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  • Step 4 How to complete the CGT schedule

    Your entity must complete a CGT schedule for the 2016–17 income year if:

    If your entity is required to complete a CGT schedule, attach it to your entity’s 2017 tax return. You should lodge only one CGT schedule with your entity’s tax return.

    If you are lodging a paper tax return and CGT schedule, print and complete the CGT schedule provided. To get copies of the schedule, phone our Publications Distribution Service on 1300 720 092.

    Print your entity’s tax file number (TFN), name and Australian business number in the boxes provided. The CGT schedule must be signed in the same way that the 2017 tax return is signed.

    If you are a multi-class AMIT you will be required to lodge your tax return and CGT schedule electronically. If you are a multi-class AMIT show the name of the AMIT class that the schedule relates to on the CGT schedule for each class. The name should be identical to the AMIT class name used in the related AMIT tax schedule.

    Consolidated groups

    If a group consolidates during the income year, the head company must lodge a CGT schedule if the total capital gains or total capital losses that it makes (as head company of the consolidated group and while not a member of a consolidated group) are greater than $10,000.

    An entity that has joined a consolidated group or groups during the income year as a subsidiary member must lodge a CGT schedule covering any periods of non-membership if the entity satisfies the requirements for lodgment of that schedule.

    Attribution Managed Investment Trusts (AMIT)

    If an AMIT chooses multi-class treatment, complete a separate CGT schedule for each class with a total capital gain or loss greater than $10,000.

    AMITs that do not choose multi-class treatment must lodge a CGT schedule if the entity has a total capital gain or loss greater the $10,000.

    Item 1 Current year capital gains and capital losses

    Transcribe the amounts at 1A to 1I for capital gains and from 1K to 1R for capital losses in table 1 on your CGT summary worksheet to the corresponding labels at item 1 of the CGT schedule. For example, transcribe the figure at 1A in table 1 of the CGT summary worksheet to A Shares in companies listed on an Australian securities exchange item 1 of the CGT schedule.

    For an AMIT that chooses multi-class treatment, include any:

    • capital gains as a result of transfers of assets between classes of the AMIT at 1I
    • any capital losses as a result of transfers of assets between classes at 1R.

    Sum labels A to I at item 1 of the CGT schedule and write the total at J Total current year capital gains.

    Item 2 Capital losses

    Sum labels K to R item 1 and write the total at A Total current year capital losses item 2.

    From your CGT summary worksheet, transcribe the amounts at 2B in table 2, 2C in table 3 and 2D in table 4 to the corresponding labels at item 2 of the CGT schedule.

    Sum labels B, C and D at item 2 and write the total at E Total capital losses applied.

    Item 3 Unapplied net capital losses carried forward

    Transcribe the amounts at 3A in table 9 and 3B in table 5 from your CGT summary worksheet to the corresponding labels at item 3 of the CGT schedule.

    Item 4 CGT discount

    Transcribe the amount at 4A in table 6 from your CGT summary worksheet to A item 4 of the CGT schedule.

    Item 5 CGT concessions for small business

    Transcribe the amounts 5A, 5B and 5C in table 7 from your CGT summary worksheet to the corresponding labels at item 5 of the CGT schedule.

    Sum labels A, B and C at item 5 and write the total at D Total small business concessions applied.

    Item 6 Net capital gain

    Follow the instructions on the schedule to calculate A Net capital gain at item 6 of the CGT schedule.

    Item 7 Earnout arrangements

    Are you a party to an earnout arrangement?

    Print X in the appropriate box at A.

    If you are a party to more than one earnout arrangement you will need to provide details of all earnout arrangements in which you are a party. To do this, attach a separate sheet to the CGT schedule providing the details listed in this item for each additional earnout arrangement.

    If you are a buyer, complete B and C.

    If you are a seller, complete:

    • B and C
    • D and E for arrangements which do not involve look-through earnout rights.

