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Guide to capital gains tax 2005

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Appendixes

Appendix 1 - Summary of CGT events

Appendix 2 - Consumer price index

Appendix 3 - Flowcharts

Appendix 4 - Some major share transactions

Definitions

Appendix 1- Summary of CGT events

Disposal

CGT event		Time of event	Capital gain	Capital loss
A1	Disposal of a CGT asset	when the disposal contract is entered into or, if none, when the entity stops being the asset's owner	capital proceeds from disposal less the asset's cost base	asset's reduced cost base less capital proceeds

Hire purchase and similar agreements

CGT event		Time of event	Capital gain	Capital loss
B1	Use and enjoyment before title passes	when use of the CGT asset passes	capital proceeds less the asset's cost base	asset's reduced cost base less capital proceeds

End of a CGT asset

CGT event		Time of event	Capital gain	Capital loss
C1	Loss or destruction of a CGT asset	when compensation is first received or, if none, when the loss is discovered or destruction occurred	capital proceeds less the asset's cost base	asset's reduced cost base less capital proceeds
C2	Cancellation, surrender and similar endings	when the contract ending an asset is entered into or, if none, when an asset ends	capital proceeds from the ending less the asset's cost base	asset's reduced cost base less capital proceeds
C3	End of an option to acquire shares and so on	when the option ends	capital proceeds from granting the option less expenditure in granting it	expenditure in granting the option less capital proceeds

Bringing a CGT asset into existence

CGT event		Time of event	Capital gain	Capital loss
D1	Creating contractual or other rights	when the contract is entered into or the right is created	capital proceeds from creating the right less incidental costs of creating the right	incidental costs of creating the right less capital proceeds
D2	Granting an option	when the option is granted	capital proceeds from the grant less expenditure to grant it	expenditure to grant the option less capital proceeds
D3	Granting a right to income from mining	when the contract is entered into or, if none, when the right is granted	capital proceeds from the grant of right less the expenditure to grant it	expenditure to grant the right less capital proceeds
D4	Entering into a conservation covenant	when covenant is entered into	capital proceeds from covenant less cost base apportioned to the covenant	reduce cost base apportioned to the covenant less capital proceeds from covenant

Trusts

CGT event		Time of event	Capital gain	Capital loss
E1	Creating a trust over a CGT asset	when the trust is created	capital proceeds from creating the trust less the asset's cost base	asset's reduced cost base less capital proceeds
E2	Transferring a CGT asset to a trust	when the asset is transferred	capital proceeds from the transfer less the asset's cost base	asset's reduced cost base less capital proceeds
E3	Converting a trust to a unit trust	when the trust is converted	market value of the asset at that time less its cost base	asset's reduced cost base less that market value
E4	Capital payment for trust interest	when the trustee makes the payment	non-assessable part of the payment less the cost base of the trust interest	no capital loss
E5	Beneficiary becoming entitled to a trust asset	when the beneficiary becomes absolutely entitled	for a trustee - market value of the CGT asset at that time less its cost base; for a beneficiary - that market value less the cost base of the beneficiary's capital interest	for a trustee - reduced cost base of the CGT asset at that time less that market value; for a beneficiary - reduced cost base of the beneficiary's capital interest less that market value
E6	Disposal to a beneficiary to end an income right	the time of the disposal	for a trustee - market value of the CGT asset at that time less its cost base; for a beneficiary - that market value less the cost base of the beneficiary's right to income	for a trustee - reduced cost base of the CGT asset at that time less that market value; for a beneficiary - reduced cost base of the beneficiary's right to income less that market value
E7	Disposal to a beneficiary to end capital interest	the time of the disposal	for a trustee - market value of the CGT asset at that time less its cost base; for a beneficiary - that market value less the cost base of the beneficiary's capital interest	for a trustee - reduced cost base of the CGT asset at that time less that market value; for a beneficiary - reduced cost base of the beneficiary's capital interest less that market value
E8	Disposal by a beneficiary of capital interest	when the disposal contract is entered into or, if none, when the beneficiary ceases to own the CGT asset	capital proceeds less the appropriate proportion of the trust's net assets	appropriate proportion of the trust's net assets less the capital proceeds
E9	Creating a trust over future property	when the entity makes an agreement	market value of the property (as if it existed when the agreement was made) less incidental costs in making the agreement	incidental costs in making the agreement less the market value of the property (as if it existed when the agreement was made)

Leases

CGT event		Time of event	Capital gain	Capital loss
F1	Granting a lease	for granting a lease - when the entity enters into the lease contract or, if none, at the start of the lease; for a lease renewal or extension - at the start of the renewal or extension	capital proceeds less the expenditure on grant, renewal or extension	expenditure on grant, renewal or extension less capital proceeds
F2	Granting a long-term lease	for granting a lease - when the lessor grants the lease; for a lease renewal or extension - at the start of the renewal or extension	capital proceeds from the grant, renewal or extension less the cost base of the leased property	reduced cost base of the leased property less the capital proceeds from the grant, renewal or extension
F3	Lessor pays lessee to get lease changed	when the lease term is varied or waived	no capital gain	amount of expenditure to get lessee's agreement
F4	Lessee receives payment for changing a lease	when the lease term is varied or waived	capital proceeds less the cost base of lease	no capital loss
F5	Lessor receives payment for changing a lease	when the lease term is varied or waived	capital proceeds less expenditure in relation to variation or waiver	expenditure in relation to variation or waiver less capital proceeds

CGT event		Time of event	Capital gain	Capital loss
G1	Capital payment for shares	when the company pays a non-assessable amount	payment less cost base of shares	no capital loss
G3	Liquidator or administrator declares shares or financial instruments worthless	when declaration is made	no capital gain	shares' or financial instruments' reduced cost base

Special capital receipts

CGT event		Time of event	Capital gain	Capital loss
H1	Forfeiture of a deposit	when the deposit is forfeited	deposit less expenditure in connection with the prospective sale	expenditure in connection with the prospective sale less deposit
H2	Receipt for an event relating to a CGT asset	when the act, transaction or event occurred	capital proceeds less the incidental costs	incidental costs less capital proceeds

Cessation of residency

CGT event		Time of event	Capital gain	Capital loss
I1	Individual or company stops being an Australian resident	when the individual or company stops being an Australian resident	for each CGT asset the person owns, its market value less its cost base	for each CGT asset the person owns, its reduced cost base less its market value
I2	Trust stops being a resident trust	when the trust ceases to be a resident trust for CGT purposes	for each CGT asset the trustee owns, its market value less its cost base	for each CGT asset the trustee owns, its reduced cost base less its market value

Reversal of rollover

CGT event		Time of event	Capital gain	Capital loss
J1	Company stops being a member of a wholly owned group after a rollover	when the company stops being a member of a wholly owned group after a rollover	market value of the asset at the time of the event less its cost base	reduced cost base of the asset less that market value
J2	Change in status of a CGT asset that was a replacement asset in a rollover under Subdivision 152-E	when the change in status happens	the amount of the capital gain that you disregarded under Subdivision 152-E	no capital loss
J3	A change happens in circumstances where a share in a company or an interest in a trust was a replacement asset in a rollover under Subdivision 152-E	when the change in circumstances happens	the amount of the capital gain that you disregarded under Subdivision 152-E	no capital loss
J4	Trust failing to cease to exist after rollover under Subdivision 124-N	when the failure to cease to exist happens	for the company - market value of the asset at the time the company acquired it less its cost base at that time for shareholder - market value of the share at the time the shareholder acquired it less its cost base at that time	for the company - reduced cost base of the asset at the time the company acquired it less its market value at that time for shareholder - reduced cost base of the share at the time the shareholder acquired it less its market value at that time

