Income Tax Assessment Act 1997
Hide history noteThis Division is a simplified outline of the capital gains and capital losses provisions, commonly referred to as capital gains tax ( CGT ). It will help you to understand your current liabilities, and to factor CGT into your on-going financial affairs.
This Division is a *Guide.
Note:
In interpreting an operative provision, a Guide may be considered only for limited purposes: see section 950-150 .
CGT affects your income tax liability because your assessable income includes your net capital gain for the income year. Your net capital gain is the total of your capital gains for the income year, reduced by certain capital losses you have made.
See later in this Guide (section 100-50) for more detail.
100-10(2)
When you prepare your income tax return, you need to check whether you have made any capital gains for the income year.
You also need to check whether you have made any capital losses. You cannot deduct a capital loss from your assessable income, but it will reduce your capital gain in the current income year or later income years.
100-10(3)
You will also need to consider the impact of CGT when doing your financial planning. In particular, you will need adequate record-keeping to deal most effectively with any immediate or future CGT liability.
To give you a sense of the range of things affected by CGT, if you are involved with any of the following, you may have a CGT liability now or at some time in the future:
| • leases | • marriage or relationship breakdown |
| • inheritance | • working from home |
| • subdividing land | • shares |
| • goodwill | • a civil court case |
| • contracts | • trusts |
| • options | • bankruptcy |
| • a company liquidation | • incorporating a company |
| • leaving Australia |
Note:
Capital proceeds and cost base are not relevant for some CGT events, for example CGT event K7 or any of the CGT events created by Subdivision 104-L .
You can make a capital gain or loss only if a CGT event happens.
100-20(2)
There are a wide range of CGT events. Some happen often and affect many different taxpayers. Others are rare and affect only a few.
| Some examples of CGT events | ||
| Situation | Event | Which CGT event? |
| You own shares you acquired on or after 20 September 1985 | You sell them | CGT event A1 |
| . | ||
| You sell a business | You agree with the purchaser not to operate a similar business in the same area | CGT event D1 |
| . | ||
| You are a lessor | You receive a payment for changing the lease | CGT event F5 |
| . | ||
| You own shares in a company | The company makes a payment (not a dividend) to you as a shareholder | CGT event G1 |
A summary of all the CGT events is in section 104-5 .
Identifying the time of a CGT event
100-20(3)
The specific time when a CGT event happens is important for various reasons: in particular, for working out whether a capital gain or loss from the event affects your income tax for the current or another income year.
If a CGT event involves a contract, the time of the event will often be when the contract is made , not when it is completed.
The time of each CGT event is explained early in the relevant section in Division 104 .
SECTION 100-25 What are CGT assets? 100-25(1)
Most CGT events involve a CGT asset. (For many, there is an exception if the CGT asset was acquired before 20 September 1985.) However, many CGT events are concerned directly with capital receipts and do not involve a CGT asset.
See the summary of the CGT events in section 104-5 .
100-25(2)
Some CGT assets are reasonably well-known:
100-25(3)
Other CGT assets are not so well-known. For example:
For a full explanation of what things are CGT assets: see Division 108 .
SECTION 100-30 Does an exception or exemption apply? 100-30(1)
Once you identify a CGT event which applies to you, you need to know if there is an exception or exemption that would reduce the capital gain or loss or allow you to disregard it.
100-30(2)
There are 4 categories of exemptions:
1. exempt assets: for example, cars;
2. exempt or loss-denying transactions: for example, compensation for personal injury or your tenancy comes to an end;
3. anti-overlap provisions (that reduce your capital gain by the amount that is otherwise assessable);
4. small business relief.
Note:
Most of the exceptions are in Division 104 . You will find most of the possible exemptions in Division 118 . The small business relief provisions are in Division 152 .
Some exemptions are limited
100-30(3)
Take the family home for example. Generally, you are exempt from CGT when you make a capital gain on disposing of your main residence.
But this can change depending on how you came to own the house and what you have done with it. For example, if you rent it out, you may be liable to CGT when you sell it.
For the limits on the general exemption of your main residence: see Subdivision 118-B .
Roll-overs allow you to defer or disregard a capital gain or loss from a CGT event. They apply in specific situations. Some require a choice (for example, where an asset is compulsorily acquired: see Subdivision 124-B ) and some are automatic (for example, where an asset is transferred because of marriage or relationship breakdown: see Subdivision 126-A ).
100-33(2)
There are 2 types of roll-over:
1. a replacement-asset roll-over allows you to defer a capital gain or loss from one CGT event until a later CGT event happens where a CGT asset is replaced with another one;
2. a same-asset roll-over allows you to disregard a capital gain or loss from a CGT event where the same CGT asset is involved.
Note:
The replacement-asset roll-overs are listed in section 112-115, and the same-asset roll-overs are listed in section 112-150 .
SECTION 100-35 100-35 What is a capital gain or loss?
For most CGT events:
Capital proceeds
100-40(1)
For most CGT events, the capital amounts you receive (or are entitled to receive) from the event are called the capital proceeds .
To work out the capital proceeds: see Division 116 .
Cost base and reduced cost base
100-40(2)
For most CGT events, your total costs associated with the event are worked out in 2 different ways:
One of the main differences is that the costs may be indexed for inflation occurring before 1 October 1999 in working out a capital gain for a CGT asset acquired at or before 11.45 am on 21 September 1999 (which reduces the size of the gain), but not in working out a capital loss .
To work out the cost base and reduced cost base: see Division 110 .
SECTION 100-45 100-45 How to calculate the capital gain or loss for most CGT events
1. Work out your capital proceeds from the CGT event.
2. Work out the cost base for the CGT asset.
3. Subtract the cost base from the capital proceeds.
4. If the proceeds exceed the cost base, the difference is your capital gain .
5. If not, work out the reduced cost base for the asset.
6. If the reduced cost base exceeds the capital proceeds, the difference is your capital loss .
7. If the capital proceeds are less than the cost base but more than the reduced cost base, you have neither a capital gain nor a capital loss .
SECTION 100-50 100-50 How to work out your net capital gain or loss
1. Reduce your capital gains for the income year, in the order you choose, by your capital losses for the income year. (If the capital losses for the income year exceed the capital gains, the difference is your net capital loss. You cannot deduct a net capital loss from your assessable income.)
2. Reduce any remaining capital gains, in the order you choose, by any unapplied net capital losses for previous income years.
3. Reduce any remaining discount capital gains by the discount percentage.
To find out what is a discount capital gain and the discount percentage: see Division 115 .
4. If you carry on a small business, apply the small business concessions in further reduction of your capital gains (whether or not the gains are discount capital gains).
For the small business concessions: see Division 152 .
5. Add up:
(a) any remaining capital gains that are not discount capital gains; and
The total is your net capital gain.
(b) any remaining discount capital gains.
For the rules on working out your net capital gain or loss: see Division 102 .
Declare any net capital gain as assessable income in your income tax return.
Defer any net capital loss to the next income year for which you have capital gains that exceed the capital losses for that income year.
SECTION 100-60 100-60 Why keep records?
1. To ensure you do not disadvantage yourself.
2. To comply as easily as possible.
3. To plan for your CGT position in future income years.
4. The law requires you to: see Division 121 .
Keeping full records will make it easier for you to comply. For example, keep records of:
The law requires you to keep records for 5 years after a CGT event has happened.
This Division tells you how to work out if you have made a net capital gain or a net capital loss for the income year. A net capital gain is included in your assessable income. However, you cannot deduct a net capital loss. (Amounts otherwise included in your assessable income do not form part of a net capital gain.)
Concessional rules apply to working out the net capital gain of some entities (see subsection (2)) if:
(a) they have a capital gain (a discount capital gain ) from a CGT asset acquired at least 12 months before the CGT event that caused the capital gain; and
(b) they have not chosen to include indexation in the cost base of the asset for working out the capital gain (if relevant).
Note 1:
Division 115 explains what is a discount capital gain.
Note 2:
Under Division 110 , the entity can choose to include indexation in the cost base of a CGT asset acquired at or before 11.45 am on 21 September 1999.
102-3(2)
Only these entities get the concession:
(a) individuals;
(b) complying superannuation entities;
(c) trusts;
(d) life insurance companies, in relation to discount capital gains for CGT events in respect of CGT assets that are complying superannuation assets.
Note:
Shareholders in a listed investment company can also receive a concession equivalent to a discount capital gain: see Subdivision 115-D .
102-3(3)
The concession is that the net capital gain includes only part of the amount of the discount capital gain left after applying capital losses and net capital losses from earlier income years.
See subsection 102-5(1) .
| Operative provisions | |
| 102-5 | Assessable income includes net capital gain |
| 102-10 | How to work out your net capital loss |
| 102-15 | How to apply net capital losses |
| 102-20 | Ways you can make a capital gain or a capital loss |
| 102-22 | Amounts of capital gains and losses |
| 102-23 | CGT event still happens even if gain or loss disregarded |
| 102-25 | Order of application of CGT events |
| 102-30 | Exceptions and modifications |
Your assessable income includes your net capital gain (if any) for the income year. You work out your net capital gain in this way: Working out your net capital gain
Step 1.
Reduce the *capital gains you made during the income year by the *capital losses (if any) you made during the income year.
Note 1:
You choose the order in which you reduce your capital gains. You have a net capital loss for the income year if your capital losses exceed your capital gains: see section 102-10 .
Note 2:
Some provisions of this Act (such as Divisions 104 and 118 ) permit or require you to disregard certain capital gains or losses when working out your net capital gain. Subdivision 152-B permits you, in some circumstances, to disregard a capital gain on an asset you held for at least 15 years.
Step 2.
Apply any previously unapplied *net capital losses from earlier income years to reduce the amounts (if any) remaining after the reduction of *capital gains under step 1 (including any capital gains not reduced under that step because the *capital losses were less than the total of your capital gains).
Note 1:
Section 102-15 explains how to apply net capital losses.
Note 2:
You choose the order in which you reduce the amounts.
Step 3.
Reduce by the *discount percentage each amount of a *discount capital gain remaining after step 2 (if any).
Note:
Only some entities can have discount capital gains, and only if they have capital gains from CGT assets acquired at least a year before making the gains. See Division 115 .
Step 4.
If any of your *capital gains (whether or not they are *discount capital gains) qualify for any of the small business concessions in Subdivisions 152-C , 152-D and 152-E , apply those concessions to each capital gain as provided for in those Subdivisions.
Note 1:
The basic conditions for getting these concessions are in Subdivision 152-A .
Note 2:
Subdivision 152-C does not apply to CGT events J2, J5 and J6. In addition, Subdivision 152-E does not apply to CGT events J5 and J6.
Step 5.
Add up the amounts of *capital gains (if any) remaining after step 4. The sum is your net capital gain for the income year.
Note:
For exceptions and modifications to these rules: see section 102-30 .
102-5(2)
However, if during the income year:
(a) you became bankrupt; or
(b) you were released from debts under a law relating to bankruptcy;
any *net capital loss you made for an earlier income year must be disregarded in working out whether you made a *net capital gain for the income year or a later one.
102-5(3)
Subsection (2) applies even though your bankruptcy is annulled if:
(a) the annulment happens under section 74 of the Bankruptcy Act 1966 ; and
(b) under the composition or scheme of arrangement concerned, you were, will be or may be released from debts from which you would have been released if instead you had been discharged from the bankruptcy.
SECTION 102-10 How to work out your net capital loss 102-10(1)
You work out if you have a net capital loss for the income year in this way: Working out your net capital loss
Step 1.
Add up the *capital losses you made during the income year. Also add up the *capital gains you made.
Step 2.
Subtract your *capital gains from your *capital losses.
Step 3.
If the Step 2 amount is more than zero, it is your net capital loss for the income year.
Note:
For exceptions and modifications to these rules: see section 102-30 .
102-10(2)
You cannot deduct from your assessable income a *net capital loss for any income year.
SECTION 102-15 102-15 How to apply net capital losses
In working out if you have a * net capital gain, your * net capital losses are applied in the order in which you made them.
Note 1:
A net capital loss can be applied only to the extent that it has not already been utilised: see subsection 960-20(1) .
Note 2:
For applying a net capital loss for the 1997-98 income year or an earlier income year, see section 102-15 of the Income Tax (Transitional Provisions) Act 1997 .
You can make a *capital gain or *capital loss if and only if a *CGT event happens. The gain or loss is made at the time of the event.
Note 1:
The full list of CGT events is in section 104-5 .
Note 2:
The gain or loss may be affected by an exemption, or may be able to be rolled-over. For exemptions generally, see Division 118 . For roll-overs, see Divisions 122 , 123 , 124 and 126 .
Note 3:
You may make a capital gain or capital loss as a result of a CGT event happening to another entity: see subsections 115-215(3) , 170-275(1) and 170-280(3) .
Note 4:
You cannot make a capital loss from a CGT event that happens to your original interests during a trust restructuring period if you choose a roll-over under Subdivision 124-N .
Note 5:
The capital loss may be affected if the CGT asset was owned by a member of a demerger group just before a demerger: see section 125-170 .
Note 6:
Under subsection 230-310(4) gains and losses are taken to arise from a CGT event in particular circumstances.
