Guide to capital gains tax 2015

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Appendixes

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 for variation or waiver	expenditure for variation or waiver less capital proceeds

 

Shares

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 for replacement asset or improved asset after a rollover under Subdivision 152-E	when the change happens	the amount mentioned in subsection 104-185(5)	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 a 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 a shareholder, reduced cost base of the share at the time the shareholder acquired it less its market value at that time
J5	Failure to acquire replacement asset and to incur fourth element expenditure after a rollover under Subdivision 152-E	at the end of the replacement asset period	the amount of the capital gain that you disregarded under Subdivision 152-E	no capital loss
J6	Cost of acquisition of replacement asset or amount of fourth element expenditure, or both, not sufficient to cover disregarded capital gain	at the end of the replacement asset period	the amount mentioned in subsection 104-198(3)	no capital loss

 

Other CGT events

CGT event		Time of event	Capital gain	Capital loss
K2	Bankrupt pays an amount for 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 775-75(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
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	-	-	39.7	40.5
1986	41.4	42.1	43.2	44.4
1987	45.3	46.0	46.8	47.6
1988	48.4	49.3	50.2	51.2
1989	51.7	53.0	54.2	55.2
1990	56.2	57.1	57.5	59.0
1991	58.9	59.0	59.3	59.9
1992	59.9	59.7	59.8	60.1
1993	60.6	60.8	61.1	61.2
1994	61.5	61.9	62.3	62.8
1995	63.8	64.7	65.5	66.0
1996	66.2	66.7	66.9	67.0
1997	67.1	66.9	66.6	66.8
1998	67.0	67.4	67.5	67.8
1999	67.8	68.1	68.7	N/A*

 

For an explanation of indexation and how it applies, see   The indexation method .

*   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 Flowcharts

Flowchart 3.1	Treatment of bonus shares issued on or after 20   September 1985
Flowchart 3.2	Treatment of bonus units issued on or after 20   September 1985
Flowchart 3.3	Treatment of rights or options: to acquire shares where the rights or options were issued directly to you by the company (but not under an employee share scheme) for no payment because you were a shareholder, or to acquire units where the rights or options were issued directly to you after 28   January 1988 by the trust for no payment because you were a unit holder.
Flowchart 3.4	Treatment of rights or options: to acquire shares where the rights or options were acquired by you from an individual or entity that acquired them as a shareholder in the company, or to acquire units where the rights or options were issued after 28   January 1988 and were acquired by you from an individual or entity that acquired them as a unit holder in the trust.
Flowchart 3.5	Treatment of rights or options to acquire shares or units: you paid for and which were issued directly to you from the company (but not under an employee share scheme) or trust, or you acquired from an individual or entity that was not a shareholder or unit holder.
Flowchart 3.6	The capital gains tax (CGT) main residence exemption rules when you sell a dwelling you inherited. Real estate and main residence needs to be read with this flowchart.

 

Flowchart 3.1

Treatment of bonus shares issued on or after 20   September 1985

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

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

 

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

Yes	Read on from question 3 .
No	Read answer 1 .

 

3. Were the bonus shares issued before 1   July 1987?

Yes	Read answer 1 .
No	Read answer 3 .

 

4. 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 .

 

5. Were the bonus shares issued before 1   July 1987?

Yes	Read on from question 6 .
No	Read answer 3 .

 

6. Are the bonus shares partly paid?

Yes	Read on from question 7 .
No	Read answer 4 .

 

7. Were the bonus shares issued before 10 December 1986?

Yes	Read answer 4 .
No	Read on from question 8 .

 

8. Before sale of the bonus shares, were any more call payments made to the company?

Yes	Read answer 5 .
No	Read answer 4 .

 

Answer 1

1. The bonus shares are subject to capital gains tax.

2. The bonus shares are acquired when the original shares were acquired.

3. The cost base of each original and bonus share is equal to

• the cost base of the original shares divided by the total number of original and bonus shares, plus
• any calls on partly paid bonus shares.

Answer 2

1. The bonus shares are subject to capital gains tax if issued on or after 20   September 1985.

2. The acquisition date of the bonus shares is their date of issue.

3. The cost base is the amount of the dividend plus any calls on partly paid bonus shares.

Answer 3

1. The bonus shares are subject to capital gains tax.

2. The acquisition date of the bonus shares is their date of issue.

3. The cost base is 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

1. The bonus shares are subject to capital gains tax.

2. The acquisition date of the bonus shares is the date when the liability to pay the first call arises.

3. 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 3.2

Treatment of bonus units issued on or after 20   September 1985

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

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

 

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

Yes	Read answer 1 .
No	Read answer 2 .