    Also, if you’re a seller, complete F and G if:

    • you received or provided a financial benefit under a look-through earnout right created in an earlier income year; and
    • you wish to seek an amendment to that earlier income year via this schedule; and
    • you satisfy all the following conditions:    
      • the look-through earnout right was created on or after 24 April 2015
      • you are an individual or a company (not in a trustee capacity)
      • you are lodging your current year income tax return before its lodgment due date, and
      • none of the following apply to you:    
        • you have a substituted accounting period
        • you are the head company of a consolidated group
        • you are no longer eligible to CGT concessions for the earlier income year to which you are seeking the amendment
        • you are a company seeking to utilise tax losses as a result of this amendment
        • you need to request an amendment to more than one income year as a result of receiving or providing financial benefits
        • you need to amend amounts other than your net capital gains or capital losses carried forward in the earlier income year for which you are seeking the amendment.
         
       

    If you received or provided a financial benefit under a look-through earnout right created in an earlier income year, you may need to seek an amendment to your net capital gain (or capital losses carried forward amount) of that earlier income year. You can request such amendment via this schedule by completing labels 7F and 7G if you satisfy all the conditions above.

    Completing the labels

    Write at B the number of years the earnout arrangement runs for in total.

    Write at C the year of the earnout arrangement you are in.

    For example, if you are in the second year of a four year earnout arrangement, you would write

    • 4 at B
    • 2 at C.

    Write at D the total estimated capital proceeds from the earnout arrangement.

    Write at E the amount of any capital gain or loss you made under your earnout arrangement in the income year for which this schedule is being completed. If this amount is a loss, print L in the box at the right of the amount at E.

    For F and G, if you meet all the conditions above:

    • write at F the income year in which the look-through earnout right or rights were created
    • write at G the amended net capital gain or capital losses carried forward amount resulting from the financial benefits received or provided.

    If you are amending your capital losses carried forward amount, you must print L in the box at the right of the amount at G.

    If your CGT position changes from a net capital gain to a capital loss as a result of receiving or providing a financial benefit under a look-through earnout right and you are required to temporarily disregard that capital loss as explained below, write '0' at G.

    Capital losses arising from the disposal of assets to which look-through earnout rights relate are temporarily disregarded if the capital losses could be reduced by you receiving future financial benefits. You can recognise such capital losses only until such time as the losses become certain.

    For example, if you are a seller in a standard or combination look-through earnout arrangement and you are in a capital loss position resulting from the disposal of the underlying asset to which the look-through earnout right relates and not in the last year of the arrangement, you must temporarily disregard the capital loss as it could potentially be reduced by you receiving future financial benefits. However, if you are in a reverse earnout arrangement then a capital loss can be recognised as the capital loss can only be increased through your provision of financial benefits to the buyer.

    If your circumstances do not satisfy the conditions above

    If your circumstances do not satisfy the conditions above and you are applying the look-through CGT treatment, you will need to lodge an amendment request for the relevant income tax assessment. In your amendment request, you should clearly indicate that the amendment you are seeking is in relation to a look-through earnout right. This allows us to process your amendment correctly and to ensure no penalties or interests will apply if other conditions are met.

    Example

    Mark is retiring and he sold all of the shares in his business XYZ Co Pty Ltd, to Janet on 24 April 2016.

    According to the sale contract, Mark would

    • receive an upfront payment of $1 million at the time of sale;
    • have a right to future payments of $150,000 in the next five income years provided the turnover of XYZ Co Pty Ltd exceeds an agreed threshold in the prior income year; and
    • be obliged to provide $100,000 to Janet if the turnover of previous year falls short of the agreed threshold.

    The following assumptions are made for this example:

    • Mark has a cost base of XYZ Co Pty Ltd of $1.1 million.
    • The business turnover exceeds the agreed threshold for the 2016 income year.
    • The business turnover does not exceed the agreed threshold for the 2017 income year and the 2018 income year.
    • Mark is only entitled to the 50% CGT discount.
    • There are no other CGT events in those relevant income years.
    • The right is a look-through earnout right.
    • There are no capital losses brought forward from prior years.

    In June 2019, Mark offers to pay Janet $100,000, as well as giving up his right to the potential future benefits, if Janet agrees to forgo her right to further payments under the look-through earnout right. Janet agrees to this offer.