Other CGT events

CGT event		Time of event	Capital gain	Capital loss
K2	Bankrupt pays an amount in relation to debt	when payment is made	no capital gain	that part of the payment that relates to the denied part of a net capital loss
K3	Asset passing to a tax-advantaged entity	when an individual dies	market value of the asset at death less its cost base	reduced cost base of the asset less that market value
K4	CGT asset starts being trading stock	when the asset starts being trading stock	market value of asset less its cost base	reduced cost base of asset less that market value
K5	Special capital loss from a collectable that has fallen in market value	when CGT event A1, C2 or E8 happens to shares in the company, or an interest in the trust, that owns the collectable	no capital gain	market value of the shares or interest (as if the collectable had not fallen in market value) less the capital proceeds from CGT event A1, C2 or E8
K6	Pre-CGT shares or trust interest	when another CGT event involving the shares or interest happens	capital proceeds from the shares or trust interest that are attributable to post-CGT assets owned by the company or trust, less the assets' cost bases	no capital loss
K7	Balancing adjustment occurs for a depreciating asset that you used for purposes other than taxable purposes	when the balancing adjustment event occurs	termination value less cost times fraction	cost less termination value times fraction
K8	Direct value shifts affecting your equity or loan interests in a company or trust	the decrease time for the interests	the capital gain worked out under section 725-365	no capital loss
K9	Entitlement to receive payment of a carried interest	when you become entitled to receive the payment	capital proceeds from the entitlement	no capital loss
K10	You make a forex realisation gain as a result of forex realisation event 2 and item 1 of the table in subsection 775-70(1) applies	when the forex realisation event happens	equal to the forex realisation gain	no capital loss
K11	You make a forex realisation loss as a result of forex realisation event 2 and item 1 of the table in subsection 775-70(1) applies	when the forex realisation event happens	no capital gain	equal to the forex realisation loss
K12	Foreign hybrid loss exposure adjustment	Just before the end of the income year	no capital gain	the amount stated in subsection 104-270(3)

Consolidations

CGT event		Time of event	Capital gain	Capital loss
L1	Reduction under section 705-57 in tax cost setting amount of assets of entity becoming subsidiary member of consolidated group or MEC group	just after entity becomes subsidiary member	no capital gain	amount of reduction
L2	Amount remaining after step 3A etc of 'joining allocable cost amount is negative'	just after entity becomes subsidiary member	amount remaining	no capital loss
L3	Tax cost setting amounts for retained cost base assets exceed joining allocable cost amount	just after entity becomes subsidiary member	amount of excess	no capital loss
L4	No reset cost base assets against which to apply excess of net allocable cost amount on joining	just after entity becomes subsidiary member	no capital gain	amount of excess
L5	Amount remaining after step 4 of 'leaving allocable cost amount is negative'	when entity ceases to be subsidiary member	amount remaining	no capital loss
L6	Error in calculation of tax cost setting amount for joining entity's assets	start of the income year when the Commissioner becomes aware of the errors	the net overstated amount resulting from the errors, or a portion of that amount	the net understated amount resulting from the errors, or a portion of that amount
L7	Discharged amount of liability differs from amount for allocable cost amount purposes	start of the income year in which the liability is realised	your allocable cost amount less what it would have been had you used the correct amount for liability	what your allocable cost amount would have been had you used the correct amount for the liability less your allocable cost amount
L8	Reduction in tax cost setting amount for reset cost base assets on joining cannot be allocated	just after entity becomes subsidiary member	no capital gain	amount of reduction that cannot be allocated

Appendix 2

Consumer price index (CPI)

All groups - weighted average of eight capital cities

Year	Quarter ending
	31 Mar	30 Jun	30 Sep	31 Dec
1985	-	-	71.3	72.7
1986	74.4	75.6	77.6	79.8
1987	81.4	82.6	84.0	85.5
1988	87.0	88.5	90.2	92.0
1989	92.9	95.2	97.4	99.2
1990	100.9	102.5	103.3	106.0
1991	105.8	106.0	106.6	107.6
1992	107.6	107.3	107.4	107.9
1993	108.9	109.3	109.8	110.0
1994	110.4	111.2	111.9	112.8
1995	114.7	116.2	117.6	118.5
1996	119.0	119.8	120.1	120.3
1997	120.5	120.2	119.7	120.0
1998	120.3	121.0	121.3	121.9
1999	121.8	122.3	123.4	N/A*

For an explanation of indexation and how it applies, See Indexation .

*If you use the indexation method to calculate your capital gain, the indexation

factor is based on increases in the CPI up to September 1999 only.

Appendix 3

This appendix contains four flowcharts. Download Appendices here .

Flowchart 1	Treatment of bonus shares issued on or after 20 September 1985
Flowchart 2	Treatment of bonus units issued on or after 20 September 1985
Flowchart 3	Treatment of rights or options to acquire shares or units issued directly to you from a company or trust for no payment (but not under an employee share scheme)
Flowchart 4	Treatment of rights or options (to acquire shares or units) that you paid to acquire from a company or trust - or that you acquired from another person (but not under an employee share scheme).

Flowchart 1: Treatment of bonus shares issued on or after 20 September 1985

Did you acquire the original shares on or after 20 September 1985?

Yes	Read on from question 2
No	Read on from question 4

Is any part of the bonus shares a dividend or treated as a dividend?

Yes	Read on from question 3
No	Read answer 1

Were the bonus shares issued before 1 July 1987?

Yes	Read answer 1
No	Read answer 2

Is any part of the bonus shares a dividend or treated as a dividend?

Yes	Read on from question 5
No	Read on from question 6

Were the bonus shares issued before 1 July 1987?

Yes	Read on from question 6
No	Read answer 3

Are the bonus shares partly paid?

Yes	Read on from question 7
No	Read answer 4

Were the bonus shares issued before 10 December 1986?

Yes	Read answer 4
No	Read on from question 8

Before the sale of the bonus shares, were any further call payments made to the company?

Yes	Read answer 5
No	Read answer 4

Answer 1:

The bonus shares are subject to capital gains tax.
The bonus shares are acquired when the original shares were acquired.
The cost base of each original and bonus share is equal to
- the cost of the original shares divided by the total number of original and bonus shares, plus
- any calls on partly paid bonus shares.

Answer 2

The bonus shares are subject to capital gains tax if issued on or after 20 September 1985.
The acquisition date of the bonus shares is their date of issue.
The cost base includes the amount of the dividend plus any calls on partly paid bonus shares.

Answer 3

The bonus shares are subject to capital gains tax if issued on or after 20 September 1985.
The acquisition date of the bonus shares is their date of issue.
The cost base includes the amount of the dividend, plus any calls on partly paid bonus shares.

Answer 4

You are taken to have acquired the bonus shares before 20 September 1985 and they are not subject to capital gains tax.