 

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

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

 

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

Yes	Read answer 1 .
No	Read answer 4 .

 

5. Are the bonus units partly paid?

Yes	Read on from question 6 .
No	Read answer 4 .

 

6. Were the bonus units issued before 10 December 1986?

Yes	Read answer 4 .
No	Read on from question 7 .

 

7. Before the sale of the bonus units were any more call payments made to the trust?

Yes	Read answer 3 .
No	Read answer 4 .

 

Answer 1

1. The bonus units are subject to capital gains tax.

2. The acquisition date of the bonus units is their date of issue.

3. The cost base is the amount included in assessable income, plus any calls on partly paid bonus units.

Answer 2

1. The bonus units are subject to capital gains tax.

2. The bonus units are acquired when the original units were acquired.

3. 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

1. The bonus units are subject to capital gains tax.

2. The acquisition date of the bonus units is the date when the liability to pay the first call arises.

3. 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 units before 20   September 1985 and they are not subject to capital gains tax.

Flowchart 3.3

Treatment of rights or options:

• to acquire shares where the rights or options were issued directly to you by the company (but not under an employee share scheme) for no payment because you were a shareholder, or
• to acquire units where the rights or options were issued directly to you after 28   January 1988 by the trust for no payment because you were a unit holder.

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

Yes	Read question 2 .
No	The acquisition date of the rights or options is the date of acquisition of the original shares or units. Read question 3 .

 

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

Yes	Read answer 1 .
No	Read answer 2 .

 

3. Did you exercise the rights or options?

Yes	Read answer 3 .
No	Read answer 4 .

 

Answer 1

1. The shares or units acquired on exercise of the rights or options are subject to capital gains tax.

2. The acquisition date of the shares or units is the date of exercise of the rights or options to acquire the shares or units.

3. The first element of the cost base and the reduced cost base of the shares or units is:

• the market value of the rights or options at the time you exercise them, plus
• the amount you pay for the shares or units on exercising the rights or options, plus
• any amount that was included in your assessable income as a result of the rights or options being exercised on or after 1   July 2001.

Note:

Although the shares or units are subject to capital gains tax, any capital gain or capital loss you make from exercising the rights or options to acquire those shares or units is disregarded.

Answer 2

1. If you did not exercise the rights or options, you disregard any capital gain or capital loss on the sale or expiry of the rights or options.

2. If you exercised the rights or options before that date, you disregard any capital gain or capital loss you make when you dispose of the shares or units that you acquired.

Answer 3

1. The shares or units acquired on exercise of the rights or options are subject to capital gains tax.

2. The acquisition date of the shares or units is the date of the exercise.

3. The first element of the cost base and the reduced cost base of the shares or units is

• the cost base of the rights or options at the time of exercise, plus
• the amount you pay for the shares or units on exercising the rights or options, plus
• any amount that was included in your assessable income as a result of the rights or options being exercised on or after 1   July 2001.

Although the shares or units are subject to capital gains tax, any capital gain or capital loss you make from exercising the rights or options to acquire those shares or units is disregarded.

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 3.4

Treatment of rights or options:

• to acquire shares where the rights or options were acquired by you from an individual or entity that acquired them as a shareholder in the company, or
• to acquire units where the rights or options were issued after 28   January 1988 and were acquired by you from an individual or entity that acquired them as a unit holder in the trust.

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

Yes	Read question 3 .
No	The acquisition date of the rights or options was the date of the contract to acquire the rights or options or, if there was no contract, the date the other individual or entity stopped being the owner of the rights or options. Read question 2 .

 

2. Did you exercise the rights or options?

Yes	Read answer 4 .
No	Read answer 1 .

 

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

Yes	Read answer 3 .
No	Read answer 2 .

 

Answer 1

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.

Answer 2

1. If you did not exercise the rights or options, you disregard any capital gain or capital loss on the sale or expiry of the rights or options.

2. If you exercised the rights or options before that date, you disregard any capital gain or capital loss when you dispose of the shares or units that you acquired.

Answer 3

1. The shares acquired on exercise of the rights or options are subject to capital gains tax.

2. The acquisition date of the shares is the date of exercise of the rights or options to acquire the shares or units.

3. The first element of the cost base and the reduced cost base of the shares is:

• the market value of the rights or options at the time you exercise them, plus
• the amount you pay for the shares on exercising the rights or options, plus.
• if the rights or options were exercised on or after 1   July 2001 (and as a result, an amount is included in your assessable income) that amount.

