• Step 2 How to complete the CGT summary worksheet for 2014 tax returns

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    You use the CGT summary worksheet to calculate your entity’s net capital gain for the 2013–14 income year or net capital losses carried forward to later income years. It also provides the information you need to complete the capital gains item on your entity’s tax return and, if required, the CGT schedule.

    You should include on this worksheet any capital gain your entity is entitled to as a distribution from a trust.

    The CGT summary worksheet is designed for entities that make capital gains or capital losses 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 CGT affairs.

    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 active assets if certain conditions are met. You will only need to differentiate your capital gains between active and non-active assets if you are going to apply the small business concessions.

    There are four small business CGT concessions that may apply to capital gains from active assets:

    • The small business 15-year exemption: this exemption, subject to certain conditions being satisfied, means a capital gain is totally disregarded if you or your small business entity has continuously owned the CGT asset for at least 15 years, and
      • you are 55 years old 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 you to disregard capital gains for active assets (up to a lifetime limit of $500,000) if the conditions are satisfied. If you are eligible for this exemption and are under 55 years old just before you choose it, you must pay the amount into a superannuation (or similar) fund.
    • The small business rollover: this enables you to defer all or part of a capital gain if you acquire a replacement asset or make an improvement to an existing asset and satisfy other conditions.

    To find out if your business is eligible for the small business CGT concessions, see Capital gains tax (CGT) concessions for small business – overview.

    Attention

    Active assets

    At 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 three small business CGT concessions:

    • small business 50% active asset reduction
    • small business retirement exemption
    • small business rollover.

    If the asset does not qualify for one or more of these three concessions, include the capital gain at Non-active assets

    Limit on value of assets

    Where the turnover of your entity and related entities exceeds $2 million, the small business CGT concessions are only available if the net value of the assets of your entity and related entities just before the CGT event do not exceed $6 million. For more information see Capital gains tax (CGT) concessions for small business – more changes for the 2007–09 years.

    If your entity is not entitled to the small business concessions, include the capital gain at Non-active assets.

    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). You can only apply capital losses from one class of income against capital gains from that class of income. Combine the details from both summary worksheets onto one CGT schedule, if it is required.

    End of attention

    The following parts in this step relate to the parts of the CGT summary worksheet which in turn match the items of the CGT schedule. Work through each relevant part to complete your entity's CGT summary worksheet.

    Attention

    If you have total capital losses from collectables (including current year and prior year losses) greater than your current year capital gains from collectables you need to complete part 9 of the summary worksheet. Otherwise you only need to complete parts 1 to 6.

    End of attention

    Part 1 Total current year capital gains and losses

    Each group of worksheets you organised at Step 1 corresponds with a column and row in table 1 according to the method you used to calculate your capital gain or loss and the type of CGT asset or event that gave rise to it. To complete table 1 write your entity’s current year capital gains and capital losses for each group of worksheets in the corresponding column and row.

    Attention

    What to include and exclude

    You generally do not include any capital gain to which an exemption (for example, the small business 15-year exemption) or exception applies.

    However, you must include in the Active assets columns capital gains for which your entity may be exempt because it is entitled to one or more of the following:

    • small business 50% active asset reduction
    • small business retirement exemption
    • small business rollover.

    If a capital gain does not qualify for one or more of these three concessions, include it at Non-active assets.

    Do not include any capital loss made from personal use assets at Other CGT assets and any other CGT events. You disregard capital losses from personal use assets and cannot apply them to reduce capital gains.

    End of attention
    Trust capital gains

    Include in row 7 of table 1 amounts of capital gains your entity received from a trust (including a managed fund) other than a capital gain involving a collectable.

    You must use the same method as the method used by the trustee to calculate your entity’s amount of capital gain from the trust. For example, if the trustee used the discount method to calculate a capital gain, you must use the discount method. In some cases, your entity must gross up the amount of the trust’s capital gain. If this applies, you include the grossed-up amount at row 7 as explained below.

    If the trustee used the discount method to calculate a capital gain, you need to gross it up by multiplying the distribution amount by two. Include the result at the appropriate box in row 7 under Non-active asset Capital gains – discount method. Grossing up ensures that any capital losses your entity has made are deducted from your entity’s grossed-up capital gain before the CGT discount is applied.