Answer 5

The bonus shares are subject to capital gains tax.
The acquisition date of the bonus shares is the date when the liability to pay the first call arises.
The cost base is the market value of the bonus shares just before the liability to pay the first call arises, plus the amount of call payments made.

Flowchart 2: Treatment of bonus units issued on or after 20 September 1985

Did you acquire the original units on or after 20 September 1985?

Yes	Read on from question 2
No	Read on from question 3

Is any part of the bonus units included in your assessable income?

Yes	Read answer 1
No	Read answer 2

Is any part of the bonus units included in your assessable income?

Yes	Read on from question 4
No	Read on from question 5

Were the bonus units issued on or after 20 September 1985?

Yes	Read answer 1
No	Read answer 4

Are the bonus units partly paid?

Yes	Read on from question 6
No	Read answer 4

Were the bonus units issued before 10 December 1986?

Yes	Read answer 4
No	Read on from question 7

Before the sale of the bonus units were any further call payments made to the trust?

Yes	Read answer 3
No	Read answer 4

Answer 1

The bonus units are subject to capital gains tax.
The acquisition date of the bonus units is their date of issue.
The cost base includes the amount included in assessable income, plus any calls on partly paid bonus units.

Answer 2

The bonus units are subject to capital gains tax.
The bonus units are acquired when the original units were acquired.
The cost base of each original and bonus unit is equal to
- the cost of the original units divided by the total number of original and bonus units, plus
- any calls on partly paid bonus units.

Answer 3

The bonus units are subject to capital gains tax.
The acquisition date of the bonus units is the date when the liability to pay the first call arises.
The cost base is the market value of the bonus units just before the liability to pay the first call arises, plus the amount of call payments made.

Answer 4

You are taken to have acquired the bonus shares before 20 September 1985 and they are not subject to capital gains tax.

Flowchart 3: Treatment of rights or options to acquire shares or units issued directly to you from a company or trust for no payment

Did you acquire the original shares or units before 20 September 1985?

Yes

Read question 2

The acquisition date of the rights or options is the date of acquisition of the original shares or units.

Read question 3

Did you exercise the rights or options on or after 20 September 1985?

Yes	Read answer 1
No	Read answer 2

Did you exercise the rights or options?

Yes	Read answer 3
No	Read answer 4

Answer 1

The shares or units acquired on exercise of the rights or options are subject to capital gains tax.
The acquisition date of the shares or units is the date of exercise of the rights or options.
The first element of the cost base and the reduced cost base of the shares or units is the sum of
- the market value of the rights or options at the time you exercise them, plus
- the amount you pay for the shares or units, plus
- if the rights or options are exercised on or after 1 July 2001 and, as a result, an amount is included in your assessable income - that amount.

Note: You disregard any capital gain or capital loss you make from exercising the rights or options.

Answer 2

You disregard any capital gain or loss on the sale or expiry of the rights or options.

Answer 3

The shares or units acquired on exercise of the rights or options are subject to capital gains tax.
The acquisition date of the shares or units is the date of the exercise.
The first element of the cost base and the reduced cost base of the shares or units is
- the amount you pay for the shares or units, plus
- if the rights or options are exercised on or after 1 July 2001 and, as a result, an amount is included in your assessable income - that amount.

Note: You disregard any capital gain or capital loss you make from exercising the rights or options.

Answer 4

If the capital proceeds on the sale or expiry of the rights or options are more than their cost base, you make a capital gain.

If the capital proceeds are less than their reduced cost base, you make a capital loss.

Flowchart 4: Treatment of rights or options (to acquire shares or units) that you paid to acquire from a company or trust - or that you acquired from another person (but not under an employee share scheme).

Did you acquire the rights or options before 20 September 1985?

Yes	Read question 2
No	Read question 4

Did you exercise the rights or options?

Yes	Read question 3
No	Read answer 1

Did you exercise the rights or options on or after 20 September 1985?

Yes	Read answer 3
No	Read answer 2

Did you exercise the rights or options?

Yes	Read answer 4
No	Read answer 5

Answer 1

You disregard any capital gain or capital loss you make from exercising the rights or options.

Answer 2

You disregard any capital gain or capital loss on the shares or units acquired from the exercise of the rights or options because the shares or units were acquired before 20 September 1985.

Answer 3

The shares or units acquired on exercise of the rights or options are subject to capital gains tax.
The acquisition date of the shares or units is the date of exercise of the rights or options.
The first element of the cost base and the reduced cost base of the shares or units is the sum of
- the market value of the rights or options at thetime you exercise them, plus
- the amount you pay for the shares or units.

If you acquired the rights or options from a person other than the company or trust and exercise them on or after 1 July 2001, your cost base and reduced cost base will also include any amounts included in your assessable income as a result of exercising the right or option.

Note: You disregard any capital gain or capital loss you make from exercising the rights or options.

Answer 4

The shares or units acquired on exercise of the rights or options are subject to capital gains tax.
The acquisition date of the shares or units is the date of exercise of the rights or options.
The first element of the cost base and the reduced cost base of the shares or units is the sum of
- the amount you pay for the rights or options, plus
- the amount you pay for the shares or units.

Note: You disregard any capital gain or capital loss you make from exercising the rights or options.

Answer 5

You may make a capital gain or loss on sale or expiry of the rights or options. This depends on the amount of capital proceeds received.