Although the shares or units are subject to capital gains tax, any capital gain or capital loss you make from exercising the rights or options to acquire those shares or units is disregarded.

Answer 4

1. The shares or units acquired on exercise of the rights or options are subject to capital gains tax.

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

3. The first element of the cost base and the reduced cost base of the shares or units is:

• the cost base of the rights or options at the time of exercise, plus
• the amount you paid for the shares or units on exercising the rights or options, plus
• any amount that was included in your assessable income as a result of the rights or options being exercised on or after 1   July 2001.

Although the shares or units are subject to capital gains tax, any capital gain or capital loss you make from exercising the rights or options to acquire those shares or units is disregarded.

Flowchart 3.5

Treatment of rights or options to acquire shares or units:

• you paid for and which were issued directly to you from the company (but not under an employee share scheme) or trust, or
• you acquired from an individual or entity that was not a shareholder or unit holder.

Note

This flowchart does not apply to rights or options for the issue of units by the grantor of the rights or options if they were exercised before 27   May 2005.

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

Yes	Read question 2 .
No	Read question 4 .

 

2. Did you exercise the rights or options?

Yes	Read question 3 .
No	Read answer 1 .

 

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

Yes	Read question 5 .
No	Read answer 4 .

 

4. Did you exercise the rights or options?

Yes	Read answer 3 .
No	Read answer 2 .

 

5. Were the rights or options ones which were renewed or extended after 20   September 1985?

Yes	Read question 6 .
No	Read answer 5 .

 

6. Were they exercised before 27   May 2005?

Yes	Read answer 5 .
No	Read answer 3 .

 

Answer 1

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

Answer 2

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.

Answer 3

1. The shares or units acquired on exercise of the rights or options are subject to capital gains tax.

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

3. The first element of the cost base and the reduced cost base of the shares or units is:

• the amount you paid for the rights or options, plus
• the amount you paid for the shares or units on exercising the rights or options.

Although the shares or units are subject to capital gains tax, any capital gain or capital loss you make from exercising the rights or options to acquire those shares or units is disregarded.

Answer 4

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 5

1. The shares or units acquired on exercise of the rights or options are subject to capital gains tax.

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

3. The first element of the cost base and the reduced cost base of the shares or units is:

• the market value of the rights or options at the time you exercised them, plus
• the amount you paid for the shares on exercising the rights or options.

Although the shares or units are subject to capital gains tax, any capital gain or capital loss you make from exercising the rights or options to acquire those shares or units is disregarded.

Flowchart 3.6

The capital gains tax (CGT) main residence exemption rules when you sell a dwelling you inherited.

Real estate and main residence needs to be read with this flowchart.

1. Did the deceased person acquire the dwelling before 20   September 1985?

Yes	Read question 2 .
No	Read question 3 .

 

2. Did settlement of your contract to sell the dwelling happen within two years of the person dying (or did the Commissioner allow you more time)?

Yes	Read answer 1 .
No	Read question 5 .

 

3. Was the dwelling the deceased person's main residence just before they died?

Yes	Read question 4 .
No	Read answer 2 .

 

4. Just before they died, was the dwelling being used to produce income

Yes	Read answer 2 .
No	Read question 2 .

 

5. From the deceased person's death until settlement of your contract to sell the inherited dwelling, was it your main residence (or the main residence of an individual who had a right to occupy it under the will or the spouse of the deceased person)?

Yes	Read question 6 .
No	Read answer 2 .

 

6. From the deceased person's death until settlement of your contract to sell the inherited dwelling, was any part of the dwelling used to produce income?

Yes	Read answer 2 .
No	Read answer 1 .

 

Answer 1

Dwelling is fully exempt

Answer 2

Dwelling is not fully exempt (but you may qualify for a part exemption)

• Dwellings that passed to you before 21   August 1996

This flowchart does not apply to a dwelling that passed to you before 21   August 1996. For the rules that apply in that situation, see Real estate and main residence .

• Where the deceased person died before 20   September 1985

If the deceased person died before 20   September 1985, the dwelling is fully exempt when you sell it. However, if you made a major capital improvement to the dwelling on or after 20   September 1985 and have used it to produce assessable income it may be subject to CGT, see Real estate and main residence .

 

Appendix 4 Definitions

Amount of capital gains from a trust (including a managed fund)

Distributions from trusts can include different amounts but only the following types of amounts are relevant for CGT purposes:

• distributions of all or a part of the trust's income where the trust's net income for tax purposes includes a net capital gain
• distributions or other entitlements described as being referable to a specific capital gain or gains
• distributions of non-assessable amounts.