Note 7:
This section does not apply in relation to the capital gain mentioned in paragraph 294-120(5)(b) of the Income Tax (Transitional Provisions) Act 1997 .
Most *CGT events provide for calculating a *capital gain or *capital loss by comparing 2 different amounts. The amount of the gain or loss is the difference between those amounts.
A *CGT event still happens even if:
(a) it does not result in a *capital gain or *capital loss; or
(b) a capital gain or capital loss from the event is disregarded.
Example:
Lindy sells a car. Section 118-5 says that any capital gain or loss from a CGT event happening to a car is disregarded. However, the sale is still an example of CGT event A1.
Work out if a *CGT event (except *CGT events D1 and H2) happens to your situation. If more than one event can happen, the one you use is the one that is the most specific to your situation.
102-25(2)
However, there are 3 exceptions: one for *CGT event J2, one for CGT event K5 and one for CGT event K12.
102-25(2A)
If the circumstances that gave rise to *CGT event J2 constitute another CGT event, CGT event J2 applies in addition to the other event.
Example:
CGT event J2 happens because a replacement asset for a small business roll-over under Subdivision 152-E becomes your trading stock (in circumstances where CGT event K4 happens). Both CGT events apply.
102-25(2B)
*CGT event K5 happens if CGT event A1, C2 or E8 happens. CGT event K5 applies in addition to the other event.
102-25(2C)
If:
(a) *CGT events happen for which you make *capital gains or *capital losses; and
(b) the capital gains or losses are taken into account in working out a *foreign hybrid net capital loss amount; and
(c) the foreign hybrid net capital loss amount is itself taken into account in determining that *CGT event K12 happens;
CGT event K12 applies in addition to the other CGT events.
102-25(3)
If no *CGT event (except *CGT events D1 and H2) happens:
(a) work out if CGT event D1 happens and use that event if it does; and
(b) if it does not, work out if CGT event H2 happens and use that event if it does.
Note:
The full list of CGT events is in section 104-5 .
SECTION 102-30 102-30 Exceptions and modifications
Provisions of this Act are in normal text. The other provisions, in bold , are provisions of the Income Tax Assessment Act 1936 .
| Special rules affecting capital gains and capital losses | ||||
| Item | For this kind of entity: | There are these special rules: | See: | |
| 1 | All entities | You can subtract capital losses from collectables only from your capital gains from collectables. | section108-10 | |
| . | ||||
| 2 | All entities | Disregard capital losses you make from personal use assets. | section 108-20 | |
| . | ||||
| 2AA | Beneficiary of trust that makes a capital gain taken into account in working out the net income of the trust | The beneficiary is treated as having an extra capital gain corresponding to the beneficiary ' s share of the capital gain (taking into account adjustments in respect of the CGT discount and small business concessions). | Subdivision 115-C | |
| . | ||||
| 2A | (Repealed by No 165 of 1999) | |||
| 2B | (Repealed by No 165 of 1999) | |||
| . | ||||
| 3 | All entities | If any of your commercial debts have been forgiven in the income year, your net capital losses (including net capital losses from collectables) may be reduced. | sections 245-130 and 245-135 | |
| . | ||||
| 4 | A company | If it has a change of ownership or control during the income year, and has not satisfied the business continuity test, it works out its net capital gain and net capital loss in a special way. | Subdivision 165-CB | |
| . | ||||
| 5 | A company | It cannot apply a net capital loss unless: | Subdivision 165-CA | |
| • | the same people owned the company during the loss year, the income year and any intervening year; and | |||
| • | no person controlled the company ' s voting power at any time during the income year who did not also control it during the whole of the loss year and any intervening year; | |||
| or the company has satisfied the business continuity test. | ||||
| . | ||||
| 6 | A company | If one or more of these things happen: | Division 175 | |
| • | a capital gain or loss is injected into it; | |||
| • | a tax benefit is obtained from its available net capital losses or current year capital losses; | |||
| • | a tax benefit is obtained because of its available capital gains; | |||
| the Commissioner can disallow its net capital losses or current year capital losses, and it may have to work out its net capital loss in a special way. | ||||
| . | ||||
| 7 | A company | A company can transfer a surplus amount of its net capital loss to another company so that the other company can apply the amount in the income year of the transfer. (Both companies must be members of the same wholly-owned group.) | Subdivision 170-B | |
| . | ||||
| 7A | The head company of a consolidated group or a MEC group | The head company of a consolidated group or a MEC group must apply the capital loss from CGT event L1 over at least 5 income years | section 104-500 | |
| . | ||||
| 8 | A PDF | If it is a PDF at the end of an income year for which it has a net capital loss, it can apply the loss in a later income year only if it is a PDF throughout the last day of the later income year. | section 195-25 | |
| . | ||||
| 9 | A PDF | If it becomes a PDF during an income year, it works out its net capital gain and net capital loss for the income year in a special way. | section 195-35 | |
| . | ||||
| 10 | Body that has ceased to be an STB | Net capital losses made before cessation disregarded. Special rules apply in cessation year where net capital gain before cessation and net capital loss after cessation. | section 24AX | |
| . | ||||
| 10A | All entities | Division 316 contains special rules affecting capital gains and capital losses connected with demutualisation of friendly society health or life insurers. | Division 316 | |
| . | ||||
| 11 | A life insurance company | Division 320 contains special rules that apply to capital gains and capital losses | Division 320 | |
| . | ||||
| 12 | A company | The capital gain or capital loss a company makes from a CGT event that happened to a share in a company that is a foreign resident may be reduced. | Subdivision 768-G | |
| . | ||||
| 13 | A PDF | Sections 102-5 and 102-10 do not apply to the calculation of net capital gains and losses. Capital gains and losses are instead allocated to separate classes of income. | Subdivision C of Division 10E of Part III | |
| . | ||||
| 14 | A CFC | In calculating the CFC ' s attributable income, pre-1 July 1990 capital losses are disregarded. | section 409 |
This Division sets out some general rules that apply to the provisions dealing with capital gains and capital losses.
There are a number of provisions in this Part and Part 3-3 that say that a payment, cost or expenditure can include giving property.
To the extent that such a provision does say that a payment, cost or expenditure can include giving property, use the *market value of the property in working out the amount of the payment, cost or expenditure.
This Part and Part 3-3 apply to you as if you had received money or other property if it has been applied for your benefit (including by discharging all or part of a debt you owe) or as you direct.
103-10(2)
Those Parts apply to you as if you are entitled to receive money or other property:
(a) if you are entitled to have it so applied; or
(b) if:
(i) you will not receive it until a later time; or
(ii) the money is payable by instalments.
SECTION 103-15 103-15 Requirement to pay money or give property
This Part and Part 3-3 apply to you as if you are required to pay money or give other property even if:
(a) you do not have to pay or give it until a later time; or
(b) the money is payable by instalments.
(Repealed by No 133 of 2003)
A choice you can make under this Part or Part 3-3 must be made:
(a) by the day you lodge your *income tax return for the income year in which the relevant *CGT event happened; or
(b) within a further time allowed by the Commissioner.
[
CCH Note:
No 42 of 2009, s 3 and Sch 2 item 48 contains the following transitional provision:
48 Transitional: choice
]
48(1)
Subitem (2) applies in relation to:
(a)
a CGT event that happened before 23 June 2009; and
(b)
an entity who becomes eligible to make a choice under Division
152
of the
Income Tax Assessment Act 1997
in relation to that event because of this Schedule.
48(2)
Despite subsection
103-25(1)
of the
Income Tax Assessment Act 1997
, any such choice must be made by the entity by the latest of:
(a)
the day the entity lodges its income tax return for the income year in which the relevant CGT event happened; and
(b)
12 months after 23 June 2009; and
(c)
a later day allowed by the Commissioner of Taxation.
103-25(2)
The way you (and any other entity making the choice) prepare your *income tax returns is sufficient evidence of the making of the choice.
103-25(3)
However, there are some exceptions:
(aa) subsection 115-230(3) (relating to assessment of *capital gains of resident testamentary trusts) requires a trustee to make a choice by the time specified in subsection 115-230(5) ; and
(a) (Repealed by No 133 of 2014)
(b) subsections 152-315(4) and (5) (relating to the small business retirement exemption) require a choice to be made in writing.
(c) (Repealed by No 55 of 2007 )
Note:
This section is modified in calculating the attributable income of a CFC: see section 421 of the Income Tax Assessment Act 1936 .
SECTION 103-30 103-30 Reduction of cost base etc. by net input tax credits
Reduce the *cost base and *reduced cost base of a *CGT asset, and any other amount that could be involved in the calculation of an entity's *capital gain or *capital loss, by the amount of any *net input tax credit of the entity in relation to that amount.
Example:
The other amount could be expenditure in the case of some CGT events (see, for example, CGT event D1).
Note:
Subsection 116-20(5) deals with the effect of net GST on supplies for the purposes of capital proceeds.
This Division sets out all the CGT events for which you can make a capital gain or loss. It tells you how to work out if you have made a gain or loss from each event and the time of each event. It also contains exceptions for gains and losses for many events (such as the exception for CGT assets acquired before 20 September 1985) and some cost base adjustment rules.
| CGT events | |||
| Event number and description | Time of event is: | Capital gain is: | Capital loss is: |
| A1 Disposal of a CGT asset | when disposal contract is entered into or, if none, when entity stops being asset ' s owner | capital proceeds from disposal less asset ' s cost base | asset ' s reduced cost base less capital proceeds |
| [ See section 104-10 ] | |||
| . | |||
| B1 Use and enjoyment before title passes | when use of CGT asset passes | capital proceeds less asset ' s cost base | asset ' s reduced cost base less capital proceeds |
| [ See section 104-15 ] | |||
| . | |||
| C1 Loss or destruction of a CGT asset | when compensation is first received or, if none, when loss discovered or destruction occurred | capital proceeds less asset ' s cost base | asset ' s reduced cost base less capital proceeds |
| [ See section 104-20 ] | |||
| . | |||
| C2 Cancellation, surrender and similar endings | when contract ending asset is entered into or, if none, when asset ends | capital proceeds from ending less asset ' s cost base | asset ' s reduced cost base less capital proceeds |
| [ See section 104-25 ] | |||
| . | |||
| C3 End of option to acquire shares etc. | when option ends | capital proceeds from granting option less expenditure in granting it | expenditure in granting option less capital proceeds |
| [ See section 104-30 ] | |||
| . | |||
| D1 Creating contractual or other rights | when contract is entered into or right is created | capital proceeds from creating right less incidental costs of creating it | incidental costs of creating right less capital proceeds |
| [ See section 104-35 ] | |||
| . | |||
| D2 Granting an option | when option is granted | capital proceeds from grant less expenditure to grant it | expenditure to grant option less capital proceeds |
| [ See section 104-40 ] | |||
| . | |||
| D3 Granting a right to income from mining | when contract is entered into or, if none, when right is granted | capital proceeds from grant of right less expenditure to grant it | expenditure to grant right less capital proceeds |
| [ See section 104-45 ] | |||
| . | |||
| D4 Entering into a conservation covenant | when covenant is entered into | capital proceeds from covenant less cost base apportioned to the covenant | reduced cost base apportioned to the covenant less capital proceeds from covenant |
| [ See section 104-47 ] | |||
| . | |||
| E1 Creating a trust over a CGT asset | when trust is created | capital proceeds from creating trust less asset ' s cost base | asset ' s reduced cost base less capital proceeds |
| [ See section 104-55 ] | |||
| . | |||
| E2 Transferring a CGT asset to a trust | when asset transferred | capital proceeds from transfer less asset ' s cost base | asset ' s reduced cost base less capital proceeds |
| [ See section 104-60 ] | |||
| . | |||
| E3 Converting a trust to a unit trust | when trust is converted | market value of asset at that time less its cost base | asset ' s reduced cost base less that market value |
| [ See section 104-65 ] | |||
| . | |||
| E4 Capital payment for trust interest | when trustee makes payment | non-assessable part of the payment less cost base of the trust interest | no capital loss |
| [ See section 104-70 ] | |||
| . | |||
| E5 Beneficiary becoming entitled to a trust asset | when beneficiary becomes absolutely entitled | for trustee - market value of CGT asset at that time less its cost base; for beneficiary - that market value less cost base of beneficiary ' s capital interest | for trustee - reduced cost base of CGT asset at that time less that market value; for beneficiary - reduced cost base of beneficiary ' s capital interest less that market value |
| [ See section 104-75 ] | |||
| . | |||
| E6 Disposal to beneficiary to end income right | the time of the disposal | for trustee - market value of CGT asset at that time less its cost base; for beneficiary - that market value less cost base of beneficiary ' s right to income | for trustee - reduced cost base of CGT asset at that time less that market value; for beneficiary - reduced cost base of beneficiary ' s right to income less that market value |
| [ See section 104-80 ] | |||
| . | |||
| E7 Disposal to beneficiary to end capital interest | the time of the disposal | for trustee - market value of CGT asset at that time less its cost base; for beneficiary - that market value less cost base of beneficiary ' s capital interest | for trustee - reduced cost base of CGT asset at that time less that market value; for beneficiary - reduced cost base of beneficiary ' s capital interest less that market value |
| [ See section 104-85 ] | |||
| . | |||