Appendix 4

Some major share transactions

Company	Details of transaction
AMP Ltd	Demutualisation The acquisition cost for AMP Ltd shares was $10.43 per share and the acquisition date was 20 November 1997. Demerger In December 2003 the UK operations of AMP (referred to as 'HHG') were demerged from AMP. There were tax consequences from the demerger for shareholders in 2003 - 04 which are set out in our fact sheet AMP Group demerger: How it affects Australian resident shareholders . You can also work out the cost base of AMP and HHG shares after the demerger using the fact sheet or the AMP demerger calculator on our website at www.ato.gov.au/demergers (follow the link under 'Shareholder information'). If you used the AMP demerger calculator before December 2004, your 'AMP shares - cost base report' may be incorrect if, in the calculation, your two largest share parcels appear one after the other in the report and the difference between the two share parcels is 10 shares or less. See AMP demerger . 2005 return of capital On 16 June 2005, AMP made a return of capital to shareholders of $0.40 per share. Shareholders needed to reduce the cost base and reduced cost base of each share by $0.40. For each share that had a cost base of less than $0.40, the difference was a capital gain in 2004 - 05. See our fact sheet AMP 2005 return of capital.
Australian Co-operative Foods Ltd	Restructure On 29 June 2004, Australian Co-operative Foods Ltd undertook a restructure which involved a number of steps, including its members receiving shares in Dairy Farmers Milk Co-operative Ltd. The CGT consequences are set out in our fact sheet 2004 Australian Co-operative Foods Ltd restructure.
Australian Gas Light Company Ltd (AGL)	Return of capital On 29 April 2005, AGL made a return of capital to shareholders of $0.50 per share. Shareholders needed to reduce the cost base and reduced cost base of each share by $0.50. For each share that had a cost base of less than $0.50, the difference was a capital gain in 2004 - 05. See our fact sheet Australian Gas Light Company (AGL) 2005 return of capital .
Bank of Western Australia	Takeover During September 2003, HBOS plc acquired all shares in Bank of Western Australia. Minority shareholders received $4.25 per share. The shares were disposed of on or about 11 September 2003. If the capital proceeds of $4.25 were more than the cost base of the share, the difference was a capital gain in 2003 - 04. If $4.25 was less than the share's reduced cost base, the difference was a capital loss.
BHP Billiton Limited	Demerger In July 2002 BHP shareholders received one BHP Steel Ltd share for every five BHP Billiton shares held. In November 2003 BHP Steel Limited changed its name to BlueScope Steel Limited. BHP Billiton has advised that BHP Steel represented 5.063% of the market value of the group as a whole just after the demerger. Shareholders who received BHP Steel shares should use this percentage to apportion the sum of the cost bases of their post-CGT BHP Billiton shares between these shares and the BHP Steel shares they received in relation to those post-CGT BHP Billiton shares. The fact sheet 2002 BHP Billiton Group demerger and the demergers calculator on our website at www.ato.gov.au/demergers (follow the link under 'Shareholder information') will help you work out the cost bases of your BHP Billiton and BlueScope shares after the demerger. 2004 share buy-back On 23 November 2004, BHP Billiton completed an off-market share buy-back. Shareholders who took part in the buy-back received $12.57 per share, which included a fully franked dividend of $10.47 per share. For capital gains tax purposes, they are taken to have received $4.04 per share. The date the shares were sold under the buy-back was 23 November 2004. If the capital proceeds of $4.04 were more than the cost base of the share, the difference is a capital gain to the shareholder in 2004 - 05. If $4.04 was less than the share's reduced cost base, the difference is a capital loss. See our fact sheet BHP Billiton 2004 off-market share buy-back .
BlueScope Steel Ltd	2005 share buy-back In February 2005, BlueScope Steel Ltd (formerly BHP Steel Ltd) announced a share buy-back. Shareholders who took part in the buy-back received $7.75 per share, which included a fully franked dividend of $4.68 per share. For capital gains tax purposes, they are taken to have received $4.79 per share. The date the shares were sold under the buy-back was 12 April 2005. If the capital proceeds of $4.79 was more than the cost base of the share, the difference is a capital gain to the shareholder in 2004 - 05. If $4.79 was less than the share's reduced cost base, the difference is a capital loss. See our fact sheet BlueScope Steel: 2005 off-market share buy-back.
Coles Myer Ltd	Share sale facility Between 15 March and 23 April 2004, Coles Myer made a share sale facility available to shareholders who had 800 shares or less. If the capital proceeds were more than the cost base of the share, the difference was a capital gain to the shareholder in 2003 - 04. If the capital proceeds were less than the share's reduced cost base, the difference was a capital loss. See our fact sheet Coles Myer Limited 2004 share sale facility . 2005 share buy-back On 17 March 2005, Coles Myer announced a share buy-back. Shareholders who took part in the buy-back received $8.30 per share, which included a fully franked dividend of $5.30 per share. For capital gains tax purposes, they are taken to have received $3.84 per share. The date the shares were sold under the buy-back was 23 May 2005. If the capital proceeds of $3.84 were more than the cost base of the share, the difference is a capital gain to the shareholder in 2004 - 05. If $3.84 was less than the share's reduced cost base, the difference is a capital loss. See our fact sheet Coles Myer 2005 off-market share buy-back .
Commonwealth Bank of Australia Ltd	Public share offer The Commonwealth Bank public shares were acquired on 13 July 1996. For shareholders who use the indexation method in calculating their capital gain, they index their first and final instalments from 13 July 1996. 2004 share buy-back In March 2004, the Commonwealth Bank announced a general share buy-back. Shareholders who took part in the buy-back received $27.50 per share, which included a fully franked dividend of $16.50 per share. For capital gains tax purposes, they are taken to have received $13.92 per share. The date the shares were sold under the buy-back was 29 March 2004. If the capital proceeds of $13.92 were more than the cost base of the share, the difference was a capital gain to the shareholder in 2003 - 04. If $13.92 was less than the share's reduced cost base, the difference was a capital loss. See our fact sheet Commonwealth Bank of Australia Ltd: 2004 off-market share buy-back .
CSR Limited - Rinker Group Limited	Demerger In April 2003 CSR shareholders received one Rinker share for every CSR share they held. CSR has advised that Rinker represented 75% of the market value of the group as a whole just after the demerger. Shareholders who received Rinker shares should use this percentage to apportion the sum of the cost bases of their post-CGT CSR shares between these shares and the Rinker shares they received in relation to those post-CGT CSR shares. The demergers calculator on our website at www.ato.gov.au/demergers (follow the link under 'Shareholder information') will help you work out the cost bases of your Rinker and CSR shares after the demerger. Also see our fact sheet 2003 CSR demerger: impact on resident individual shareholders .
Fosters Group Ltd	2003 share buy-back On 22 December 2003, Foster's announced that they had completed an off-market share buy-back. Shareholders who took part in the buy-back received $4.00 per share, which included a fully franked dividend of $2.19 per share. The date the shares were sold was 22 December 2003. If the capital proceeds of $1.81 per share was more than the cost base of the share, the difference was a capital gain in 2003 - 04. If $1.81 was less than the share's reduced cost base, the difference was a capital loss. See our fact sheet Foster's Group Ltd: 2003 off-market share buy-back .