For more information on trusts, see Trust distributions .

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.

Adjusted Division 6 percentage

Under recently enacted legislation relating to trusts, a beneficiary's adjusted Division   6 percentage is the percentage of the income of the trust estate (disregarding any amount of a capital gain or a franked distribution to which any beneficiary or the trustee is specifically entitled) that they are presently entitled to.

For more information, see Improving the taxation of trust income .

Bonus shares

Bonus shares are additional shares a shareholder receives wholly or partly as a dividend. You may also be required to 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.

Call on shares

A company may sometimes issue a partly paid share and then make a call 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 distributes an amount described as a capital gain to you.

Under the trust provisions, you may make a capital gain if you are:

• specifically entitled to an amount of a capital gain made by the trust, and/or
• there is an amount of capital gain included in the income of the trust to which no entity is specifically entitled and you are presently entitled to a share of that income.

For more information, see Improving the taxation of trust income .

Capital gains disregarded by a foreign resident

If a foreign resident or the trustee of a foreign trust for CGT purposes has a CGT event happen during the income year, to a CGT asset that is not considered to be taxable Australian property, any capital gain or capital loss made is disregarded under Division 855 of the Income Tax Assessment Act 1997 .

For more information, see foreign residents and taxable Australian property .

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 improvement

A capital improvement 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 or 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 The 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.

Collectables

A collectable is an artwork, an item of jewellery, an antique, a coin, a medallion, a rare folio, a rare manuscript, a rare book, a postage stamp or a first day cover that is used or kept mainly for personal use or enjoyment. Collectables also include an interest in any of the listed items, a debt that arises from any of those items or an option or right to acquire any of those items.

Consolidation rules

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

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)
• costs of 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 or preserving its value or installing or moving it, and
• what it has cost you to preserve or defend your title or rights to it, for example, if you paid a call on shares.

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 exemption

This exemption applies to disregard certain capital gains or capital losses made by a demerging entity in a demerger group. A demerger group comprises the head entity of a group of companies or trusts and at least one demerger subsidiary. Discretionary trusts and superannuation funds cannot be members of a demerger group.

Demerger rollover

This may apply to CGT events that happened 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. We 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 CGT 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.

Disposal of assets by a trust to a company

You can apply a rollover if a trust restructures and disposes of all of its assets to a company and the units or interests in the trust are replaced by shares in the company.

Disposal or creation of assets in a wholly-owned company

A rollover may be chosen to defer the capital gain if:

• you dispose of a CGT asset, or all the assets of a business, to a company in which you own all the shares, or you create a CGT asset in such a company
• all the partners in a partnership dispose of partnership property to a company in which they all own shares or the partners create a CGT asset in such a company.

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 (ESS)

If you acquired shares or rights at a discount under an ESS and the scheme complies with the income tax rules for certain schemes, you may reduce the amount of the discount that you include in your assessable income by up to $1,000 when certain conditions are met. There are special CGT rules relating to the calculation of the cost base of these shares or rights and, in some circumstances, you disregard the capital gain or capital loss that you make.

Exchange of rights or options

You may apply a rollover to defer the capital gain when you exchange rights or options to acquire shares in a company or units in a unit trust.

This rollover is a type of replacement asset rollover.

Exchange of share in one company for share in another company

You may apply a rollover to defer the capital gain when you exchange shares in one company for shares in an interposed company.

This rollover is a type of replacement asset rollover.

Exchange of shares or units

A rollover may be chosen to defer the capital gain if you exchange shares in the same company or units in the same unit trust.

This rollover is a type of replacement asset rollover.

Exchange of units in a unit trust for share in a company

You can apply a rollover to defer the capital gain when you exchange units in a unit trust for shares in a company due to a reorganisation.

Extra capital gains

A beneficiary of a trust who has a share of a capital gain that was included in the net income of the trust for tax purposes, will include an amount of extra capital gains when working out their own net capital gain. The amount of extra capital gains will depend on the beneficiary's share of a capital gain/s, the amount of the taxable income of the trust that relates to the beneficiary's share of the capital gain/s and whether any discounts or concessions were applied by the trustee when working out the amount of the capital gain for tax purposes.

For more information, see Improving the taxation of trust income .

Gross up

Grossing up applies to unit holders who are entitled to a share of the trust'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 trust. You may also have to gross up a capital gain that was reduced by the small business 50% active asset reduction.