| E8 Disposal by beneficiary of capital interest | when disposal contract entered into or, if none, when beneficiary ceases to own CGT asset | capital proceeds less appropriate proportion of the trust ' s net assets | appropriate proportion of the trusts ' s net assets less capital proceeds |
| [ See section 104-90 ] | |||
| . | |||
| E9 Creating a trust over future property | when entity makes agreement | market value of the property (as if it existed when agreement made) less incidental costs in making agreement | incidental costs in making agreement less market value of the property (as if it existed when agreement made) |
| [ See section 104-105 ] | |||
| . | |||
| E10 Annual cost base reduction exceeds cost base of interest in AMIT | when reduction happens | excess of cost base reduction over cost base | no capital loss |
| [See section 104-107A] | |||
| . | |||
| F1 Granting a lease | for grant of lease - when entity enters into lease contract or, if none, at start of lease; for lease renewal or extension - at start of renewal or extension | capital proceeds less expenditure on grant, renewal or extension | expenditure on grant, renewal or extension less capital proceeds |
| [ See section 104-110 ] | |||
| . | |||
| F2 Granting a long term lease | for grant of lease - when lessor grants lease; for lease renewal or extension - at start of renewal or extension | capital proceeds from grant, renewal or extension less cost base of leased property | reduced cost base of leased property less capital proceeds from grant, renewal or extension |
| [ See section 104-115 ] | |||
| . | |||
| F3 Lessor pays lessee to get lease changed | when lease term is varied or waived | no capital gain | amount of expenditure to get lessee ' s agreement |
| [ See section 104-120 ] | |||
| . | |||
| F4 Lessee receives payment for changing lease | when lease term is varied or waived | capital proceeds less cost base of lease | no capital loss |
| [ See section 104-125 ] | |||
| . | |||
| F5 Lessor receives payment for changing lease | when 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 |
| [ See section 104-130 ] | |||
| . | |||
| G1 Capital payment for shares | when company pays non-assessable amount | payment less cost base of shares | no capital loss |
| [ See section 104-135 ] | |||
| . | |||
| G2 (Repealed by No 90 of 2002) | |||
| . | |||
| G3 Liquidator or administrator declares shares or financial instruments worthless | when declaration was made | no capital gain | shares ' or financial instruments ' reduced cost base |
| [ See section 104-145 ] | |||
| . | |||
| H1 Forfeiture of a deposit | when deposit is forfeited | deposit less expenditure in connection with prospective sale | expenditure in connection with prospective sale less deposit |
| [ See section 104-150 ] | |||
| . | |||
| H2 Receipt for event relating to a CGT asset | when act, transaction or event occurred | capital proceeds less incidental costs | incidental costs less capital proceeds |
| [ See section 104-155 ] | |||
| . | |||
| I1 Individual or company stops being an Australian resident | when individual or company stops being 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 |
| [ See section 104-160 ] | |||
| . | |||
| I2 Trust stops being a resident trust | when trust ceases to be resident trust for CGT purposes | for each CGT asset the trustee owns, its market value of asset less its cost base | for each CGT asset the trustee owns, its reduced cost base less its market value |
| [ See section 104-170 ] | |||
| . | |||
| J1 Company stops being member of wholly-owned group after roll-over | when the company stops | market value of asset at time of event less its cost base | reduced cost base of asset less that market value |
| [ See section 104-175 ] | |||
| . | |||
| J2 Change in relation to replacement asset or improved asset after a roll-over under Subdivision 152-E | when the change happens | the amount mentioned in subsection 104-185(5) | no capital loss |
| [ See section 104-185 ] | |||
| . | |||
| J3 (Repealed by No 55 of 2007 ) | |||
| . | |||
| J4 Trust fails to cease to exist after a roll-over under Subdivision 124-N | when the failure happens | market value of asset less asset ' s cost base | reduced cost base of asset less asset ' s market value |
| [ See section 104-195 ] | |||
| . | |||
| J5 Failure to acquire replacement asset and to incur fourth element expenditure after a roll-over 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 |
| [ See section 104-197 ] | |||
| . | |||
| 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 |
| [ See section 104-198 ] | |||
| . | |||
| K1 As the result of an incoming international transfer of a Kyoto unit or an Australian carbon credit unit from your foreign account or your nominee
'
s foreign account, you start to hold the unit as a registered emissions unit
[See section 104-205] |
when you start to hold the unit as a registered emissions unit | market value of unit less its cost base | reduced cost base of unit less its market value |
| . | |||
| K2 Bankrupt pays amount in relation to debt | when payment is made | no capital gain | so much of payment as relates to denied part of a net capital loss |
| [ See section 104-210 ] | |||
| . | |||
| K3 Asset passing to tax-advantaged entity | when individual dies | market value of asset at death less its cost base | reduced cost base of asset less that market value |
| [ See section 104-215 ] | |||
| . | |||
| K4 CGT asset starts being trading stock | when asset starts being trading stock | market value of asset less its cost base | reduced cost base of asset less its market value |
| [ See section 104-220 ] | |||
| . | |||
| K5 Special capital loss from 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 |
| [ See section 104-225 ] | |||
| . | |||
| 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 (so far as attributable to post-CGT assets owned by the company or trust) less the assets ' cost bases | no capital loss |
| [ See section 104-230 ] | |||
| . | |||
| K7 Balancing adjustment occurs for a depreciating asset that you used for purposes other than taxable purposes | When balancing adjustment event occurs | Termination value less cost times fraction | Cost less termination value times fraction |
| [ See section 104-235 ] | |||
| . | |||
| K8 Direct value shifts affecting your equity or loan interests in a company or trust | the decrease time for the interests | the gain worked out under section 725-365 | no capital loss |
| [ See section 104-250 and Division 725 ] | |||
| . | |||
| K9 Entitlement to receive payment of a carried interest | when you become entitled to receive payment | capital proceeds from entitlement | no capital loss |
| [ See section 104-255 ] | |||
| . | |||
| K10 You make a forex realisation gain covered by item 1 of the table in subsection 775-70(1) | when the forex realisation event happens | the forex realisation gain | no capital loss |
| [ See section 104-260 ] | |||
| . | |||
| K11 You make a forex realisation loss covered by item 1 of the table in subsection 775-75(1) | when the forex realisation event happens | no capital gain | the forex realisation loss |
| [ See section 104-265 ] | |||
| . | |||
| 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) |
| [ See section 104-270 ] | |||
| . | |||
| 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 |
| [ See section 104-500 ] | |||
| . | |||
| 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 |
| [ See section 104-505 ] | |||
| . | |||
| 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 |
| [ See section 104-510 ] | |||
| . | |||
| 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 |
| [ See section 104-515 ] | |||
| . | |||
| 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 |
| [ See section 104-520 ] | |||
| . | |||
| L6 Error in calculation of tax cost setting amount for joining entity ' s assets: CGT event L6 | 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 |
| [ See section 104-525 ] | |||
| . | |||
| L7 (Repealed by No 56 of 2010) | |||
| . | |||
| 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 |
| [ See section 104-535 ] |
Note:
Subsection 230-310(4) (which deals with hedging financial arrangements) provides that in certain circumstances a CGT event is taken to have occurred in relation to a hedging financial arrangement at the same time as a CGT event actually occurs in relation to a hedged item covered by the arrangement.
CGT event A1 happens if you *dispose of a *CGT asset.
104-10(2)
You dispose of a *CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law. However, a change of ownership does not occur if you stop being the legal owner of the asset but continue to be its beneficial owner.
Note:
A change in the trustee of a trust does not constitute a change in the entity that is the trustee of the trust (see subsection 960-100(2) ). This means that CGT event A1 will not happen merely because of a change in the trustee.
104-10(3)
The time of the event is:
(a) when you enter into the contract for the *disposal; or
(b) if there is no contract - when the change of ownership occurs.
Example:
In June 1999 you enter into a contract to sell land. The contract is settled in October 1999. You make a capital gain of $50,000.
The gain is made in the 1998-99 income year (the year you entered into the contract) and not the 1999-2000 income year (the year that settlement takes place).
Note 1:
If the contract falls through before completion, this event does not happen because no change in ownership occurs.
Note 2:
If the asset was compulsorily acquired from you: see subsection (6).
104-10(4)
You make a capital gain if the *capital proceeds from the disposal are more than the asset ' s *cost base. You make a capital loss if those capital proceeds are less than the asset ' s *reduced cost base.
Exceptions
104-10(5)
A *capital gain or *capital loss you make is disregarded if:
(a) you *acquired the asset before 20 September 1985; or
(b) for a lease that you granted:
(i) it was granted before that day; or
(ii) if it has been renewed or extended - the start of the last renewal or extension occurred before that day.
Note 1:
You can make a gain if you dispose of shares in a company, or an interest in a trust, that you acquired before that day: see CGT event K6.
Note 2:
A capital gain or loss you make because you assign a right under or in relation to a general insurance policy you held with an HIH company to the Commonwealth, the trustee of the HIH Trust or a prescribed entity is also disregarded: see section 322-15.
Note 3:
A capital gain or loss made by a demerging entity from CGT event A1 happening as a result of a demerger is also disregarded: see section 125-155 .
Note 4:
A capital gain or loss you make because of section 16AI of the Banking Act 1959 is disregarded: see section 253-10 of this Act. Section 16AI of the Banking Act 1959 :
Note 5:
A capital gain or loss you make because, under section 62ZZL of the Insurance Act 1973 , you dispose of a CGT asset consisting of your rights against a general insurance company to APRA is disregarded: see section 322-30 of this Act.
Compulsory acquisition
104-10(6)
If the asset was *acquired from you by an entity under a power of compulsory acquisition conferred by an *Australian law or a *foreign law, the time of the event is the earliest of:
(a) when you received compensation from the entity; or
(b) when the entity became the asset ' s owner; or
(c) when the entity entered it under that power; or
(d) when the entity took possession under that power.
Note:
You may be able to choose a roll-over if an asset is compulsorily acquired: see Subdivision 124-B .
104-10(7)
(Repealed by No 119 of 2013)
Subdivision 104-B - Use and enjoyment before title passes SECTION 104-15 Use and enjoyment before title passes: CGT event B1 104-15(1)
CGT event B1 happens if you enter into an agreement with another entity under which:
(a) the right to the use and enjoyment of a *CGT asset you own passes to the other entity; and
(b) title in the asset will or may pass to the other entity at or before the end of the agreement.
Note:
Division 240 provides for the inclusion of amounts under hire purchase agreements in assessable income.
104-15(2)
The time of the event is when the other entity first obtains the use and enjoyment of the asset.
104-15(3)
You make a capital gain if the *capital proceeds from the agreement are more than the asset ' s *cost base. You make a capital loss if those capital proceeds are less than the asset ' s *reduced cost base.
Exceptions
104-15(4)
A *capital gain or *capital loss you make is disregarded if:
(a) title in the asset does not pass to the other entity at or before the end of the agreement; or
(b) you *acquired the asset before 20 September 1985.
Subdivision 104-C - End of a CGT asset SECTION 104-20 Loss or destruction of a CGT asset: CGT event C1 104-20(1)
CGT event C1 happens if a *CGT asset you own is lost or destroyed.
Note:
This event can apply to part of a CGT asset: see section 108-5 (definition of CGT asset ).
104-20(2)
The time of the event is:
(a) when you first receive compensation for the loss or destruction; or
(b) if you receive no compensation - when the loss is discovered or the destruction occurred.
104-20(3)
You make a capital gain if the *capital proceeds from the loss or destruction are more than the asset ' s *cost base. You make a capital loss if those capital proceeds are less than the asset ' s *reduced cost base.
Exception
104-20(4)
A *capital gain or *capital loss you make is disregarded if you *acquired the asset before 20 September 1985.
CGT event C2 happens if your ownership of an intangible *CGT asset ends by the asset:
(a) being redeemed or cancelled; or
(b) being released, discharged or satisfied; or
(c) expiring; or
(d) being abandoned, surrendered or forfeited; or
(e) if the asset is an option - being exercised; or
(f) if the asset is a *convertible interest - being converted.
104-25(2)
The time of the event is:
(a) when you enter into the contract that results in the asset ending; or
(b) if there is no contract - when the asset ends.
104-25(3)
You make a capital gain if the *capital proceeds from the ending are more than the asset ' s *cost base. You make a capital loss if those capital proceeds are less than the asset ' s *reduced cost base.
Note:
The capital proceeds referred to in this subsection are reduced if the gain or loss was for shares and an amount was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997-98 income year or an earlier income year: see section 104-25 of the Income Tax (Transitional Provisions) Act 1997 .
104-25(4)
A lease is taken to have expired even if it is extended or renewed.
Exceptions
104-25(5)
A *capital gain or *capital loss you make is disregarded if:
(a) you *acquired the asset before 20 September 1985; or
(b) for a lease that you granted:
(i) it was granted before that day; or
(ii) if it has been renewed or extended - the start of the last renewal or extension occurred before that day.
Note 1:
There are other exceptions if:
Note 2:
A company can agree to forgo any capital loss it makes as a result of forgiving a commercial debt owed to it by another company where the companies are under common ownership: see section 245-90 .
