGT rules where secondary investors or subsequent participants hold forestry managed investment scheme (FMIS) interests on capital account.

These new rules apply to interests in an FMIS sold or disposed of in the 2007-08 income year.

See Forestry managed investment scheme interests.

Tobacco growers adjustment assistance program 2006

A Bill introduced into Parliament provides an exemption from CGT for grants made under the Tobacco Growers Adjustment Assistance Program 2006. The exemption only applies to those recipients who undertake to exit all agricultural enterprises for at least five years.

This change to the law applies to the 2006-07 and later income years.

Last modified: 06 Oct 2009QC 27921