    2016 income tax return

    At this time, Mark has received an upfront payment of $1 million for the sale of the XYZ Co Pty Ltd shares. Under the treatment provided in withdrawn TR 2007/D10, Mark would need to exclude from the capital proceeds of this CGT event so much of the payment as is reasonably attributable to the granting of the right to provide financial benefits to Janet. Mark would also need to include in the capital proceeds the value of the right to receive future financial benefits from Janet. However, as this is a look through earnout right, the amount attributable to the granting of the right to provide financial benefits as well as the value of the right to receive financial benefits are disregarded when working out the capital proceeds.

    Accordingly, for the 2016 income year, Mark has a capital loss of $100,000 (capital proceeds of $1 million less the cost base of $1.1 million) as a result of the sale of XYZ Co Pty Ltd shares. However, as the capital loss could be reduced by Mark receiving future financial benefits, Mark must temporarily disregard the capital loss of $100,000. He cannot recognise the capital loss at the net capital losses carried forward label of his 2016 income tax return.

    2017 income tax return

    XYZ Co Pty Ltd’s turnover exceeds the agreed threshold in the 2016 income year and therefore Janet pays Mark a further amount of $150,000 in the 2017 income year.

    As a result of this payment, Mark's capital proceeds from the sale of XYZ Co Pty Ltd shares are now considered to be $1.15 million – made up of the $1 million initial payment and the $150,000 payment he received in 2017. Mark has now made a capital gain of $50,000 (capital proceeds of $1.15 million less the cost base of $1.1 million).

    Accordingly, Mark now needs to amend his 2016 income tax return to include a net capital gain of $25,000 (after applying the 50% CGT discount). Mark meets all the conditions listed above, and therefore has the option of completing F and G to inform the Commissioner of the amended net capital gain or alternatively Mark can write to the Commissioner to seek an amendment. If Mark decides to complete F and G, he would need to write ‘2016’ at F and '25,000' at G. By writing '25,000' at G Mark’s net capital gain for the 2016 income tax return will be amended to $25,000.

    2018 income tax return

    In the 2018 income year, Mark is required to provide Janet with $100,000 as the turnover for the 2017 income year is less than the agreed threshold. As a result, the total capital proceeds from the sale of all the shares in XYZ Co Pty Ltd changes to $1.05 million, resulting in a capital loss of $50,000. As previous mentioned, Mark cannot recognise this capital loss. Therefore, when Mark seeks an amendment, he should write '0' at G. We will reduce the net capital gain from $25,000 (the net capital gain reported in the prior amendment request) to Nil.

    2019 income tax return

    Janet accepts Mark's offer and foregoes her right to future financial benefits for $100,000.

    The amount of $100,000 paid by Mark is a financial benefit provided to terminate a look-through earnout right and is treated in the same way as a financial benefit provided under the right.

    As the turnover in 2018 does not exceed the agreed threshold, Mark also pays Janet $100,000 as per the earnout arrangement.

    Consequently, Mark’s total capital proceeds for the sale reduces to $850,000, made up of the $1 million initial payment, the subsequent $150,000 payment received, $200,000 provided to Janet under the earnout right for the business performance not achieving the agreed threshold , as well as the payment of $100,000 to end the earnout right.

    Mark’s capital loss from the share sale is now $250,000 (capital proceeds of $850,000 less the cost base of $1.1 million). As no further financial benefits could be received, Mark can recognise this capital loss which resulted from the share disposal to which the look-through earnout right relates. Mark will need to record ‘2016’ at F and '250,000' at G and write L in the box at the right of this amount. By writing $250,000 at G and L in the box at the right of this amount, Mark's 2016 income tax return is amended to reflect net capital losses carried forward of $250,000.

    The table below summarises how Mark will complete F and G.

    Year

    Financial benefits received

    Financial benefits provided

    Total capital proceeds from the disposal

    Net Capital gain

    Capital loss

    How to complete F and G

    2016

    $1 million (upfront payment)

    N/A

    $1 million

    N/A

    $100,000

    N/A

    2017

    $150,000 (received as agreed threshold is met for 2016 income tax year)

    N/A

    $1.15 million

    $25,000 (after applying the 50% CGT discount)

    N/A

    F: 2016

    G: $25,000

    2018

    N/A

    $100,000

    (paid as agreed threshold is not met for 2017 income year)

    $1.05 million

    N/A

    $50,000

    F: 2016

    G: $0

    2019

    N/A

    $200,000 ($100,000 for payment to end earnout rights plus $100,000 for business performance falling to meet the agreed threshold for 2018 income year)

    $850,000

    N/A

    $250,000

    F: 2016

    G: $250,000(L)

    Item 8 Other CGT information required (if applicable)

    Small business 15-year exemption

    Write the total amount of any capital gains disregarded by the small business 15-year exemption at A item 8 of the CGT schedule. Do not apply the CGT discount.