Note 3:
A capital gain or loss a company makes because shares in its 100% subsidiary are cancelled (an example of CGT event C2) on the liquidation of the subsidiary may be reduced if there was a roll-over for a CGT asset under Subdivision 126-B : see section 126-85 .
Note 5:
Cost base adjustments are made only under Subdivision 125-B if there is a roll-over under that Subdivision for CGT event C2 happening as a result of a demerger.
Note 6:
A capital gain or loss made by a demerging entity from CGT event C2 happening as a result of a demerger is also disregarded: see section 125-155 .
Note 7:
A capital gain or loss you make from the meeting of your entitlement under Division 2AA (Financial claims scheme for account-holders with insolvent ADIs) of Part II of the Banking Act 1959 or Part VC (Financial claims scheme for account-holders with insolvent general insurers) of the Insurance Act 1973 is disregarded: see sections 253-10 and 322-30 of this Act.
CGT event C3 happens if an option a company or a trustee of a unit trust granted to an entity to *acquire a *CGT asset that is:
(a) *shares in the company or units in the unit trust; or
(b) *debentures of the company or unit trust;
ends in one of these ways:
(c) it is not exercised by the latest time for its exercise;
(d) it is cancelled;
(e) it is released or abandoned.
104-30(2)
The time of the event is when the option ends.
104-30(3)
The company or trustee makes a capital gain if the *capital proceeds from the grant of the option are more than the expenditure incurred in granting it. It makes a capital loss if those capital proceeds are less .
104-30(4)
The expenditure can include giving property: see section 103-5 . However, it does not include an amount you have received as *recoupment of it and that is not included in your assessable income.
Exception
104-30(5)
A *capital gain or *capital loss the company or trustee makes is disregarded if it granted the option before 20 September 1985.
Note:
This subsection is modified for the purpose of calculating the attributable income of a CFC: see section 418 of the Income Tax Assessment Act 1936 .
CGT event D1 happens if you create a contractual right or other legal or equitable right in another entity.
Example:
You enter into a contract with the purchaser of your business not to operate a similar business in the same town. The contract states that $20,000 was paid for this.
You have created a contractual right in favour of the purchaser. If you breach the contract, the purchaser can enforce that right.
104-35(2)
The time of the event is when you enter into the contract or create the other right.
104-35(3)
You make a capital gain if the *capital proceeds from creating the right are more than the *incidental costs you incurred that relate to the event. You make a capital loss if those capital proceeds are less .
Example:
To continue the example: If you paid your lawyer $1,500 to draw up the contract, you make a capital gain of:
$20,000 − $1,500 = $18,500
104-35(4)
The costs can include giving property: see section 103-5 . However, they do not include an amount you have received as *recoupment of them and that is not included in your assessable income, or an amount to the extent that you have deducted or can deduct it.
Exceptions
104-35(5)
CGT event D1 does not happen if:
(a) you created the right by borrowing money or obtaining credit from another entity; or
(b) the right requires you to do something that is another *CGT event that happens to you; or
(c) a company issues or allots *equity interests or *non-equity shares in the company; or
(d) the trustee of a unit trust issues units in the trust; or
(e) a company grants an option to acquire equity interests, non-equity shares or *debentures in the company; or
(f) the trustee of a unit trust grants an option to acquire units or debentures in the trust; or
(g) you created the right by creating in another entity a right to receive an *exploration benefit under a *farm-in farm-out arrangement.
Example:
You agree to sell land. You have created a contractual right in the buyer to enforce completion of the transaction. The sale results in you disposing of the land, an example of CGT event A1. This means that CGT event D1 does not happen.
SECTION 104-40 Granting an option: CGT event D2 104-40(1)
CGT event D2 happens if you grant an option to an entity, or renew or extend an option you had granted.
Note:
Some options are not covered: see subsections (6) and (7).
104-40(2)
The time of the event is when you grant, renew or extend the option.
104-40(3)
You make a capital gain if the *capital proceeds from the grant, renewal or extension of the option are more than the expenditure you incurred to grant, renew or extend it. You make a capital loss if those capital proceeds are less .
104-40(4)
The expenditure can include giving property: see section 103-5 . However, it does not include an amount you have received as *recoupment of it and that is not included in your assessable income, or an amount to the extent that you have deducted or can deduct it.
Exceptions
104-40(5)
A *capital gain or *capital loss you make from the grant, renewal or extension of the option is disregarded if the option is exercised.
Note 1:
Section 134-1 sets out the consequences of an option being exercised.
Note 2:
A capital gain or capital loss you made for the 1997-98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 is also disregarded where the option is exercised in the 1998-99 income year or a later one: see section 104-40 of the Income Tax (Transitional Provisions) Act 1997 .
104-40(6)
This section does not apply to an option granted, renewed or extended by a company or the trustee of a unit trust to *acquire a *CGT asset that is:
(a) *shares in the company or units in the unit trust; or
(b) debentures of the company or unit trust.
Note:
Section 104-30 deals with this situation.
104-40(7)
Nor does it apply to an option relating to a *personal use asset or a *collectable.
CGT event D3 happens if you own a *prospecting entitlement or *mining entitlement, or an interest in one, and you grant another entity a right to receive *ordinary income or *statutory income from operations permitted to be carried on by the entitlement.
Note:
If this event applies, there is no disposal of the entitlement.
104-45(2)
The time of the event is:
(a) when you enter into the contract with the other entity; or
(b) if there is no contract - when you grant the right to receive *ordinary income or *statutory income.
104-45(3)
You make a capital gain if the *capital proceeds from the grant of the right are more than the expenditure you incurred in granting it. You make a capital loss if those capital proceeds are less .
104-45(4)
The expenditure can include giving property: see section 103-5 . However, it does not include an amount you have received as *recoupment of it and that is not included in your assessable income, or an amount to the extent that you have deducted or can deduct it.
SECTION 104-47 Conservation covenants: CGT event D4 104-47(1)
CGT event D4 happens if you enter into a *conservation covenant over land you own.
104-47(2)
The time of the event is when you enter into the covenant.
104-47(3)
You make a *capital gain if the *capital proceeds from entering into the covenant are more than that part of the *cost base of the land that is apportioned to the covenant. You make a *capital loss if those capital proceeds are less than the part of the *reduced cost base of the land that is apportioned to the covenant.
Note:
The capital proceeds from entering into the covenant are modified if you do not receive anything for entering into the covenant: see section 116-105 .
104-47(4)
The part of the *cost base of the land that is apportioned to the covenant is worked out in this way:
| *Cost base of land | × |
*Capital proceeds from entering into the covenant
Those capital proceeds plus the *market value of the land just after you enter into the covenant |
The part of the *reduced cost base of the land that is apportioned to the covenant is worked out similarly.
104-47(5)
The *cost base and *reduced cost base of the land are reduced by the part of the cost base or reduced cost base of the land that is apportioned to the covenant.
Example:
Lisa receives $10,000 for entering into a conservation covenant that covers 15% of the land she owns. Lisa uses the following figures in calculating the cost base of the land that is apportioned to the covenant:
The cost base of the entire land is $200,000.
The market value of the entire land before entering into the covenant is $300,000, and its market value after entering into the covenant is $285,000.
Lisa calculates the cost base of the land that is apportioned to the covenant to be:
$200,000 × 10,000 ÷ [ 10,000 + 285,000] = $6,780
She reduces the cost base of the land by the part that is apportioned to the covenant:
$200,000 − $6,780 = $193,220
Exceptions
104-47(6)
*CGT event D4 does not happen if:
(a) you did not receive any *capital proceeds for entering into the covenant; and
(b) you cannot deduct an amount under Division 31 for entering into the covenant.
Note:
In this case, CGT event D1 will apply.
104-47(7)
A *capital gain or *capital loss you make is disregarded if you *acquired the land before 20 September 1985.
CGT event E1 happens if you create a trust over a *CGT asset by declaration or settlement.
Note:
A change in the trustee of a trust does not constitute a change in the entity that is the trustee of the trust (see subsection 960-100(2) ). This means that CGT event E1 will not happen merely because of a change in the trustee.
104-55(2)
The time of the event is when the trust over the asset is created.
104-55(3)
You make a capital gain if the *capital proceeds from the creation are more than the asset ' s *cost base. You make a capital loss if those capital proceeds are less than the asset ' s *reduced cost base.
Cost base rule
104-55(4)
If you are the trustee of the trust and no beneficiary is absolutely entitled to the asset as against you (disregarding any legal disability), the first element of the asset ' s *cost base and *reduced cost base in your hands is its *market value when the trust is created.
Exceptions
104-55(5)
CGT event E1 does not happen if you are the sole beneficiary of the trust and:
(a) you are absolutely entitled to the asset as against the trustee (disregarding any legal disability); and
(b) the trust is not a unit trust.
104-55(6)
A *capital gain or *capital loss you make is disregarded if you *acquired the asset before 20 September 1985.
CGT event E2 happens if you transfer a *CGT asset to an existing trust.
Note:
A change in the trustee of a trust does not constitute a change in the entity that is the trustee of the trust (see subsection 960-100(2) ). This means that CGT event E2 will not happen merely because of a change in the trustee.
104-60(2)
The time of the event is when the asset is transferred.
104-60(3)
You make a capital gain if the *capital proceeds from the transfer are more than the asset ' s *cost base. You make a capital loss if those capital proceeds are less than the asset ' s *reduced cost base.
104-60(4)
If you are the trustee of the trust and no beneficiary is absolutely entitled to the asset as against you (disregarding any legal disability), the first element of the asset ' s *cost base and *reduced cost base in your hands is its *market value when the asset is transferred.
Exceptions
104-60(5)
CGT event E2 does not happen if you are the sole beneficiary of the trust and:
(a) you are absolutely entitled to the asset as against the trustee (disregarding any legal disability); and
(b) the trust is not a unit trust.
104-60(6)
A *capital gain or *capital loss you make is disregarded if you *acquired the asset before 20 September 1985.
CGT event E3 happens if:
(a) a trust (that is not a unit trust) over a *CGT asset is converted to a unit trust; and
(b) just before the conversion, a beneficiary under the trust was absolutely entitled to the asset as against the trustee (disregarding any legal disability the beneficiary is under).
104-65(2)
The time of the event is when the trust is converted.
104-65(3)
The beneficiary makes a capital gain if the *market value of the asset (when the trust is converted) is more than the asset's *cost base. The beneficiary makes a capital loss if that market value is less than the asset's *reduced cost base.
Exception
104-65(4)
A *capital gain or *capital loss the beneficiary makes is disregarded if it *acquired the asset before 20 September 1985.
CGT event E4 happens if:
(a) the trustee of a trust makes a payment to you in respect of your unit or your interest in the trust (except for *CGT event A1, C2, E1, E2, E6 or E7 happening in relation to it); and
(b) some or all of the payment (the non-assessable part ) is not included in your assessable income.
To avoid doubt, in applying paragraph (b) to work out what part of the payment is included in your assessable income, disregard your share of the trust ' s net income that is subject to the rules in subsection 115-215(3).
Note 1:
Subsections 104-71(1) (tax-exempted amounts), 104-71(3) (tax-free amounts) and 104-71(4) (CGT concession amounts) can affect the calculation of the non-assessable part.
Note 2:
The non-assessable part includes amounts (tax-deferred amounts) associated with the small business 50% reduction, frozen indexation, building allowance and accounting differences in income.
Note 3:
A payment made to you after you stop owning the unit or interest in the trust forms part of the capital proceeds for the CGT event that happened when you stopped owning it.
104-70(1A)
However, CGT event E4 does not happen if the unit or interest mentioned in subsection (1) is a unit or interest in an *AMIT.
104-70(2)
The payment can include giving property (see section 103-5).
104-70(3)
The time of the event is:
(a) just before the end of the income year in which the trustee makes the payment ; or
(b) if another *CGT event (except CGT event E4) happens in relation to the unit or interest or part of it after the trustee makes the payment but before the end of that income year - just before the time of that other CGT event.
104-70(4)
You make a capital gain if the sum of the amounts of the non-assessable parts of the payments made in the income year made by the trustee in respect of the unit or interest is more than its *cost base.
Note:
You cannot make a capital loss.
104-70(5)
If you make a *capital gain, the *cost base and *reduced cost base of the unit or interest are reduced to nil.
Note:
A capital gain under former section 160ZM of the Income Tax Assessment Act 1936 is also taken into account for the purposes of this subsection: see subsection 104-70(3) of the Income Tax (Transitional Provisions) Act 1997 .
104-70(6)
However, if that sum is not more than the *cost base:
(a) the cost base is reduced by that sum; and
(b) the *reduced cost base is reduced by that sum (without the adjustment in subsection 104-71(3)).
Example:
Mandy owns units in a unit trust that she bought on 1 July 1998 for $10 each. During the 1999-2000 income year the trustee makes 4 non-assessable payments of $0.50 per unit. If at the end of the income year Mandy ' s cost base for each unit (including indexation) would otherwise be $10.10, the payments require that it be reduced by $2, giving a new cost base of $8.10. If Mandy sells the units (CGT event A1) in the 2000-01 year for more than their cost base at that time, she will make a capital gain equal to the difference.