Income year

A financial year in Australia is a period of 12   months beginning on 1   July and ending on the next 30   June. An income year is the period covered by your tax return, generally 1   July to the next 30   June. However, in particular circumstances, the Commissioner may allow a company or other entity to adopt another 12-month period for their income year.

Indexation factor

The indexation 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 (68.7), divided by the CPI for the quarter in which you incurred costs relating to the asset. The result is taken to three decimal places rounding up if the fourth decimal place is five or more.

Indexation method

The indexation method is one of the ways to calculate your capital gain if you acquired 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 acquired after 11.45am (by legal time in the ACT) on 21   September 1999
• 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.

Inter-company asset rollover

A same asset rollover is available where a company transfers or creates (CGT event) a CGT asset in another company that is a member of the same wholly-owned group, but one of the companies is a non-resident.

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)
• 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   18 on the tax return (supplementary section). See example   47 and the instructions for dividend income for question   11 in Individual tax return instructions 2015 .

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. For more information, see Is the dwelling your 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 if the land around your home is more than two   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 previous owner 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, managed funds and 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).

Other CGT assets and any other CGT events

Any capital gain or capital loss that you have made that does not fit into any of the more specific categories listed in item 1 of the CGT schedule. For example, disposal of your forestry interests in a forestry managed investment scheme or hedging financial arrangements.

Other real estate

Any real estate including land and buildings that are situated outside of Australia, for example, a rental property situated in the United States.

Other exemptions and rollovers

Any exemption or rollover that you have applied that is not listed in one of the more specific codes under the question 'Have you applied an exemption or rollover?' of the individual tax return (supplementary section) or your entity's tax return.

Other shares

Any shares that are not listed on an Australian securities exchange, such as privately held shares or shares listed on a foreign securities exchange, but not also on an Australian securities exchange, for example, shares listed on the New York Stock Exchange.

Other units

Any units in a unit trust that are not listed on an Australian securities exchange, such as privately held units or units listed on a foreign securities exchange, but not also on an Australian securities exchange, for example, units listed on the New York Stock Exchange.

Ownership interest

You have an ownership interest if you own a dwelling or land. For other circumstances where you may have an ownership interest, see What is an ownership interest?

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 .

Post-CGT

Acquired on or after 20   September 1985.

Real estate situated in Australia

Any real property including land and buildings that are situated in Australia.

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 costs of owning the asset such as interest on monies borrowed to buy it.

Replacement asset rollovers

A replacement asset rollover may apply to defer the capital gain when you replace an asset in certain circumstances.

For more information, see Other replacement asset rollovers .

Rollover

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

Same asset rollover

A same asset rollover allows a capital gain that you make to be deferred when you transfer or dispose of assets in certain circumstances.

For more information, see Other same asset rollovers .

Scrip for scrip rollover

A scrip for scrip rollover can apply to CGT events that happened 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 us.

Share buy-back

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.

Share in companies listed on an Australian securities exchange

These do not include shares in privately owned companies whereby those shares are not publicly traded. Shares in a privately owned company should be included in the Other Shares label.

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

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

Specifically entitled

A beneficiary that is specifically entitled to the whole or part of a capital gain made by the trust will be assessable on the amount of the net (taxable) income of the trust that relates to that gain.

Generally, a beneficiary will be taken to be specifically entitled to an amount of a capital gain if they have received or are likely to receive the benefit of that capital gain.

Spouse

Your 'spouse' includes another person (of any sex) who:

• you were in a relationship with that was registered under a prescribed state or territory law,
• although not legally married to you, lived with you on a genuine domestic basis in a relationship as a couple.

Takeovers and mergers

If a company in which you held shares was taken over or merged and you received new shares in the takeover or merged company, you may be entitled to a 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
• a pooled superannuation fund.

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 years 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.

Units in unit trusts listed on an Australian securities exchange

These do not include units in private equity trusts or family trusts, whereby the trust is created for the benefit of one or more ascertainable beneficiaries, and not for the promotion of the welfare of the general public or for the advancement of a cause. Units in a private trust should be included in the Other units label.

 

Appendix 5 Abbreviations

ACT	Australian Capital Territory
CGT	capital gains tax
CPI	consumer price index
CYCG	current year capital gains
CYCL	current year capital losses
ESS	employee share scheme
FMIS	forestry managed investment scheme
GST	goods and services tax
GVSR	general value shifting regime
LIC	listed investment company
MDO	medical defence organisation
PYNCL	prior year net capital losses
SIC	shortfall interest charge
TFN	tax file number
TOFA	taxation of financial arrangements
UNCL	unapplied net capital losses
UCA	uniform capital allowance

 

 

ATO references:
NO NAT 4151