Grainco Australia Ltd (GAL)	Takeover On 1 October 2003, Grainco Australia Ltd (GAL) and Graincorp entered a scheme of arrangement under which Graincorp took control of GAL. GAL shareholders had a choice of receiving either cash or Graincorp reset preference shares (RPS) in exchange for their GAL shares. In either case, the value received was $1.392 per GAL share they surrendered. Scrip-for-scrip rollover was available on the exchange of Graincorp RPS for GAL shares but not to the extent cash was received. Note: Scrip-for-scrip rollover does not apply to a capital loss. If scrip-for-scrip rollover does not apply and the cost base of the GAL share was more than $1.392, the difference was a capital gain in 2003 - 04. If $1.392 was less than the share's reduced cost base, the difference was a capital loss. The date the shares were disposed of under the takeover was 1 October 2003.
Henderson Group PLC (formerly HHG PLC)	Return of cash and reduction of investor base In April 2005, HHG PLC undertook a capital reduction which included: a return of cash to all shareholders, and a reduction in investor base - which affected shareholders unless they chose not to participate. There are capital gains tax consequences for shareholders. See our fact sheet HHG PLC capital reduction .
Hibernian Friendly Society (NSW) Limited (now Aevum Limited)	Demutualisation The acquisition cost for Hibernian shares was $1.162 per share and the acquisition date was 2 September 2002. Hibernian changed its name to Aevum Ltd in May 2004. See our fact sheet Hibernian demutualisation: impact on shareholders.
Insurance Australia Group (IAG) Limited	Share purchase plan Offers opened on 4 November 2002 for shareholders to purchase shares from IAG (formerly NRMA) for $2.40 per share free of brokerage and transaction costs. There are no CGT consequences at the time of purchase. However, there are tax consequences in relation to owning and disposing of the shares you purchase. 2004 share buy-back In May 2004, IAG announced a share buy-back. Shareholders who took part in the buy-back received $4.40 per share, which included a fully franked dividend of $2.62 per share. The date the shares were sold under the buy-back was 21 June 2004. For capital gains tax purposes, they are taken to have received $2.16 per share. If the capital proceeds of $2.16 were more than the cost base of the share, the difference was a capital gain in 2003 - 04. If $2.16 was less than the share's reduced cost base, the difference was a capital loss. See our fact sheet Insurance Australia Group Limited 2004 off-market share buy-back .
IOOF Ltd	Demutualisation The acquisition cost for IOOF shares was $2.53 per share and the acquisition date was 14 June 2002. See fact sheet IOOF demutualisation: impact on individual shareholders.
Jupiters Limited (merger with TABCorp)	Merger On 13 November 2003 Jupiters Limited merged with TABCorp. Jupiter's shareholders were offered a choice of cash or a combination of cash and TABCorp shares for their Jupiters shares. Partial scrip-for-scrip rollover was available where TABCorp shares were acquired. Rollover is not available for the cash amounts received. Note: Scrip-for-scrip rollover does not apply to a capital loss. If scrip-for-scrip rollover does not apply and the cost base of the Jupiter share was more than $11.28, the difference was a capital gain in 2003 - 04. If $11.28 was less than the share's reduced cost base, the difference was a capital loss. See our fact sheet Jupiters Limited merger with TABCorp Holdings Limited.
Mayne Group Ltd	2004 share buy-back In March 2004, Mayne conducted an off-market share buy-back. Shareholders who took part in the buy-back received $3.55 per share. The date the shares were sold was 22 March 2004. If the capital proceeds of $3.55 per share was more than the cost base of the share, the difference was a capital gain to the shareholder in 2003 - 04. If $3.55 was less than the share's reduced cost base, the difference was a capital loss. See our fact sheet Mayne Group Ltd: 2004 off-market share buy-back.
Mincor Resources NL	Demerger In October 2003 Mincor shareholders received one Tethyan Copper Company Ltd (TCC) share for every 3.37 Mincor shares they held. Mincor has advised that TCC represented 9.582% of the market value of the group as a whole just after the demerger. Shareholders who received TCC shares should use this percentage to apportion the sum of the cost bases of their post-CGT Mincor shares between these shares and the TCC shares they received in relation to those post-CGT Mincor shares. The demergers calculator on our website at www.ato.gov.au/demergers (follow the link under 'Shareholder information') will help you work out the cost bases of your Mincor and TCC shares after the demerger. See our fact sheet 2003 Mincor Resources NL demerger.
News Corporation Ltd	Reincorporation In September 2004, News Corporation Ltd reincorporated in the US. Shareholders of News Corporation Ltd can choose scrip-for-scrip rollover on the receipt of News Corporation shares (including those represented by Chess Depository Instruments or CDIs) for the cancellation of their News Corporation Ltd shares. Note : Scrip-for-scrip rollover does not apply to a capital loss. If rollover is chosen, the first element of the cost base of each News Corporation share (including those represented by CDIs) is the sum of the cost base of the two News Corporation Ltd shares they exchanged for it, and shareholders are taken to have acquired their News Corporation shares or CDIs at the time they acquired News Corporation Ltd shares they exchanged for them. See our fact sheet Newscorp reincorporation .
NRMA Insurance Group Ltd (NIGL)	Demutualisation The acquisition cost of NIGL shares allocated to shareholders was $1.78 per share. The acquisition date was 19 June 2000. For additional shares purchased through the facility, the acquisition cost was $2.75 and the acquisition date was 6 August 2000.
OPSM Group Ltd	Takeover Between 16 June 2003 and 2 September 2003 Luxottica South Pacific Pty Limited made a successful takeover offer for OPSM. Shareholders who accepted the offer received $3.80 cash for each OPSM share they held. The date the shares were disposed of under the takeover was: 17 July 2003 if the shareholder accepted the offer on or before that date, or the date the offer was accepted if the shareholder accepted the offer after 17 July 2003. If the capital proceeds of $3.80 per share were more than the cost base of the share, the difference was a capital gain in 2003 - 04. If $3.80 was less than the share's reduced cost base, the difference was a capital loss.
Over 50s Mutual Friendly Society Limited (OFM Ltd)	Demutualisation The acquisition cost of OFM Ltd shares was $1.65 per share and the acquisition date was 12 June 2001. </
Pasminco Limited	Declaration that shares are worthless made by administrators Following the declaration by the administrators on 31 March 2005 that they consider that Pasminco shares are worthless, shareholders of Pasminco can choose to make a capital loss in the 2004 - 05 year equal to the reduced cost base of their shares at the time of the declaration. See fact sheet Capital losses on Pasminco Ltd shares . Creation of a trust over shares Shareholders may make a capital loss if they create a valid trust over shares they own in a company under administration - for example, Pasminco shareholders who agree to sell their shares but hold them on trust for the buyer until the sale can be completed. See our fact sheet Capital losses on Pasminco Ltd shares and Taxation Determination TD 2004/13: Capital gains: can CGT event E1 in section 104 - 55 of the Income Tax Assessment Act 1997 happen to a shareholder in a company in voluntary administration under Part 5.3A of the Corporations Act 2001 who declares a trust over their shares?
Pivot Ltd	Merger Pivot Ltd changed its name to Incitec-Pivot Ltd in April 2003 and then merged with Incitec Fertilizers Ltd (IFL) on 1 June 2003. Shareholders of Pivot who acquired their shares before 20 September 1985 made a capital gain under CGT event K6 if their capital proceeds per share was more than $15.08 and they disposed of them after 28 July 2003. The capital gain is equal to 70% of the difference between the capital proceeds and $15.08. (No capital loss is available under CGT event K6.) See our fact sheet Pivot merger with Incitec - CGT on sale of pre-CGT shares .