    Print in the code box at A the code from the list below that best describes the CGT asset or CGT event from which your entity made the capital gain. If your entity made capital gains from more than one CGT asset or CGT event, select the code which best describes the type of CGT asset or CGT event that produced the largest amount of capital gain.

    CGT asset or CGT event code:

    • S shares
    • U units in unit trusts
    • R real estate
    • G goodwill
    • O other CGT assets or CGT events not listed above.
    Capital gains disregarded by a foreign resident

    If you are a foreign resident, you are subject to CGT if a CGT event happens to a CGT asset that is ‘taxable Australian property’. However, if you are eligible for an exemption then you may disregard the capital gain you have made. If your CGT asset is not a taxable Australian property, you do not need to answer this question.

    Write the total amount of any capital gains disregarded by the application of foreign resident exemption at B item 8 of the CGT schedule. Do not apply the CGT discount.

    Capital gains disregarded as a result of scrip for scrip rollover

    During the income year, did your entity choose a scrip for scrip rollover when an arrangement was made to exchange original interests for replacement interests?

    Original interests are shares or units or other interests (or an option, right or similar interest in a company or trust), while replacement interests are similar interests in another company or trust.

    Write the total amount of any capital gains disregarded by the application of the scrip for scrip rollover at C item 8 of the CGT schedule.

    Capital gains disregarded as a result of inter-company assets rollover

    A same asset rollover may be available where a company transfers or creates a CGT asset in another company that is a member of the same wholly-owned group, where at least one of the companies is a foreign resident.

    Write the total amount of any capital gains disregarded by the application of the inter-company asset rollover at D item 8 of the CGT schedule.

    Capital gains disregarded by a demerging entity

    You may be eligible to disregard any capital gains arising from a demerger if you are a demerging entity in a demerger group, see Demerger exemption.

    Write the total amount of any capital gains disregarded by the application of the demerger exemption at E item 8 of the CGT schedule. Do not include any amounts disregarded by the application of a Demerger rollover.

    After following all these steps, you have completed your entity’s CGT schedule.

    Remember to lodge the CGT schedule with your entity’s tax return.

    Do not lodge your worksheets. Keep these with your own records.

    Capital Gains deferred due to CGT relief (Super funds)

    Transitional CGT relief is available for funds to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the new transfer balance cap, or as a result of Transition-to-Retirement Income Stream (TRIS) reforms, both commencing on 1 July 2017. It applies to certain CGT assets held by a complying SMSF at all times from 9 November 2016 to 30 June 2017.

    CGT relief is not automatic; it must be chosen by a trustee for a CGT asset. If CGT relief is chosen, the trustee will need to advise us in the CGT schedule on, or before, the day they are required to lodge their fund’s 2016–17 income tax return. The decision is irrevocable.

    If you have applied CGT relief, print X in the Yes box at F item 8, otherwise print X in the No box. If you selected Yes, and you have used the proportionate method and chosen to defer a capital gain, then provide the deferred amount of the notional capital gain at G.

    You must lodge the CGT schedule on or before the day the fund is required to lodge their 2016–17 Income Tax Return.

    For more information regarding transitional CGT relief, see LCR 2016/8 Superannuation reform: transfer balance cap and transition-to-retirement reforms: transitional CGT relief for superannuation funds

    Capital gains and capital losses from transfers to other classes

    This section applies to all Attribution Managed Investment Trusts (AMITs).

    You must lodge an AMIT's income tax return, and where applicable its CGT schedule, electronically.

    You may make an irrevocable election to treat separate classes of interests in the AMIT as separate AMITs. If you made this election and transferred assets between separate AMIT classes in 2016–17, show the capital gains and losses arising from those asset transfers at.

    • Total capital gains from transfers to other classes
      Last modified: 19 Feb 2018QC 51236