Note:
Cost base adjustments are made only under Subdivision 125-B if there is a roll-over under that Subdivision for CGT event E4 happening as a result of a demerger.
Exceptions
104-70(7)
A *capital gain you make from *CGT event E4 is disregarded if you *acquired the *CGT asset that is the unit or interest before 20 September 1985.
104-70(8)
CGT event E4 does not happen to the extent that the payment is reasonably attributable to a *LIC capital gain.
104-70(9)
CGT event E4 does not happen for a payment made to a foreign resident to the extent that the payment is reasonably attributable to *ordinary income or *statutory income from sources other than an *Australian source. However, this exception does not apply if the trust is a *public trading trust.
In working out the non-assessable part referred to in section 104-70 , disregard any part of the payment that is:
(a) *non-assessable non-exempt income; or
(b) (Omitted by No 66 of 2003)
(c) paid from an amount that has been assessed to the trustee; or
(d) paid from an amount that is *personal services income included in your assessable income, or another entity ' s assessable income, under section 86-15 ; or
(da) a payment to which paragraph 118-37(1)(ba) applies (about compensation paid through a trust); or
(db) a payment to which subsection 118-300(1A) applies (about insurance and annuity payments paid through a trust); or
(e) repaid by you; or
(f) compensation you paid that can reasonably be regarded as a repayment of all or part of the payment; or
(g) an amount referred to in section 152-125 (which exempts a payment of a small business 15-year exemption amount) as an exempt amount.
The payment can include giving property (see section 103-5 ).
104-71(2)
However, the non-assessable part is not reduced by any part of the payment that you candeduct.
104-71(3)
The amount of the non-assessable part referred to in section 104-70 is adjusted to exclude any part of it that is attributable to:
(a) an amount that is not included in the assessable income of an entity because of section 124ZM or 124ZN (which exempt income arising from *shares in a *PDF) of the Income Tax Assessment Act 1936 ; or
(aa) an amount that is not included in the assessable income of an entity because of section 51-52 or subsection 51-54(1) or (1A) of this Act; or
(b) *capital proceeds from a *CGT event that happens in relation to *shares in a company that was a *PDF when that event happened; or
(c) capital proceeds from a CGT event if:
(i) the CGT event relates to an *eligible venture capital investment; and
(ii) the share of a partner in an ESVCLP in a *capital gain or *capital loss from the CGT event is disregarded under section 118-407 ; or
(d) that part of the capital proceeds from a CGT event, relating to an eligible venture capital investment, for which there is a partial exemption under section 118-408 ; or
(e) capital proceeds from a CGT event if a capital gain made from the event may be disregarded under subsection 360-50(4) .
104-71(4)
The amount of the non-assessable part referred to in section 104-70 for an entity shown in the table is adjusted to exclude the amount or amounts applicable to the entity under the table.
| Adjustment of non-assessable part | |||
| Item | Entity | Amount excluded | |
| 1 | Any entity | So much of the amount of a *discount capital gain excluded from the *net capital gain of the trust making the payment because of step 3 of the method statement in subsection 102-5(1) and that is reflected in the payment to the entity | |
| 2 | Individual, company or trust that has a *capital loss or *net capital loss to reduce its *capital gain described in paragraph 115-215(3)(b) where the trust gain referred to in subsection 115-215(3) is reduced under Subdivision 152-C | ½ of the amount of the capital loss or net capital loss | |
| 3 | Individual or trust that has a *capital loss or *net capital loss to reduce its *capital gain described in paragraph 115-215(3)(c) | ¼ of the amount of the capital loss or net capital loss | |
| 4 | Company that has a *capital loss or *net capital loss to reduce its *capital gain described in paragraph 115-215(3)(c) where: | The excess of the reduction amount over the Subdivision 152-C reduction to the paragraph 115-215(3)(c) amount | |
| (a) | that capital loss or net capital loss is more than ½ of the trust gain referred to in subsection 115-215(3); and | ||
| (b) | that trust gain is reduced by an amount (the reduction amount) under Subdivision 152-C | ||
| 5 | *Complying superannuation entity that has a *capital loss or *net capital loss to reduce its *capital gain described in paragraph 115-215(3)(b) where: | ½ of the amount of the capital loss or net capital loss | |
| (a) | that capital loss or net capital loss is more than ½ of the trust gain referred to in subsection 115-215(3); and | ||
| (b) | that trust gain is reduced under Subdivision 152-C | ||
| 6 | *Complying superannuation entity that has a *capital loss or *net capital loss to reduce its *capital gain described in paragraph 115-215(3)(c) where: | The excess of the reduction amount over the Subdivision 152-C reduction to the paragraph 115-215(3)(c) amount | |
| (a) | that capital loss or net capital loss is more than ¼ of the trust gain referred to in subsection 115-215(3); and | ||
| (b) | that trust gain is reduced by an amount (also the reduction amount) under Subdivision 152-C | ||
| 7 | Any entity receiving the payment where the trust making the payment, or another trust that is part of the same *chain of trusts, has a *capital loss or *net capital loss to reduce its *capital gain described in subsection 115-215(3) | The proportion of the capital loss or net capital loss reflected in the payment |
Example:
Claude is paid $100 by the trustee of a unit trust. The trustee advises that the amount comprises $50 CGT discount, $25 small business 50% reduction and $25 net income from a capital gain made by the trust.
In applying the rules in Subdivision 115-C of the Income Tax Assessment Act 1997 , Claude reduces his capital gain of $100 by a $20 net capital loss from an earlier year. He then reduces the remaining $80 gain by $40 (CGT discount) and $20 (small business 50% reduction) leaving a net capital gain of $20.
In applying the rules in CGT event E4, the $100 payment is reduced by $25 (being the amount assessed under section 97 of the Income Tax Assessment Act 1936 ). It is further reduced by $50 under item 1 of the table and $5 under item 3. Claude ' s non-assessable part is $20.
Effectively, CGT event E4 applies to the $20 small business 50% reduction allowed to Claude in applying Subdivision 115-C of the Income Tax Assessment Act 1997 .
Note 1:
Step 3 of the method statement in subsection 102-5(1) (see table item 1) reduces by 50% the trust ' s discount capital gains remaining after applying capital losses and earlier net capital losses. That 50% is excluded from the trust ' s net capital gain.
Note 2:
Subdivision 152-C (small business 50% reduction - see table items 2, 3, 4, 5, 6 and 7) reduces by 50% the trust ' s capital gains or discount capital gains remaining after applying step 3 of the method statement in subsection 102-5(1) . That 50% is also excluded from the trust ' s net capital gain.
Note 3:
Paragraph 115-215(3)(b) or (c) (see table items 2, 3, 4, 5 and 6) treats a beneficiary as having an extra capital gain if an amount of the trust ' s net income that is included in the beneficiary ' s assessable income is attributable to trust gains that were reduced by step 3 of the method statement in subsection 102-5(1) and/or the small business 50% reduction.
104-71(5)
A chain of trusts consists of 2 or more trusts where at least one of these conditions is satisfied for each of the trusts:
(a) the trustee of the trust owns units or interests in another of the trusts; or
(b) the trustee of another of the trusts owns units or interests in the trust.
104-71(6)
Item 7 of the table in subsection (4) does not apply if the entity making the payment is a *managed investment trust.
A *capital gain you make under subsection 104-70(4) is reduced if:
(a) you are the trustee of another trust that is a *fixed trust and is not a *complying superannuation entity; and
(b) you are taken to have a *capital gain under paragraph 115-215(3)(b) or (c) (your notional gain ) in respect of a corresponding trust gain (the trust gain ); and
(c) some or all (the attributable amount ) of the total of the non-assessable parts referred to in subsection 104-70(4) is attributable to proceeds from the trust gain.
104-72(2)
The *capital gain is reduced (but not below 0) by the lesser of:
(a) your notional gain; and
(b) the attributable amount.
SECTION 104-75 Beneficiary becoming entitled to a trust asset: CGT event E5 104-75(1)
CGT event E5 happens if a beneficiary becomes absolutely entitled to a *CGT asset of a trust (except a unit trust or a trust to which Division 128 applies) as against the trustee (disregarding any legal disability the beneficiary is under).
Note:
Division 128 deals with the effect of death.
104-75(2)
The time of the event is when the beneficiary becomes absolutely entitled to the asset.
Trustee makes a capital gain or loss
104-75(3)
The trustee makes a capital gain if the *market value of the asset (at the time of the event) is more than its *cost base. The trustee makes a capital loss if that market value is less than the asset ' s *reduced cost base.
Exception for trustee
104-75(4)
A *capital gain or *capital loss the trustee makes is disregarded if it *acquired the asset before 20 September 1985.
Note:
There is also an exception for employee share trusts: see section 130-80 .
Beneficiary makes a capital gain or loss
104-75(5)
The beneficiary makes a capital gain if the *market value of the asset (at the time of the event) is more than the *cost base of the beneficiary ' s interest in the trust capital to the extent it relates to the asset.
The beneficiary makes a capital loss if that market value is less than the *reduced cost base of that beneficiary ' s interest in the trust capital to the extent it relates to the asset.
Exceptions for beneficiary
104-75(6)
A *capital gain or *capital loss the beneficiary makes is disregarded if:
(a) the beneficiary *acquired the *CGT asset that is the interest (except by way of an assignment from another entity) for no expenditure; or
(b) the beneficiary acquired it before 20 September 1985; or
(c) all or part of the capital gain or capital loss the trustee makes from the *CGT event is disregarded under Subdivision 118-B (about main residence).
Expenditure can include giving property: see section 103-5 .
Note 1:
For provisions affecting the application of Subdivision 118-B to the trustee, see sections 118-215 to 118-230 .
Note 2:
There are also exceptions for employee share trusts: see sections 130-80 and 130-90 .
SECTION 104-80 Disposal to beneficiary to end income right: CGT event E6 104-80(1)
CGT event E6 happens if the trustee of a trust (except a unit trust or a trust to which Division 128 applies) *disposes of a *CGT asset of the trust to a beneficiary in satisfaction of the beneficiary's right, or part of it, to receive *ordinary income or *statutory income from the trust.
Note:
Division 128 deals with the effect of death.
104-80(2)
The time of the event is when the disposal occurs.
Trustee makes a capital gain or loss
104-80(3)
The trustee makes a capital gain if the *market value of the asset (at the time of the disposal) is more than its *cost base. It makes a capital loss if that market value is less than the asset's *reduced cost base.
Exception for trustee
104-80(4)
A *capital gain or *capital loss the trustee makes is disregarded if it *acquired the asset before 20 September 1985.
Beneficiary makes a capital gain or loss
104-80(5)
The beneficiary makes a capital gain if the *market value of the asset (at the time of the disposal) is more than the *cost base of the right, or the part of it. The beneficiary makes a capital loss if that market value is less than the *reduced cost base of the right or part.
Note:
If the beneficiary did not pay anything for the right, the market value substitution rule does not apply: see section 112-20 .
Exception for beneficiary
104-80(6)
A *capital gain or *capital loss the beneficiary makes is disregarded if it *acquired the *CGT asset that is the right before 20 September 1985.
CGT event E7 happens if the trustee of a trust (except a unit trust or a trust to which Division 128 applies) *disposes of a *CGT asset of the trust to a beneficiary in satisfaction of the beneficiary's interest, or part of it, in the trust capital.
Note:
Division 128 deals with the effect of death.
104-85(2)
The time of the event is when the disposal occurs.
Trustee makes a capital gain or loss
104-85(3)
The trustee makes a capital gain if the *market value of the asset (at the time of the disposal) is more than its *cost base. It makes a capital loss if that market value is less than the asset's *reduced cost base.
Exception for trustee
104-85(4)
A *capital gain or *capital loss the trustee makes is disregarded if it *acquired the asset before 20 September 1985.
Beneficiary makes a capital gain or loss
104-85(5)
The beneficiary makes a capital gain if the *market value of the asset (at the time of the disposal) is more than the *cost base of the interest, or the part of it, being satisfied. The beneficiary makes a capital loss if that market value is less than the *reduced cost base of that interest or part.
Exceptions for beneficiary
104-85(6)
A *capital gain or *capital loss the beneficiary makes is disregarded if:
(a) the beneficiary *acquired the *CGT asset that is the interest (except by way of an assignment from another entity) for no expenditure; or
(b) the beneficiary acquired it before 20 September 1985; or
(c) all or part of the capital gain or capital loss the trustee makes from the *CGT event is disregarded under Subdivision 118-B (about main residence).
Expenditure can include giving property: see section 103-5 .
Note 1:
For provisions affecting the application of Subdivision 118-B to the trustee, see sections 118-215 to 118-230 .
Note 2:
There is also an exception for employee share trusts: see section 130-90 .
CGT event E8 happens if:
(a) you are the beneficiary under a trust (except a unit trust or a trust to which Division 128 applies); and
(b) you did not give any money or property to *acquire the *CGT asset that is your interest in the trust capital and you did not acquire it by assignment; and
(c) you *dispose of the interest, or part of it (but not to the trustee).
Note:
Division 128 deals with the effect of death.
104-90(2)
The time of the event is:
(a) when you enter into the contract for the *disposal; or
(b) if there is no contract - when you stop owning the interest or part.
