# Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES

PART 3-1 - CAPITAL GAINS AND LOSSES: GENERAL TOPICS

Division 104 - CGT events

Subdivision 104-E - Trusts

SECTION 104-95   Making a capital gain   You are the only beneficiary

104-95(1)
If you are the only beneficiary with an interest in the trust capital and you *dispose of that interest, you work out if you have made a *capital gain in this way: Working out your capital gain

Step 1.

Work out the *capital proceeds from the *disposal.

Step 2.

Work out the *net asset amount.

Step 3.

If the Step 1 amount is greater , you make a capital gain equal to the difference.

104-95(2)

The net asset amount is worked out in this way: Working out the net asset amount

Step 1.

Work out the total of the *cost bases (at the time of the disposal) of the *CGT assets that the trustee *acquired on or after 20 September 1985 and that formed part of the trust capital at that time.

Step 2.

Work out the total of the *market values (at the time of the disposal) of the *CGT assets that the trustee *acquired before 20 September 1985 and that formed part of the trust capital at that time.

Step 3.

Work out the amount of money that formed part of the trust capital at the time of the disposal.

Step 4.

Add up the Step 1, 2 and 3 amounts.

Step 5.

Subtract from the Step 4 amount any liabilities of the trust at the time of the disposal.

Step 6.

The result is the net asset amount .

Example:

You dispose of your interest in the trust capital for \$10,000 (the capital proceeds).

The total of the cost bases of the CGT assets that the trustee acquired on or after 20 September 1985 is \$6,000.

The total of the market values of the CGT assets that the trustee acquired before 20 September 1985 is \$2,500.

There is \$1,000 in the trust. The trust liabilities are \$500.

The net asset amount is:

 \$6,000   +   \$2,500   +   \$1,000   -   \$500   =   \$9,000

You make a capital gain of:

 \$10,000   -   \$9,000   =   \$1,000

104-95(3)
If you *dispose of only part of that interest, any *capital gain is worked out using the method statement in subsection (1), except that the Step 2 amount is replaced by:

 The net asset amount × The part of the interest   you are disposing of (expressed as a fraction)

Example:

To vary the example in subsection (2), suppose you dispose of 50% of your interest for \$5,000 (the capital proceeds).

The Step 2 amount becomes:

 \$9,000   ×   50%   =   \$4,500

You make a capital gain of:

 \$5,000   -   \$4,500   =   \$500

There is more than one beneficiary

104-95(4)
If you are not the only beneficiary with an interest in the trust capital and you *dispose of your interest, any *capital gain is worked out using the method statement in subsection (1), except that the Step 2 amount is replaced by:

 The net asset amount × Your interest in the trust capital     (expressed as a fraction)

Example:

To vary the example in subsection (2), suppose you have a 20% interest in the trust capital and you dispose of it for \$4,000 (the capital proceeds).

The Step 2 amount becomes:

 \$9,000   ×   20%   =   \$1,800

You make a capital gain of:

 \$4,000   -   \$1,800   =   \$2,200

104-95(5)
If you are not the only beneficiary with an interest in the trust capital and you *dispose of part of your interest, any *capital gain is worked out using the method statement in subsection (1), except that the Step 2 amount is replaced by:

 The net asset amount × Your interest in the trust capital (expressed as a fraction) × The part of the interest   you are disposing of (expressed as a fraction)

Example:

To vary the example in subsection (2), suppose you have a 50% interest in the trust capital. You dispose of 20% of it for \$1,000 (the capital proceeds).

The Step 2 amount becomes:

 \$9,000   ×   50%   ×   20%   =   \$900

You make a capital gain of:

 \$1,000   -   \$900   =   \$100

Exception

104-95(6)
A *capital gain you make is disregarded if you *acquired the *CGT asset that is the interest in the trust capital before 20 September 1985.

##### Note:

You can make a gain if you dispose of an interest in a trust that you acquired before that day: see CGT event K6.