    If the trust’s capital gain was reduced by the small business 50% active asset reduction, again it needs to be grossed-up by multiplying the distribution amount by two. Include the result in row 7 at Active assets under the Capital gains – indexation method or Capital gains – ‘other’ method.

    If the trust’s capital gain was reduced by the CGT discount and by the small business 50% active asset reduction, multiply the distribution amount by four and include the result in row 7 at Active assets under the Capital gains – discount method.

    Did your entity receive an amount from a trust during the income year that includes a net capital gain from a collectable?

    If your entity was entitled to an amount of capital gain from a trust resulting from a collectable, include the amount in row 8 of table 1. Do not include these amounts in row 7. You must use the same method as the trustee to calculate your entity’s capital gain from the trust. For example, if the trustee used the discount method to calculate a capital gain, you need to do the same and write the grossed up amount under the Capital gains – discount method column in row 8 of table 1.

    If the trustee used the discount method to calculate a capital gain, gross it up by multiplying the distribution amount by two. Grossing up ensures that any capital losses your entity has made are deducted from your grossed-up capital gain before the CGT discount is applied.

    Amount of capital gain and loss

    Sum each row of table 1 to obtain the amounts at 1A to 1I and sum each column to obtain the amounts at A to F and 1J and 2A.

    Do not apply:

    • capital losses (which are applied at part 2 of the worksheet)
    • the CGT discount (which is applied at part 4 of the worksheet)
    • the small business CGT concessions (which are applied at part 5 of the worksheet).

    Transcribe the amounts at A to 1J to the corresponding A to 1J to table 2 in part 2 of the CGT summary worksheet.

    Part 2 Applying capital losses against current year capital gains

    Part 2A Applying current year capital losses

    In this part, you are calculating the amount of current year capital losses you can apply to reduce your entity's current year capital gains.

    A company is entitled to deduct net capital losses from current year capital gains as long as it has either:

    • substantially maintained the same ownership and control, or
    • carried on the same business.
    Further information

    For more information, see Continuity of ownership, control, and same business tests in the Guide to tax losses.

    End of further information

    If your entity has current year capital losses that can be deducted, you must deduct them here. You cannot choose to defer to a later income year any amount that can be deducted this income year.

    You can choose the order in which you apply your entity’s current year capital losses.

    Generally, if your entity is entitled to the small business CGT concessions, it is better to reduce the non-active asset capital gains first. Within the non-active and active categories you usually get the greatest benefit by reducing:

    • capital gains calculated using the 'other' method, then
    • capital gains calculated using the indexation method, then
    • capital gains calculated using the discount method.

    Write your entity’s current year capital losses applied in the order you have chosen (calculated using your current year capital losses at 2A in table 1) in row 2 of table 2. If you do not have any current year capital losses, record zeros in all labels in row 2.

    Attention

    Collectables

    If you have capital losses from collectables you can only apply those to your capital gains from collectables. If your current year capital losses from collectables (1Q of table 1) are greater than your current year capital gains from collectables (1H of table 1) you need to reduce them to the amount of the gain when calculating the amounts in row 2. Any unapplied losses from collectables are carried forward to later income years. Make a note of this amount at Q of table 9.

    End of attention

    Transcribe the total amount of unapplied current year capital losses to K in table 5.

    Calculate the amounts at G to M in table 2 and transcribe to row 1 of table 3.

    Part 2B Applying prior year net capital losses

    In this part, you are calculating the amount of prior year net capital losses you can apply to reduce your entity's current year capital gains remaining after you applied current year capital losses.

    Prior year net capital losses are the unapplied net capital losses carried forward from earlier income years.

    If your entity has prior year net capital losses that can be applied, they must be deducted here. You cannot choose to defer to a later income year any amount that can be applied this income year.

    Does your entity have any prior year net capital losses?

    Yes

    Complete the corresponding boxes in table 3A. Reduce the prior year net capital losses by any adjustment for commercial debts forgiven. For more information on commercial debts forgiven, see your entity’s tax return instructions.

    The amount at Z1 is the amount of prior year net capital losses that is available to be applied against current year capital gains remaining after applying current year capital losses.

    No

    Record a zero in Z1 of table 3A.

    Again, you can deduct prior year net capital losses from any remaining capital gains in the way that produces the best result. However, you must deduct them in the order in which they were made, for example, you must deduct a 1995–96 income year capital loss before a 1998–99 income year capital loss.