Note 1:
You work out if you have made a capital gain or capital loss under sections 104-95 and 104-100 .
Note 2:
There is a special indexation rule for this event: see section 114-10 .
SECTION 104-95 Making a capital gain
You are the only beneficiary
104-95(1)
If you are the only beneficiary with an interest in the trust capital and you *dispose of that interest, you work out if you have made a *capital gain in this way: Working out your capital gain
Step 1.
Work out the *capital proceeds from the *disposal.
Step 2.
Work out the *net asset amount.
Step 3.
If the Step 1 amount is greater , you make a capital gain equal to the difference.
104-95(2)
The net asset amount is worked out in this way: Working out the net asset amount
Step 1.
Work out the total of the *cost bases (at the time of the disposal) of the *CGT assets that the trustee *acquired on or after 20 September 1985 and that formed part of the trust capital at that time.
Step 2.
Work out the total of the *market values (at the time of the disposal) of the *CGT assets that the trustee *acquired before 20 September 1985 and that formed part of the trust capital at that time.
Step 3.
Work out the amount of money that formed part of the trust capital at the time of the disposal.
Step 4.
Add up the Step 1, 2 and 3 amounts.
Step 5.
Subtract from the Step 4 amount any liabilities of the trust at the time of the disposal.
Step 6.
The result is the net asset amount .
Example:
You dispose of your interest in the trust capital for $10,000 (the capital proceeds).
The total of the cost bases of the CGT assets that the trustee acquired on or after 20 September 1985 is $6,000.
The total of the market values of the CGT assets that the trustee acquired before 20 September 1985 is $2,500.
There is $1,000 in the trust. The trust liabilities are $500.
The net asset amount is:
$6,000 + $2,500 + $1,000 − $500 = $9,000 You make a capital gain of:
$10,000 − $9,000 = $1,000
104-95(3)
If you *dispose of only part of that interest, any *capital gain is worked out using the method statement in subsection (1), except that the Step 2 amount is replaced by:
| The net asset
amount |
× |
The part of the interest
you are disposing of (expressed as a fraction) |
Example:
To vary the example in subsection (2), suppose you dispose of 50% of your interest for $5,000 (the capital proceeds).
The Step 2 amount becomes:
$9,000 × 50% = $4,500 You make a capital gain of:
$5,000 − $4,500 = $500
There is more than one beneficiary
104-95(4)
If you are not the only beneficiary with an interest in the trust capital and you *dispose of your interest, any *capital gain is worked out using the method statement in subsection (1), except that the Step 2 amount is replaced by:
| The net asset
amount |
× | Your interest in the trust capital
(expressed as a fraction) |
Example:
To vary the examplein subsection (2), suppose you have a 20% interest in the trust capital and you dispose of it for $4,000 (the capital proceeds).
The Step 2 amount becomes:
$9,000 × 20% = $1,800 You make a capital gain of:
$4,000 − $1,800 = $2,200
104-95(5)
If you are not the only beneficiary with an interest in the trust capital and you *dispose of part of your interest, any *capital gain is worked out using the method statement in subsection (1), except that the Step 2 amount is replaced by:
| The net asset
amount |
× | Your interest in
the trust capital (expressed as a fraction) |
× | The part of the interest
you are disposing of (expressed as a fraction) |
Example:
To vary the example in subsection (2), suppose you have a 50% interest in the trust capital. You dispose of 20% of it for $1,000 (the capital proceeds).
The Step 2 amount becomes:
$9,000 × 50% × 20% = $900 You make a capital gain of:
$1,000 − $900 = $100
Exception
104-95(6)
A *capital gain you make is disregarded if you *acquired the *CGT asset that is the interest in the trust capital before 20 September 1985.
Note:
You can make a gain if you dispose of an interest in a trust that you acquired before that day: see CGT event K6.
You are the only beneficiary
104-100(1)
If you are the only beneficiary with an interest in the trust capital and you *dispose of that interest, you work out if you have made a *capital loss in this way: Working out your capital loss
Step 1.
Work out the *capital proceeds from the *disposal.
Step 2.
Work out the *reduced net asset amount.
Step 3.
If the Step 1 amount is less , you make a capital loss equal to the difference.
104-100(2)
The reduced net asset amount is worked out in this way: Working out the reduced net asset amount
Step 1.
Work out the total of the *reduced cost bases (at the time of the disposal) of the *CGT assets that the trustee *acquired on or after 20 September 1985 and that formed part of the trust capital at that time.
Step 2.
Work out the total of the *market values (at the time of the disposal) of the *CGT assets that the trustee *acquired before 20 September 1985 and that formed part of the trust capital at that time.
Step 3.
Work out the amount of money that formed part of the trust capital at the time of the disposal.
Step 4.
Add up the Step 1, 2 and 3 amounts.
Step 5.
Subtract from the Step 4 amount any liabilities of the trust at the time of the disposal.
Step 6.
The result is the reduced net asset amount .
104-100(3)
If you *dispose of only part of that interest, any *capital loss is worked out using the method statement in subsection (1), except that the Step 2 amount is replaced by:
| The reduced net asset amount | × | The part of the interest
you are disposing of (expressed as a fraction) |
There is more than one beneficiary
104-100(4)
If you are not the only beneficiary with an interest in the trust capital and you *dispose of your interest, any *capital loss is worked out using the method statement in subsection (1), except that the Step 2 amount is replaced by:
| The reduced net asset amount | × | Your interest in the trust capital
(expressed as a fraction) |
104-100(5)
If you are not the only beneficiary with an interest in the trust capital and you *dispose of part of your interest, any *capital loss is worked out using the method statement in subsection (1), except that the Step 2 amount is replaced by:
| The reduced net
asset amount |
× | Your interest in
the trust capital (expressed as a fraction) |
× | The part of the interest
you are disposing of (expressed as a fraction) |
Exception
104-100(6)
A *capital loss you make is disregarded if you *acquired the *CGT asset that is the interest in the trust capital before 20 September 1985.
CGT event E9 happens if:
(a) you agree for consideration that when property comes into existence you will hold it on trust; and
(b) at the time of the agreement, no potential beneficiary under the trust has a beneficial interest in the rights created by the agreement.
104-105(2)
The time of the event is when you made the agreement.
104-105(3)
You make a capital gain if the *market value the property would have had if it had existed when you made the agreement is more than any *incidental costs you incurred that relate to the event. You make a capital loss if that market value is less .
104-105(4)
The costs can include giving property: see section 103-5 . However, they do not include an amount you have received as *recoupment of them and that is not included in your assessable income, or an amount to the extent that you have deducted or can deduct it.
SECTION 104-107A AMIT - cost base reduction exceeds cost base: CGT event E10 104-107A(1)
CGT event E10 happens if:
(a) you are a *member of an *AMIT in respect of an income year because you have a *CGT asset that is your unit or your interest in the AMIT; and
(b) either:
(i) the *cost base of that asset is reduced under subsection 104-107B(2) during the income year; or
(ii) the cost base of that asset is nil at the start of the income year; and
(c) the asset ' s *AMIT cost base net amount for the income year is the excess mentioned in paragraph 104-107C(a) ; and
(d) the asset ' s AMIT cost base net amount for the income year exceeds the cost base of the asset.
104-107A(2)
The time of the event is:
(a) if subparagraph (1)(b)(i) applies - the time at which the reduction occurs under section 104-107B ; or
(b) if subparagraph (1)(b)(ii) applies - the time at which the *cost base would have been reduced under subsection 104-107B(2) during the income year if the cost base had been greater than nil at the start of the income year.
104-107A(3)
You make a capital gain equal to:
(a) if the *cost base of the asset is nil - the excess mentioned in paragraph 104-107C(a) ; or
(b) if the cost base of the asset is not nil - the excess mentioned in paragraph (1)(d) of this section.
Note 1:
If you make a capital gain, the cost base and reduced cost base of the CGT asset are reduced to nil (see paragraph 104-107B(2)(a) ).
Note 2:
You cannot make a capital loss.
Exceptions
104-107A(4)
A *capital gain you make from *CGT event E10 is disregarded if you *acquired the *CGT asset that is the unit or interest before 20 September 1985.
This section applies if you are a *member of an *AMIT in respect of an income year because you have a *CGT asset that is your unit or your interest in the AMIT.
104-107B(2)
If the *CGT asset ' s *AMIT cost base net amount for the income year is the excess mentioned in paragraph 104-107C(a) :
(a) in a case where that AMIT cost base net amount exceeds the *cost base of the asset - reduce the cost base and *reduced cost base of the asset to nil; or
(b) otherwise - reduce the cost base and reduced cost base of the asset by that AMIT cost base net amount.
Note:
If that AMIT cost base net amount exceeds the cost base of the asset, CGT event E10 will happen (see section 104-107A ).
104-107B(3)
If the *CGT asset ' s *AMIT cost base net amount for the income year is the shortfall mentioned in paragraph 104-107C(b) , increase the *cost base and *reduced cost base of the asset by that AMIT cost base net amount.
104-107B(4)
The time of the reduction or increase is:
(a) unless paragraph (b) applies - just before the end of the income year; or
(b) if a *CGT event happens to the *CGT asset at a time when you hold it before the end of the income year - just before the time of that CGT event.
The *CGT asset ' s AMIT cost base net amount for the income year is:
(a) if the CGT asset ' s *AMIT cost base reduction amount for the income year exceeds the CGT asset ' s *AMIT cost base increase amount for the income year - the amount of the excess; or
(b) if the CGT asset ' s AMIT cost base reduction amount for the income year falls short of the CGT asset ' s AMIT cost base increase amount for the income year - the amount of the shortfall.
The *CGT asset ' s AMIT cost base reduction amount for the income year is the total of:
(a) money, and the *market value of any property, if:
(i) you start to have a right to receive the money or property from the trustee of the *AMIT in the income year; and
(ii) that right is indefeasible (disregarding section 276-55 ) or is reasonably likely not to be defeated; and
(b) all amounts of *tax offset that you have for the income year in respect of the AMIT because of the operation of section 276-80 ;
to the extent that the total is reasonably attributable to the CGT asset.
104-107D(2)
If:
(a) *CGT event A1, C2, E1, E2, E6 or E7 happens to the *CGT asset before the end of the income year; and
(b) as a result, the time of the reduction or increase mentioned in subsection 104-107B(4) is just before the time of that CGT event;
do not include in the CGT asset ' s AMIT cost base reduction amount for the income year any *capital proceeds from that CGT event.
The *CGT asset ' s AMIT cost base increase amount for the income year is the total of the 2 amounts set out in the following subsections.
First amount - total of amounts not related to capital gains
104-107E(2)
The first amount is the total of all of the following amounts included in your assessable income or *non-assessable non-exempt income for the income year in respect of the *AMIT, to the extent that they are reasonably attributable to the *CGT asset:
(a) amounts so included because of the operation of section 276-80 ;
(b) amounts so included otherwise than because of the operation of section 276-80 (as reduced in accordance with section 276-100 ).
104-107E(3)
For the purposes of subsection (2), disregard the *AMIT ' s *net capital gain (if any) for the income year.
Second amount - total of amounts related to capital gains
104-107E(4)
The second amount is the total of each *determined member component of a character relating to *capital gains that:
(a) you have for the income year in respect of the *AMIT; and
(b) is taken into account under section 276-80 .
Residence assumption
104-107E(5)
For the purposes of working out amounts under subsections (2) and (4), assume that you are an Australian resident.
Subsections (2) and (3) apply if:
(a) you start to have a right to receive any money or any property from the trustee of an *AMIT in an income year; and
(b) the right is indefeasible (disregarding section 276-55 ) or is reasonably likely not to be defeated; and
(c) the right is not remuneration or consideration for you providing finance, services, goods or property to the trustee of the AMIT or to another person; and
(d) the right is reasonably attributable to a *CGT asset that is a *membership interest in the AMIT; and
(e) the CGT asset is neither *trading stock nor a *Division 230 financial arrangement; and
(f) as a result of you starting to have the right, the CGT asset ' s *AMIT cost base reduction amount for the income year is increased because of the operation of section 104-107D .
104-107F(2)
These provisions do not apply to you starting to have the right:
(a) sections 6-5 (about *ordinary income), 8-1 (about amounts you can deduct), 15-15 and 25-40 (about profit-making undertakings or plans);
(b) sections 25A and 52 of the Income Tax Assessment Act 1936 (about profit-making undertakings or schemes).
104-107F(3)
Section 6-10 (about *statutory income) does not apply to you starting to have the right except so far as that section applies in relation to section 102-5 (about net capital gains).
This section applies if:
(a) you are a *member of an *AMIT in respect of an income year because you have a *CGT asset that is your unit or your interest in the AMIT; and
(b) the CGT asset is a *revenue asset; and
(c) the CGT asset is not a *Division 230 financial arrangement.
104-107G(2)
Make the adjustments in subsection (3) for the purposes of working out an amount included in your assessable income (or working out an amount treated as a deduction) under any of these provisions:
(a) sections 6-5 (about *ordinary income), 8-1 (about amounts you can deduct), 15-15 and 25-40 (about profit-making undertakings or plans);
(b) sections 25A and 52 of the Income Tax Assessment Act 1936 (about profit-making undertakings or schemes).