Principal Office Fund (POF)	Takeover Between 20 June 2003 and 1 September 2003 Investa Property Group (IPG) made a successful takeover offer for Principal Office Fund (POF). Unit holders who accepted the offer had a choice of receiving $19.13, or $5.70 plus seven IPG stapled securities, for every 12 POF units they held. Unit holders who refused the offer had their POF units compulsorily acquired and received $5.70 plus seven IPG stapled securities for every 12 POF units they held. Partial scrip-for-scrip rollover was available where IPG stapled securities were received. Rollover is not available for the cash amounts received. Note : Scrip-for-scrip rollover does not apply to a capital loss. If scrip-for-scrip rollover does not apply, unit holders made a capital gain in 2002 - 03 or 2003 - 04 if the cost base of each of their POF units was less than the total value of IPG securities plus the cash they received. Unit holders made a capital loss if the reduced cost base of each of their POF unit was more than the value of IPG securities plus the cash they received for it. The date the POF units were disposed of under the takeover was: if the offer was accepted - the date the acceptance was posted (this may have been in 2002 - 03 or 2003 - 04) or if the units were acquired compulsorily - 2 October 2003.
Promina Group Ltd	2005 return of capital On 20 June 2005 Promina Group Ltd made a return of capital to shareholders of $0.23 per share. Shareholders needed to reduce the cost base and reduced cost base of each share by $0.23. For each share that had a cost base of less than $0.23, the difference was a capital gain in 2004 - 05. See our fact sheet Promina Group Ltd 2005 return of capital.
Rio Tinto Ltd	2005 share buy-back On 3 February 2005, Rio Tinto announced a share buy-back. Shareholders who took part in the buy-back received $36.70 per share, which included a fully franked dividend of $32.70 per share. For capital gains tax purposes, they are taken to have received $6.44 per share. The date the shares were sold under the buy-back was 9 May 2005. If the capital proceeds of $6.44 was more than the cost base of the share, the difference is a capital gain to the shareholder in 2004-05. If $6.44 was less than the share's reduced cost base, the difference is a capital loss. See our fact sheet Rio Tinto Ltd 2005 share buy-back .
Seven Network Ltd	2004 share buy-back On 14 December 2003, Seven Network Ltd announced a buy-back of ordinary shares. Shareholders who took part in the buy-back received $5.80 per share, which included a fully franked dividend of $2.32 per share. The date the shares were sold was 22 December 2003. If the capital proceeds of $3.48 per share was more than the cost base of the share, the difference was a capital gain in 2003 - 04. If $3.48 was less than the share's reduced cost base, the difference was a capital loss. See our fact sheet Seven Network Ltd: 2004 off-market share buy-back.
Telstra	Public share offer 1 The Telstra public shares were acquired on 15 November 1997. For shareholders who use the indexation method in calculating their capital gain, they index their first and final instalments from 15 November 1997. Public share offer 2 The Telstra public shares were acquired on 22 October 1999 if the instalment receipts were purchased through the offer. Indexation does not apply as the shares were acquired after 11.45am (by legal time in the ACT) on 21 September 1999. 2003 share buy-back In November 2003, Telstra undertook an off-market share buy-back. Shareholders who took part in the buy-back received $4.20 per share, which included a fully franked dividend of $2.70 per share. If the capital proceeds of $1.50 were more than the cost base of the share, the difference was a capital gain in 2003 - 04. If $1.50 was less than the share's reduced cost base, the difference was a capital loss. 2004 share buy-back On 15 November 2004, Telstra announced the results of an off-market share buy-back. Shareholders who took part in the buy-back received $4.05 per share, which included a fully franked dividend of $2.55 per share. The shares sold under the buy-back were disposed of on 14 November 2004. For capital gains tax purposes, they are taken to have received $2.25 per share. If the capital proceeds of $2.25 were more than the cost base of the share, the difference is a capital gain to the shareholder in 2004 - 05. If $2.25 was less than the share's reduced cost base, the difference is a capital loss. See our fact sheet Telstra 2004: Off-market share buy-back .
United Energy Ltd	Takeover On 23 July 2003 Alinta Ltd and United Energy Ltd entered into a scheme of arrangement under which Alinta acquired all the United Energy shares it did not already own. Shareholders received $3.15 for each United Energy share they held. The date the shares were disposed of under the takeover was 23 July 2003. If the capital proceeds of $3.15 was more than the cost base of the share, the difference was a capital gain in 2003 - 04. If $3.15 was less than the share's reduced cost base, the difference was a capital loss.
Wesfarmers Group Ltd	Return of capital On 18 December 2003, Wesfarmers Group Limited made a return of capital to shareholders of $2.50 per share. Shareholders needed to reduce the cost base and reduced cost base of each share by $2.50. For each share that had a cost base of less than $2.50, the difference was a capital gain in 2003 - 04. See our fact sheet Wesfarmers Group Ltd (Wesfarmers) return of capital.
Western Mining Corporation Limited - WMC Resources Limited	Demerger In December 2002 WMC shareholders received one WMCR share for every WMC share held. Also WMC Limited changed its name to Alumina Ltd. Alumina has advised that WMCR represented 46.30% of the market value of the group as a whole just after the demerger. Shareholders who received WMCR shares should use this percentage to apportion the sum of the cost bases of their post-CGT Alumina shares between these shares and the WMCR shares they received in relation to those post-CGT Alumina shares. The demergers calculator on our website at www.ato.gov.au/demergers (follow the link under 'Shareholder information') will help you work out the cost bases of your Alumina and WMCR shares after the demerger. Takeove r In March 2005 BHP Billiton Ltd made a takeover offer for WMC Resources Ltd. Shareholders received $7.85 for each WMC share they held. The date the shares were disposed of under the takeover offer was: 3 June 2005 - if the shareholder accepted the offer on or before that date, or the date the offer was accepted - if the shareholder accepted the offer between 4 June 2005 and 17 June 2005 and the acceptance was received by BHP by 7.30pm on 17 June 2005, or for other WMC shareholders - in the 2005-06 income year, when BHP Billiton completed the compulsory acquisition. If the capital proceeds of $7.85 per share was more than the cost base of the share, the difference is a capital gain in 2004 - 05. If $7.85 was less than the share's reduced cost base, the difference is a capital loss in 2004 - 05. See our fact sheet WMC Resources Ltd takeover by BHP Billiton Ltd . Shareholders who did not accept the offer by 17 June 2005 should also see the fact sheet.
Westfield	Capital restructure In July 2004, Westfield Group restructured by issuing holders of Westfield Ltd shares, Westfield Trust units, and Westfield America Trust units with stapled securities. Participants received Westfield Group stapled securities through either a stapling arrangement or a sale facility. They also had the option of receiving cash under the sale facility. The tax consequences of these transactions vary depending on whether the shareholder or unitholder chose the 'cash alternative' or 'exchange by sale alternative' or did nothing. See our fact sheets Westfield Group restructure 2005: Tax consequences for Westfield Limited shareholders ; Westfield Group restructure 2005 : Tax consequences for Westfield Trust unitholders; Westfield Group restructure 2005: Tax consequences for Westfield America Trust unitholders .
Westpac Banking Corporation	Share buy-back In June 2004, Westpac conducted a share buy-back. Shareholders who took part in the buy-back received $14.50 per share, which included a fully franked dividend of $10.50 per share. For capital gains tax purposes, they are taken to have received $7.21 per share. The date the shares were sold under the buy-back was 21 June 2004. If the capital proceeds of $7.21 were more than the cost base of the share, the difference was a capital gain to the shareholder in 2003 - 04. If $7.21 was less than the share's reduced cost base, the difference was a capital loss. See our fact sheet Westpac Banking Corporation Ltd 2004 off-market share buy-back .

