Income Tax Assessment Act 1997
CGT event F4 happens if a lessee receives a payment from the lessor for agreeing to vary or waive a term of the lease.
The payment can include giving property: see section 103-5 .104-125(2)
The time of the event is when the term is varied or waived. 104-125(3)
The lessee makes a capital gain if the *capital proceeds from the event are more than the lease's *cost base (at the time of the event). If the lessee makes a *capital gain, the lease's cost base is also reduced to nil.
The lessee cannot make a capital loss.104-125(4)
On the other hand, if those *capital proceeds are less , the lease's *cost base is reduced by that amount at the time of the event.
On 1 January 1999 a lessee enters a lease. On 1 May 1999 the lessee agrees to waive a term. The lessor pays the lessee $1,000 for this.
If the lease's cost base at the time of the waiver is $2,500, it is reduced from $2,500 to $1,500.
On 1 September 1999 the lessee agrees to waive another term. The lessor pays the lessee $2,000 for this.
If the lease's cost base at the time of the waiver is $1,500, the lessee makes a capital gain of $500, and the cost base is reduced to nil.
A *capital gain the lessee makes is disregarded if:
(a) the lease was granted before 20 September 1985; or
(b) for a lease that has been renewed or extended - the start of the last renewal or extension occurred before that day.