104-107G(3)
If the *CGT asset ' s *AMIT cost base net amount for the income year is the excess mentioned in paragraph 104-107C(a) :
(a) in a case where that AMIT cost base net amount exceeds the cost of the asset - reduce the cost of the asset to nil; or
(b) otherwise - reduce the cost of the asset by that AMIT cost base net amount.
Note:
If the AMIT cost base net amount exceeds the cost of the asset, see section 104-107H .
104-107G(4)
If the *CGT asset ' s *AMIT cost base net amount for the income year is the shortfall mentioned in paragraph 104-107C(b) , increase the cost of the asset by that AMIT cost base net amount.
104-107G(5)
The time of the reduction or increase is:
(a) unless paragraph (b) applies - just before the end of the income year; or
(b) if a *CGT event happens to the *CGT asset at a time when you hold it before the end of the income year - just before the time of that CGT event.
104-107G(6)
For the purposes of this section and section 104-107H , in working out the *CGT asset ' s *AMIT cost base net amount for the income year, disregard any right that you start to have in the income year if:
(a) the right is for you to receive any money or any property from the trustee of the *AMIT; and
(b) the right is remuneration or consideration for you providing finance, services, goods or property to the trustee of the AMIT or to another person.
104-107G(7)
For the purposes of section 118-20 , treat this section as being outside of this Part.
Note:
Section 118-20 deals with reducing capital gains if an amount is otherwise assessable.
Subsection (2) applies if:
(a) paragraph 104-107G(3)(a) applies in respect of the *CGT asset ' s *AMIT cost base net amount for the income year; and
(b) that AMIT cost base net amount exceeds the cost of the *CGT asset just before the time mentioned in subsection 104-107G(5) .
104-107H(2)
Include in your assessable income for the income year in which that time occurs:
(a) if the cost of the *CGT asset was nil just before that time - the cost reduction amount; or
(b) otherwise - the excess mentioned in paragraph (1)(b).
104-107H(3)
Subsection (2) applies despite subsection 104-107F(3) .
104-107H(4)
For the purposes of section 118-20 , treat this section as being outside of this Part.
Note:
Section 118-20 deals with reducing capital gains if an amount is otherwise assessable.
CGT event F1 happens if a lessor grants, renews or extends a lease.
Note 1:
Other CGT events can apply to leases. An assignment of a lease is an example of CGT event A1.
Note 2:
There are special rules that apply to some lease transactions: see Division 132 .
104-110(2)
The time of the event is:
(a) for the grant of a lease:
(i) when the contract for the lease is entered into; or
(ii) if there is no contract - at the start of the lease; or
(b) for a renewal or extension - at the start of the renewal or extension.
104-110(3)
The lessor makes a capital gain if the *capital proceeds from the grant, renewal or extension are more than the expenditure it incurred on the grant, renewal or extension. It makes a capital loss if those capital proceeds are less .
104-110(4)
The expenditure can include giving property: see section 103-5 . However, it does not include an amount you have received as *recoupment of it and that is not included in your assessable income, or an amount to the extent that you have deducted or can deduct it.
Exception
104-110(5)
The lessor can choose to apply section 104-115 to certain long term leases. If it does so, this section does not apply.
CGT event F2 happens if:
(a) a lessor grants a lease over land (whether or not the lessor owns an estate in fee simple in the land), or renews or extends a lease over land; and
(b) the lease, renewal or extension is for at least 50 years and:
(i) at the time of the grant, renewal or extension, it was reasonable to expect that it would continue for at least 50 years; and
(ii) the terms of the lease, renewal or extension as they apply to the lessee are substantially the same as those under which the lessor owned the land or held a lease of the land; and
(c) the lessor chooses to apply this section instead of section 104-110 .
Note:
Section 103-25 tells you when the choice must be made.
104-115(2)
The time of the event is when the lessor grants the lease, or at the start of the renewal or extension, as appropriate.
104-115(3)
The lessor makes a capital gain if the *capital proceeds from the event are more than the *cost base of the lessor ' s interest in the land. The lessor makes a capital loss if those capital proceeds are less than the *reduced cost base of that interest.
Exceptions
104-115(4)
A *capital gain or *capital loss the lessor makes is disregarded if:
(a) it *acquired the *CGT asset that is the land, or the lease to the lessor was granted, before 20 September 1985; or
(b) the lease to the lessor has been renewed or extended and the last renewal or extension started before that day.
Note:
For any later CGT event that happens to the land or the lessor ' s lease of it: see section 132-10 .
CGT event F3 happens if a lessor incurs expenditure in getting the lessee's agreement to vary or waive a term of the lease. The lessor makes a capital loss equal to the amount of expenditure it incurred. (The expenditure can include giving property: see section 103-5 .)
104-120(2)
The time of the event is when the term is varied or waived.
Exception
104-120(3)
However, this event does not apply to expenditure for a lease to which the lessor has chosen to apply section 104-115 .
CGT event F4 happens if a lessee receives a payment from the lessor for agreeing to vary or waive a term of the lease.
The payment can include giving property: see section 103-5 .
104-125(2)
The time of the event is when the term is varied or waived.
104-125(3)
The lessee makes a capital gain if the *capital proceeds from the event are more than the lease's *cost base (at the time of the event). If the lessee makes a *capital gain, the lease's cost base is also reduced to nil.
Note:
The lessee cannot make a capital loss.
104-125(4)
On the other hand, if those *capital proceeds are less , the lease's *cost base is reduced by that amount at the time of the event.
Example:
On 1 January 1999 a lessee enters a lease. On 1 May 1999 the lessee agrees to waive a term. The lessor pays the lessee $1,000 for this.
If the lease's cost base at the time of the waiver is $2,500, it is reduced from $2,500 to $1,500.
On 1 September 1999 the lessee agrees to waive another term. The lessor pays the lessee $2,000 for this.
If the lease's cost base at the time of the waiver is $1,500, the lessee makes a capital gain of $500, and the cost base is reduced to nil.
Exceptions
104-125(5)
A *capital gain the lessee makes is disregarded if:
(a) the lease was granted before 20 September 1985; or
(b) for a lease that has been renewed or extended - the start of the last renewal or extension occurred before that day.
CGT event F5 happens if a lessor receives a payment from the lessee for agreeing to vary or waive a term of the lease.
The payment can include giving property: see section 103-5 .
104-130(2)
The time of the event is when the term is varied or waived.
104-130(3)
The lessor makes a capital gain if the *capital proceeds from the event are more than the expenditure the lessor incurs in relation to the variation or waiver. The lessor makes a capital loss if those capital proceeds are less .
Example:
You own a shopping centre. The lessee of a shop in the centre pays you $10,000 for agreeing to change the terms of its lease. You incur expenses of $1,000 for a solicitor and $500 for a valuer. You make a capital gain of $8,500.
104-130(4)
The expenditure can include giving property: see section 103-5 . However, it does not include an amount you have received as *recoupment of it and that is not included in your assessable income.
Exceptions
104-130(5)
A *capital gain or *capital loss the lessor makes is disregarded if:
(a) the lease was granted before 20 September 1985; or
(b) for a lease that has been renewed or extended - the start of the last renewal or extension occurred before that day.
CGT event G1 happens if:
(a) a company makes a payment to you in respect of a *share you own in the company (except for *CGT event A1 or C2 happening in relation to the share); and
(b) some or all of the payment (the non-assessable part ) is not a *dividend, or an amount that is taken to be a dividend under section 47 of the Income Tax Assessment Act 1936 ; and
(c) the payment is not included in your assessable income.
The payment can include giving property: see section 103-5 .
104-135(1A)
In working out the non-assessable part, disregard any part of the payment that is:
(aa) *non-assessable non-exempt income; or
(a) repaid by you; or
(b) compensation you paid that can reasonably be regarded as a repayment of all or part of the payment; or
(c) an amount referred to in section 152-125 (which exempts a payment of a small business 15-year exemption amount) as an exempt amount.
The payment can include giving property: see section 103-5 .
However, the non-assessable part is not reduced by any part of the payment that you can deduct.
104-135(2)
The time of the event is when the company makes the payment.
104-135(3)
You make a capital gain if the amount of the non-assessable part is more than the *share ' s *cost base. If you make a *capital gain, the share ' s *cost base and *reduced cost base are reduced to nil.
Note 1:
You cannot make a capital loss.
Note 2:
A capital gain under former section 160ZL of the Income Tax Assessment Act 1936 is also taken into account for the purposes of this subsection: see section 104-135 of the Income Tax (Transitional Provisions) Act 1997 .
104-135(4)
However, if the amount of the non-assessable part is not more than the *share ' s *cost base, that cost base and its *reduced cost base are reduced by the amount of the non-assessable part.
Note:
Cost base adjustments are made only under Subdivision 125-B if there is a roll-over under that Subdivision for CGT event G1 happening as a result of a demerger.
Exceptions
104-135(5)
A *capital gain you make is disregarded if you *acquired the *CGT asset that is the *share before 20 September 1985.
104-135(6)
You disregard a payment by a liquidator for the purposes of this section if the company ceases to exist within 18 months of the payment.
Note:
The payment will be part of your capital proceeds for CGT event C2 happening when the share ends.
104-135(7)
You also disregard a payment that is *personal services income included in your assessable income, or another entity ' s assessable income, under section 86-15 .
104-140 (Repealed) SECTION 104-140 Shifts in share values: CGT event G2
(Repealed by No 90 of 2002)
CGT event G3 happens if you own *shares in a company, or financial instruments issued by or created by or in relation to a company, and a liquidator or administrator of the company declares in writing that the liquidator or administrator has reasonable grounds to believe (as at the time of the declaration) that:
(a) for shares - there is no likelihood that shareholders in the company, or shareholders of the relevant class of shares, will receive any further distribution for their shares; or
(b) for financial instruments - the instruments, or a class of instruments that includes instruments of that kind, have no value or have only negligible value.
104-145(2)
The time of the event is when the declaration was made.
104-145(3)
Examples of financial instruments referred to in subsection (1) are:
(a) *debentures, bonds or promissory notes issued by the company; and
(b) loans to the company; and
(c) futures contracts, forward contracts or currency swap contracts relating to the company; and
(d) rights or options to acquire an asset referred to in a preceding paragraph of this subsection; and
(e) rights or options to acquire *shares in the company.
104-145(4)
You can choose to make a capital loss equal to the *reduced cost base of your *shares or financial instruments (as at the time of the declaration).
104-145(5)
If you make the choice, the *cost base and *reduced cost base of the *shares or financial instruments are reduced to nil just after the declaration was made.
Note:
This is for the purpose of working out if you make a capital gain or loss from any later CGT event in relation to the shares or financial instruments.
Exceptions
104-145(6)
You cannot choose to make a *capital loss if:
(a) you *acquired the shares or financial instruments before 20 September 1985; or
(b) the shares or financial instruments were *revenue assets at the time when the declaration was made.
104-145(7)
You cannot choose to make a *capital loss for a *share, or a right to acquire a beneficial interest in a share, if:
(a) you acquired the beneficial interest (the ESS interest ) in the share or right under an *employee share scheme; and
(b) subsequent to an amount being included in your assessable income under Division 83A (about employee share schemes) in relation to the ESS interest, section 83A-310 (about forfeiture) applies in relation to ESS interest.
104-145(8)
(Repealed by No 133 of 2009)
Subdivision 104-H - Special capital receipts SECTION 104-150 Forfeiture of deposit: CGT event H1 104-150(1)
CGT event H1 happens if a deposit paid to you is forfeited because a prospective sale or other transaction does not proceed.
The payment can include giving property: see section 103-5 .
Example:
You decide to sell land. Before entering into a contract of sale, the prospective purchaser pays you a 2 month holding deposit of $1,000.
The negotiations fail and the deposit is forfeited.
104-150(1A)
The amount of the deposit is reduced by any part of the deposit that is:
(a) repaid by you; or
(b) compensation you paid that can reasonably be regarded as a repayment of all or part of the deposit.
The payment can include giving property: see section 103-5 .
104-150(1B)
However, the deposit is not reduced by any part of the payment that you can deduct.
104-150(2)
The time of the event is when the deposit is forfeited.
104-150(3)
You make a capital gain if the deposit is more than the expenditure you incur in connection with the prospective sale or other transaction. You make a capital loss if the deposit is less .
104-150(4)
The expenditure can include giving property: see section 103-5 . However, it does not include an amount you have received as *recoupment of it and that is not included in your assessable income.
Example:
To continue the example: if you gave a lawyer wine worth $400 in connection with the prospective sale, you make a capital gain of:
$1,000 − $400 = $600
SECTION 104-155 Receipt for event relating to a CGT asset: CGT event H2 104-155(1)
CGT event H2 happens if:
(a) an act, transaction or event occurs in relation to a *CGT asset that you own; and
(b) the act, transaction or event does not result in an adjustment being made to the asset ' s *cost base or *reduced cost base.
Example:
You own land on which you intend to construct a manufacturing facility. A business promotion organisation pays you $50,000 as an inducement to start construction early.
No contractual rights or obligations are created by the arrangement.