To get a copy of a fact sheet referred to in this appendix, visit our website or, if you do not have internet access, phone our Publications Distribution Service on 1300 720 092 .

Fact sheets may be on our website which do not appear in the table above.

For more information about share transactions in earlier years, visit our website.

Definitions

Assessable income

Assessable income is all the income you have received that should be included on your tax return. Generally, assessable income does not include non-assessable payments from a unit trust, including a managed fund.

Bonus shares

Bonus shares are additional shares a shareholder receives wholly or partly as a dividend. You may also pay an amount to get them.

Bonus units

Bonus units are additional units a unit holder receives from the trust. You may also be required to pay an amount to get them.

Calls on shares

A company may sometimes issue a share at less than its par or face value and then make calls to pay up part or all of the remaining outstanding balance.

Capital gain

You may make a capital gain from a CGT event such as the sale of an asset. Generally your capital gain is the difference between your asset's cost base (what you paid for it) and your capital proceeds (what you received for it). You can also make a capital gain if a managed fund or other unit trust distributes a capital gain to you.

Capital gains tax

Capital gains tax (CGT) refers to the income tax you pay on any net capital gain you make and include on your annual income tax return. For example, when you sell (or otherwise dispose of) an asset as part of a CGT event, you are subject to CGT.

Capital improvements

A capital improvement is an improvement you make to a CGT asset that is reflected in its state or nature at the time of a later CGT event. This does not include a repair that is deductible for income tax purposes.

Capital loss

Generally, you may make a capital loss as a result of a CGT event if you received less capital proceeds for an asset than its reduced cost base (what you paid for it).

Capital proceeds

Capital proceeds is the term used to describe the amount of money or the value of any property you receive or are entitled to receive as a result of a CGT event. For shares or units, capital proceeds may be:

the amount you receive from the purchaser
the value of shares (or units) you receive on a demerger
the value of shares (or units) and the amount of cash you receive on a merger/takeover, or
their market value if you give them away.

CGT asset

CGT assets include shares, units in a unit trust, collectables (such as jewellery), assets for personal use (such as furniture or a boat) and other assets (such as an investment property).

CGT- Concession amounts

These amounts are the CGT discount component of any actual distribution from a managed fund.

CGT discount

The CGT discount is the amount (or percentage) by which a capital gain may be reduced under the discount method (see Discount method ).

CGT event

A CGT event happens when a transaction takes place such as the sale of a CGT asset. The result is usually a capital gain or capital loss.

Consolidated income - Taxation of corporate groups

Taxing wholly owned groups as single entities. Subsidiary members are treated as parts of the head company. Intra-group transactions are disregarded for income tax purposes. Consolidation enables assets to be transferred between members of a group without triggering capital gains or requiring cost base adjustments for membership interests. Effective from 1 July 2002.

Convertible note

A convertible note is another type of investment you can make in a company or unit trust. A convertible note earns interest on the amount you pay to acquire the note until the note's expiry date. On expiry of the note, you can either ask for the return of the money paid or convert that amount to acquire new shares or units.

Cost base

The cost base of an asset is generally what it costs you. It is made up of five elements:

money you paid or property you gave for the asset
incidental costs of acquiring or selling it (for example, brokerage and stamp duty)
non-capital costs associated with owning it (generally this will not apply to shares or units because you will usually have claimed or be entitled to claim these costs as tax deductions)
costs associated with increasing its value (for example, if you paid a call on shares), and
what it has cost you to preserve or defend your title or rights to it.

You may need to reduce the cost base for a share or unit by the amount of any non-assessable payment you receive from the company or fund.

Debt forgiveness

A debt is forgiven if you are freed from the obligation to pay it. A commercial debt that is forgiven may reduce your capital loss, your cost base or your reduced cost base.

Demerger

A demerger involves the restructuring of a corporate or trust group by splitting its operations into two or more entities or groups. Under a demerger the owners of the head entity of the group acquire a direct interest in an entity (demerged entity) that was formerly part of the group.

Demerger rollover

This may apply to CGT events that happen on or after 1 July 2002 to interests that you own in the head entity of a demerger group where a company or trust is demerged from the group. Generally, the head entity undertaking the demerger will advise owners whether demerger rollover is available but you should seek our advice if you are in any doubt. The Tax Office may have provided advice in the form of a class ruling on a specific demerger, confirming that the rollover is available.

This rollover allows you to defer your CGT obligation until a later CGT event happens to your original or your new shares or units.

Demutualisation

A company demutualises when it changes its membership interests to shares. If you received shares as part of a demutualisation of an Australian insurance company (for example, AMP, IOOF or NRMA), you are not subject to capital gains tax until you sell the shares or another CGT event happens.

Usually the company will advise you of your cost base for the shares you received. The company may give you the choice of keeping the shares they have given you or of selling them and giving you the capital proceeds.

Depreciating assets

A depreciating asset is an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used. Depreciating assets include items such as computers, tools, furniture and motor vehicles.

Land and items of trading stock are specifically excluded from the definition of depreciating asset, as are most intangible assets such as options, rights and goodwill.

Discount method

The discount method is one of the ways to calculate your capital gain if:

the CGT event happened after 11.45am (by legal time in the ACT) on 21 September 1999
you acquired the asset at least 12 months before the CGT event.

If you use the discount method, you do not index the cost base but you may be able to reduce your capital gain by the CGT discount. However, you must first reduce your capital gains by the amount of any capital losses made in the year and any unapplied net capital losses from earlier years. You discount any remaining capital gain.

If you acquired the asset before 11.45am (by legal time in the ACT) on 21 September 1999, you may be able to choose either the discount method or the indexation method, whichever gives you the better result.

Discounted capital gain

A discounted capital gain is a capital gain that has been reduced by the CGT discount. If you received the discounted capital gain from a managed fund you will need to gross up the amount before you apply any capital losses and then the CGT discount.

Dividend reinvestment plans

Under these plans, shareholders can choose to have their dividend used to acquire additional shares in the company instead of receiving a cash payment. For CGT purposes, you are treated as if you received a cash dividend and then used it to buy additional shares. Each share (or parcel of shares) received in this way is treated as a separate asset when the shares are issued to you.

Dwelling

A dwelling is anything that is used wholly or mainly for residential accommodation. Examples of a dwelling are a home, an apartment, a strata title unit or a unit in a retirement village.

Employee share schemes

If you acquired shares or rights at a discount under an employee share scheme and the scheme complies with the income tax rules for employee share schemes, you can choose when to include the amount of the discount in your assessable income on your tax return. There are special CGT rules relating to the calculation of the cost base of these shares or rights and, in some circumstances, you disregard a capital gain or capital loss you make.

Gross up

Grossing up applies to unit holders who are entitled to a share of the fund's income that includes a capital gain reduced by the CGT discount. In this case, you 'gross up' your capital gain by multiplying by two your share of any discounted capital gain you have received from the fund. You may also have to gross up a capital gain that was reduced by the small business 50% active asset reduction.

Income year

The income year is the financial year relating to your current income tax return.

Indexation factor

The factor is worked out based on the consumer price index (CPI) at appendix 2 .

The indexation of the cost base of an asset is frozen as at 30 September 1999. For CGT events after that time the indexation factor is the CPI for the September 1999 quarter (123.4), divided by the CPI for the quarter in which you incurred costs relating to the asset. The result is rounded to three decimal places.

Indexation method

The indexation method is one of the ways to calculate your capital gain if you bought a CGT asset before 11.45am (by legal time in the ACT) on 21 September 1999. This method allows you to increase the cost base by applying an indexation factor (based on increases in the consumer price index up to September 1999).

You cannot use the indexation method for:

CGT assets bought after 11.45am (by legal time in the ACT) on 21 September 1999, or
expenditure relating to a CGT asset acquired after that date.

For CGT events after 11.45am (by legal time in the ACT) on 21 September 1999 the discount method may give you the better result.

Legal personal representative

A legal personal representative can be either:

the executor of a deceased estate (that is, a person appointed to wind up the estate in accordance with the will), or
an administrator appointed to wind up the estate if the person does not leave a will.

LIC capital gain amount

This is an amount notionally included in a dividend from a listed investment company (LIC) which represents a capital gain made by that company. The amount is not included as a capital gain at item 17 on the tax return (supplementary section), or item 9 if you use the tax return for retirees. (See LIC capital gain example and the instructions for dividend income for question 11 in TaxPack 2005 (or question 8 if you use Retirees TaxPack 2005 .)