    Attention

    Collectables

    If you have capital losses from collectables you can only apply those to your capital gains from collectables. If your prior year capital losses from collectables are greater than your current year capital gains from collectables remaining after applying current year capital losses from collectables, you need to reduce them to the amount of the gain when calculating the amounts in row 2. Any unapplied prior year net capital losses from collectables are carried forward to later income years. Make a note of this amount at R of table 9.

    End of attention

    Write your entity's prior year net capital losses applied in the order you have chosen (calculated using your Prior year net capital losses after adjustment from Z1 in table 3A) in row 2 of table 3.

    Transcribe any unapplied prior year net capital losses to L of table 5.

    Calculate the amounts at N to T and transcribe to row 1 of table 4.

    Part 2C Applying net capital losses transferred in

    Transfer of net capital losses is only applicable to group companies with net capital losses transferred in. All other entities record zeros in row 2 of table 4.

    A group company may transfer the whole or a part of a net capital loss to another company where:

    • both companies are members of the same wholly owned group
    • one of the companies is
      • an Australian branch of a foreign bank, or
      • an Australian permanent establishment of a foreign financial entity if the capital loss is for an income year commencing on or after 26 June 2005
       
    • the other company is
      • the head company of a consolidated group or multiple entry consolidated (MEC) group, or
      • not a member of a consolidatable group, and
       
    • further conditions in Subdivision 170-B of the Income Tax Assessment Act 1997 are satisfied.

    You need to apply the net capital losses transferred in to your entity in the order they were received. Your entity must have enough capital gains to absorb the net capital losses transferred in.

    Write the amount of net capital losses transferred in your entity chooses to apply against capital gains in row 2 of table 4.

    Calculate the amounts at U to A of table 4 and transcribe to row 1 of table 6.

    Part 3 Calculating unapplied net capital losses carried forward

    In this part you are calculating the total of any unapplied capital losses from step 2. These unapplied capital losses will be available to reduce any capital gains in later income years.

    Write the sum of K and L at 3B of table 5.

    Part 4 CGT discount on capital gains

    In this part you are calculating the amount of discount you can apply to reduce your capital gains after applying all losses.

    Attention

    CGT discount

    Companies are not eligible for the CGT discount unless they are life insurance companies or friendly societies that carry on life insurance business. These companies may be entitled to the CGT discount for their complying superannuation business.

    End of attention

    Calculate the CGT discount in row 2 of table 6 that applies to the capital gains at V and Y. The CGT discount percentage is:

    • 33 1/3% for complying superannuation entities, or
    • 50% for individuals and trusts.

    Individuals (including a beneficiary of a trust and a partner in a partnership) who have a period of foreign residency after 8 May 2012 may not be entitled to the full 50% discount on a capital gain from a CGT event that happened after 8 May 2012.

    For more information, see Capital gains tax (CGT) discount for foreign resident individuals.

    Write the amount of the CGT discount in row 2.

    Calculate the amounts at B to H and transcribe to row 1 of table 8.

    Part 5 Small business CGT concessions

    In this part, you are calculating the small business CGT concessions your entity is claiming. For more information about the small business CGT concessions, see Capital gains tax (CGT) concessions for small business – overview.

    Write:

    • the amount of your entity’s small business 50% active asset reduction in row 1 of table 7
    • the amount of your entity’s small business retirement exemption in row 2 of table 7, and
    • the amount of your entity’s small business rollover in row 3 of table 7.

    Write the total amount of the small business CGT concessions your entity is claiming at I to L of table 7 and transcribe those amounts to table 8 at I to L.

    Part 6 Net capital gain calculation

    Your entity’s net capital gain is the amount remaining after applying any:

    • current year capital losses
    • net capital losses from prior income years
    • net capital losses transferred in
    • the CGT discount, and
    • any applicable CGT small business concessions.

    In table 8, calculate the amount of your entity’s net capital gain by taking the amounts in row 2 away from the amounts in row 1. Write your entity's net capital gain in row 3 and 6A.

    Include a net capital gain as assessable income on your entity’s tax return at the relevant item. See step 3.

    There is no Part 7 or Part 8

    Part 9 Calculating net capital losses from collectables carried forward to later income years.

    Only complete this part if you have any unapplied capital losses from collectables from part 2.

    Using the amounts in Q and R transferred from part 2A and 2B, calculate the amount in 3A of table 9.

      Last modified: 01 Sep 2014QC 39804