Main residence

Your main residence is your home - that is, the dwelling you regard as your main place of residence and nominate as such for any CGT concessions dealing with the disposal of a main residence.

Main residence exemption

Generally, you can ignore a capital gain or capital loss from a CGT event that happens to a dwelling that is your main residence (also referred to as 'your home'). You may make a capital gain or capital loss if you have used your home to produce income, if it was not your home for the full period you owned it or the land around your home is more than 2 hectares.

Managed fund

A managed fund is a unit trust. The types of managed funds available include cash management trusts, fixed interest trusts, mortgage trusts, property trusts, equity trusts, international trusts and diversified trusts.

Market value substitution rule for capital proceeds

In some cases, if you receive nothing in exchange for a CGT asset (for example, if you give it away as a gift) you are taken to have received the market value of the asset at the time of the CGT event. You may also be taken to have received the market value if your capital proceeds are more or less than the market value of the CGT asset, and you and the purchaser were not dealing with each other at arm's length in connection with the event.

You are said to be dealing at arm's length with someone if each party acts independently and neither party exercises influence or control over the other in connection with the transaction. The law looks at not only the relationship between the parties but also the quality of the bargaining between them.

Market value substitution rule for cost base and reduced cost base

In some cases, the general rules for calculating the cost base and reduced cost base have to be modified. For example, the market value may be substituted for the first element of the cost base and reduced cost base if:

you did not incur expenditure to acquire the asset
some or all of the expenditure you incurred cannot be valued, or
you did not deal at arm's length with the vendor in acquiring the asset.

Net capital gain

A net capital gain is the difference between your total capital gains for the year and the total of your capital losses for the year and unapplied net capital losses from earlier years, less any CGT discount and small business CGT concessions to which you are entitled.

Net capital loss

If your total capital losses for the year are more than your total capital gains, the difference is your net capital loss for the year. This loss can be carried forward and deducted from capital gains you make in later years. There is no time limit on how long you can carry forward a net capital loss.

Capital losses from collectables can only be used to reduce capital gains from collectables. If your total capital losses from collectables for the year are more than your total capital gains from collectables, you have a net capital loss from collectables for the year. This loss is carried forward and deducted from capital gains from collectables in later years. There is no time limit on how long you can carry forward a net capital loss from a collectable.

Non-assessable payment

A non-assessable payment is a payment received from a company or fund that is not assessed as part of your income on your tax return.

This includes some distributions from unit trusts and managed funds and, less commonly, from companies.

'Other' method

To calculate your capital gain using the 'other' method, you subtract your cost base from your capital proceeds. You must use this method for any shares or units you have bought and sold within 12 months (that is, when the indexation and discount methods do not apply).

Ownership interest

You have an ownership interest if you own a dwelling or land and/or meet the conditions outlined in chapter 6 .

Pre-CGT

Acquired before 20 September 1985. Assets acquired before this date are generally exempt from CGT. An exception is if CGT event K6 applies.

Prior year net capital losses

See Unapplied net capital losses from earlier years .

Post-CGT

Acquired on or after 20 September 1985.

Reduced cost base

The reduced cost base is the amount you take into account when you are working out whether you have made a capital loss when a CGT event happens.

The reduced cost base may need to have amounts deducted from it such as non-assessable payments.

The reduced cost base does not include indexation or non-capital costs of ownership such as interest on monies borrowed to buy the asset.

Rollover

Rollover allows a capital gain to be deferred or disregarded until a later CGT event happens.

Scrip-for-scrip rollover

This can apply to CGT events that happen on or after 10 December 1999 in the case of a takeover or merger of a company or fund in which you have holdings. The company or fund would usually advise you if the rollover conditions have been satisfied.

This rollover allows you to defer your CGT obligation until a later CGT event happens to your shares or units.

You may only be eligible for partial rollover if you received shares (or units) plus cash for your original shares. In that case, if the information provided by the company or fund is not sufficient for you to calculate your capital gain, you may need to seek advice from the Tax Office.

Share buy-backs

If you disposed of shares back to a company under a buy-back arrangement, you may have made a capital gain or capital loss.

Some of the buy-back price may have been treated as a dividend for tax purposes. The time you make the capital gain or capital loss will depend on the conditions of the particular buy-back offer.

Small business CGT concessions

There are four small business CGT concessions available if certain conditions are satisfied. They are:

the small business 15-year exemption
the small business 50% active asset reduction
the small business retirement exemption, and
the small business rollover.

These concessions apply to CGT events that happen after 11.45am (by legal time in the ACT) on 21 September 1999. For information on these concessions, see the Guide to capital gains tax concessions for small business .

Takeovers and mergers

If a company in which you held shares was taken over and you received new shares in the takeover company, you may be entitled to scrip-for-scrip rollover.

If the scrip-for-scrip conditions were not satisfied, your capital proceeds for your original shares will be the total of any cash and the market value of the new shares you received.

Tax-advantaged entity

A tax-advantaged entity is a tax-exempt entity, or the trustee of:

a complying superannuation fund
a complying approved deposit fund, or
a pooled superannuation fund.

Tax-deferred amounts

These amounts include indexation allowed to a trust on its capital gains and accounting differences in income.

Tax-exempted amounts

These amounts are generally made up of exempt income and non-assessable non-exempt income of the trust, amounts on which the trust has already paid tax or income you had to repay to the trust. Tax-exempted amounts do not affect your cost base or your reduced cost base.

Tax-free amounts

These amounts arise where certain tax concessions allowed to the trust enable it to pay greater distributions to its beneficiaries.

Unapplied net capital losses from earlier years

This is the amount of net capital losses from earlier years remaining after you have deducted any capital gains made between the year(s) when the losses were made and the current year.

You use unapplied net capital losses from earlier years to reduce capital gains in the current year (after those capital gains have been reduced by any capital losses in the current year).

You can only use unapplied net capital losses from collectables from earlier years to reduce capital gains from collectables in the current and future years.

Unit trust

A unit trust is a trust or fund that is divided into units representing capital and income entitlements. Units may be traded or redeemed (including the switching and transferring of units). A managed fund is a type of unit trust.

ATO references:
NO NAT 4151

Guide to capital gains tax 2005

	Date:	Version:
	1 July 2000	Original document
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Foreign Investor

Guide to capital gains tax 2005

This version is no longer current. Please follow this link to view the current version.

Appendixes

Appendix 1- Summary of CGT events

Disposal

Hire purchase and similar agreements

End of a CGT asset

Bringing a CGT asset into existence

Trusts

Leases

Shares

Special capital receipts

Cessation of residency

Reversal of rollover

Other CGT events

Consolidations

Appendix 2

Consumer price index (CPI)

Appendix 3

Flowchart 1: Treatment of bonus shares issued on or after 20 September 1985

Flowchart 2: Treatment of bonus units issued on or after 20 September 1985

Flowchart 3: Treatment of rights or options to acquire shares or units issued directly to you from a company or trust for no payment

Flowchart 4: Treatment of rights or options (to acquire shares or units) that you paid to acquire from a company or trust - or that you acquired from another person (but not under an employee share scheme).

Appendix 4

Some major share transactions

Definitions

Tools

Tax information for

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