The payment is made because of an event (the inducement to start construction early) in relation to your land.
Note:
This event does not apply if any other CGT event applies: see section 102-25 .
104-155(2)
The time of the event is when the act, transaction or event occurs.
104-155(3)
You make a capital gain if the *capital proceeds because of the *CGT event are more than the *incidental costs you incurred that relate to the event. You make a capital loss if those capital proceeds are less .
104-155(4)
The costs can include giving property: see section 103-5 . However, they do not include an amount you have received as *recoupment of them and that is not included in your assessable income.
Exceptions
104-155(5)
CGT event H2 does not happen if:
(a) the act, transaction or event is the borrowing of money or the obtaining of credit from another entity; or
(b) the act, transaction or event requires you to do something that is another *CGT event that happens to you; or
(c) a company issues or allots *equity interests or *non-equity shares in the company; or
(d) the trustee of a unit trust issues units in the trust; or
(e) a company grants an option to acquire equity interests, non-equity shares or *debentures in the company; or
(ea) a company grants an option to dispose of *shares in the company to the company; or
(f) the trustee of a unit trust grants an option to acquire units or debentures in the trust; or
(g) a company or a trust that is a member of a *demerger group issues new *ownership interests under a *demerger.
Note:
For demergers, see Division 125 .
Subdivision 104-I - Australian residency ends SECTION 104-160 Individual or company stops being an Australian resident: CGT event I1 104-160(1)
CGT event I1 happens if you stop being an Australian resident.
104-160(2)
The time of the event is when you stop being one.
104-160(3)
You need to work out if you have made a *capital gain or a *capital loss for each *CGT asset that you owned just before the time of the event, except one that is *taxable Australian property:
(a) covered by item 1 or 3 of the table in section 855-15 ; or
(b) covered by item 4 of that table because it is an option or right to *acquire a *CGT asset covered by item 1 or 3 of that table.
104-160(4)
You make a capital gain if the *market value of the asset (at the time of the event) is more than its *cost base. You make a capital loss if that market value is less than the asset ' s *reduced cost base.
104-160(4A)
If the asset is an *indirect Australian real property interest, or an option or right to acquire such an interest, this Part and Part 3-3 apply to the asset as if the first element of the *cost base and *reduced cost base of the asset (just after the time of the event) were its *market value at the time of the event.
104-160(4B)
Subsection (4A) does not apply if the *capital gain or *capital loss you make is disregarded under subsection (5) or (6), or subsection 104-165(2) .
Exceptions
104-160(5)
A *capital gain or *capital loss you make is disregarded if you *acquired the asset before 20 September 1985.
104-160(6)
(Repealed by No 133 of 2009)
SECTION 104-165 Exception for individuals 104-165(1)
(Repealed by No 32 of 2006)
Choosing to disregard making a gain or loss
104-165(2)
If you are an individual, you can choose to disregard making a *capital gain or a *capital loss from all *CGT assets covered by *CGT event I1.
104-165(3)
If you do so choose, each of those assets is taken to be *taxable Australian property until the earlier of:
(a) a *CGT event happening in relation to the asset, if the CGT event involves you ceasing to own the asset;
(b) you again becoming an Australian resident.
Note:
If you are an individual who was in Australia on 6 April 2006, and you remain an Australian resident from that day until you stop being one, and you were an Australian resident for less than 5 years during the 10 years before you stopped being one, see section 104-166 of the Income Tax (Transitional Provisions) Act 1997 .
104-166 (Repealed) SECTION 104-166 Subsection 104-165(1) still applies if you continue to be a short term Australian resident
(Repealed by No 168 of 2006 )
CGT event I2 happens if a trust stops being a *resident trust for CGT purposes.
104-170(2)
The time of the event is when the trust stops being one.
104-170(3)
The trustee needs to work out if it has made a *capital gain or a *capital loss for each *CGT asset that it owned (in the capacity as trustee of the trust) just before the time of the event except one that is *taxable Australian property:
(a) covered by item 1 or 3 of the table in section 855-15 ; or
(b) covered by item 4 of that table because it is an option or right to *acquire a *CGT asset covered by item 1 or 3 of that table.
104-170(4)
The trustee makes a capital gain if the *market value of the asset (at the time of the event) is more than the asset ' s *cost base. The trustee makes a capital loss if that market value is less than the asset ' s *reduced cost base.
104-170(4A)
If the asset is an *indirect Australian real property interest, or an option or right to acquire such an interest, this Part and Part 3-3 apply to the asset as if the first element of the *cost base and *reduced cost base of the asset (just after the time of the event) were its *market value at the time of the event.
104-170(4B)
Subsection (4A) does not apply if the *capital gain or *capital loss the trustee makes is disregarded under subsection (5).
Exception
104-170(5)
A *capital gain or *capital loss the trustee makes is disregarded if it *acquired the asset before 20 September 1985.
CGT event J1 happens if:
(a) there is a roll-over under Subdivision 126-B for a *CGT event (the roll-over event ) that happens in relation to a *CGT asset (the roll-over asset ) involving 2 companies that are members of the same *wholly-owned group; and
(b) the company (the recipient company ) that owns the roll-over asset just after the roll-over stops being a 100% subsidiary of a company in the group in the circumstances set out in subsection (2) or (3); and
(c) at the time of the roll-over, the recipient company was a *100% subsidiary of:
(i) the other company involved in the roll-over event (the originating company ); or
(ii) another member of the same *wholly-owned group.
Note:
If the roll-over was under former section 160ZZO of the Income Tax Assessment Act 1936 , CGT event J1 does not happen if there would not have been a deemed disposal and re-acquisition under that Act: see section 104-175 of the Income Tax (Transitional Provisions) Act 1997 .
104-175(2)
This condition applies if there has been only one roll-over within the *wholly-owned group under Subdivision 126-B involving the roll-over asset.
The recipient company must stop, at a time (the break-up time ) when it still owns the roll-over asset, being a *100% subsidiary of a member of the group (the ultimate holding company ) that is not a 100% subsidiary of any other member of the group at the time of the roll-over event.
104-175(3)
This condition applies if the roll-over event was the last in a series of *CGT events involving the roll-over asset and there was a roll-over within the *wholly-owned group under Subdivision 126-B for all the events.
The recipient company must stop, at a time (also the break-up time ) when it still owns the roll-over asset, being a *100% subsidiary of another member of the group (also the ultimate holding company ) that was not a 100% subsidiary of any other member of the group at the time of the first of the events.
104-175(4)
The time of the event is the break-up time.
104-175(5)
The recipient company makes a capital gain if the roll-over asset ' s *market value (at the break-up time) is more than its *cost base. It makes a capital loss if that market value is less than its *reduced cost base.
Exceptions
104-175(6)
CGT event J1 does not happen if the conditions in section 104-180 or 104-182 are satisfied.
104-175(7)
A *capital gain or *capital loss the recipient company makes is disregarded if the roll-over asset is taken to have been *acquired by it before 20 September 1985 under Subdivision 126-B (except where the roll-over asset has stopped being a *pre-CGT asset, for example, because of Division 149 ).
Note:
CGT event J1 does not happen to a demerged entity or a member of a demerger group if CGT event A1 or C2 happens to a demerging entity under a demerger: see section 125-160 .
Acquisition rule
104-175(8)
The recipient company is taken to have *acquired the roll-over asset at the break-up time.
Cost base adjustment
104-175(9)
The first element of the recipient company ' s *cost base and *reduced cost base of the roll-over asset (just after the break-up time) is its *market value (at the break-up time).
SECTION 104-180 Sub-group break-up 104-180(1)
The condition in subsection (2) must have been satisfied at each time when there is a roll-over within the *wholly-owned group under Subdivision 126-B for a *CGT event happening in relation to the roll-over asset.
104-180(2)
The originating company and the recipient company must have been members of a group of 2 or more companies (the sub-group ) within the *wholly-owned group (excluding the ultimate holding company) for which one of these is satisfied:
(a) if the sub-group consists of 2 companies, either the recipient company is a 100% subsidiary of the other company (the holding company ), or the other company is a 100% subsidiary of the recipient company (also the holding company );
(b) if the sub-group consists of 3 or more companies:
(i) the recipient company is a 100% subsidiary of one of those other companies (also the holding company ) and so are the other companies (except the holding company) in the sub-group; or
(ii) each of the companies in the sub-group (except the recipient company) is a 100% subsidiary of the recipient company (also the holding company ).
104-180(3)
If the roll-over event was the last in a series of *CGT events involving the roll-over asset and there was a roll-over within the *wholly-owned group under Subdivision 126-B for all the events, each company that was the originating company or the recipient company for the purposes of that Subdivision for one of those roll-overs must have been members of the sub-group at the time of each of the roll-overs.
104-180(4)
The conditions in subsection (5) or (6) must be satisfied just after the break-up time.
104-180(5)
If the recipient company was the holding company of the sub-group, none of its *shares can be owned by:
(a) the ultimate holding company; or
(b) a company that is a *100% subsidiary of the ultimate holding company just after the break-up time.
104-180(6)
If the recipient company was not the holding company of the sub-group, no *shares in it or in the holding company can be owned by:
(a) the ultimate holding company; or
(b) a company that is a *100% subsidiary of the ultimate holding company just after the break-up time.
SECTION 104-182 104-182 Consolidated group break-up
*CGT event J1 does not happen if the recipient company ceases to be a *subsidiary member of a *consolidated group at the break-up time (whether or not it becomes a subsidiary member of another consolidated group at that time).
CGT event J2 happens if you choose a small business roll-over under Subdivision 152-E for a *CGT event that happens in relation to a *CGT asset in an income year and:
(a) you *acquire a replacement asset (the replacement asset ), or you incur *fourth element expenditure in relation to a CGT asset (also the replacement asset ), or you do both, by the end of the *replacement asset period; and
(b) the replacement asset is your *active asset at the end of the replacement asset period; and
(c) if the replacement asset is a *share in a company or an interest in a trust, at the end of the replacement asset period:
(i) either you, or an entity *connected with you, is a *CGT concession stakeholder in the company or trust; or
(ii) CGT concession stakeholders in the company or trust have a *small business participation percentage in you of at least 90%; and
(d) a change of a kind specified in subsection (2) or (3) happens after the end of the replacement asset period.
Note 1:
The replacement asset period may be modified or extended, see section 104-190 .
Note 2:
There is an exception: see subsection (8).
Note 3:
There may be 2 or more replacement assets.
Note 4:
CGT event J2 can also happen in relation to a capital gain you rolled-over under Division 17A of former Part IIIA of the Income Tax Assessment Act 1936 or Division 123 of the Income Tax Assessment Act 1997 if the status of the replacement asset changes: see section 104-185 of the Income Tax (Transitional Provisions) Act 1997 .
104-185(2)
For any replacement asset that satisfied paragraph (1)(b) and, if applicable, paragraph (1)(c), the change is:
(a) the asset stops being your *active asset; or
(b) the asset becomes your *trading stock; or
(c) (Repealed by No 12 of 2012)
(d) you start to use the asset solely to produce your *exempt income or *non-assessable non-exempt income.
104-185(3)
In addition, for a *share in a company or an interest in a trust, the change is:
(a) *CGT event G3 or I1 happens in relation to it; or
(b) paragraph (1)(c) stops being satisfied.
Note:
The full list of CGT events is in section 104-5 .
104-185(4)
The time of the event is when the change happens.
104-185(5)
You make a capital gain equal to:
(a) if there is only one replacement asset that satisfied paragraph (1)(b) and, if applicable, paragraph (1)(c) - the amount of the capital gain that you disregarded under Subdivision 152-E (the 152-E amount ); or
(b) if there are 2 or more replacement assets that satisfied paragraph (1)(b) and, if applicable, paragraph (1)(c) and a change of a kind specified in subsection (2) or (3) occurs for all of them - the 152-E amount; or
(c) if there are 2 or more replacement assets that satisfied paragraph (1)(b) and, if applicable, paragraph (1)(c) and such a change occurs for one or more but not all of them - so much (if any) of the 152-E amount as exceeds the sum of the following:
(i) the first element of the *cost base of each of those replacement assets *acquired;
(ii) the *incidental costs you incurred to acquire each of those replacement assets (which can include giving property, see section 103-5 );
in relation to which such a change did not occur.
(iii) the amount of *fourth element expenditure incurred in relation to each of those replacement assets;
104-185(6)
If *CGT event J6 has happened in relation to the small business roll-over under Subdivision 152-E , subsection (5) applies to the 152-E amount reduced by the amount of the capital gain under that event.
104-185(7)
If *CGT event J2 happens again in a later income year in relation to the small business roll-over under Subdivision 152-E , subsection (5) applies to any remaining part of the 152-E amount reduced by the amount of the capital gain under the earlier event.
104-185(8)
CGT event J2 does not happen because of paragraph (2)(a) for a *share in a company or an interest in a trust if the share or interest ceased to be an *active asset only because of changes in the *market values of assets that were owned by the company or trust when you *acquired the share or interest or incurred the *fourth element expenditure.
104-185(9)
You incur fourth element expenditure in relation to a *CGT asset if you incur capital expenditure that is included, under subsection 110-25(5) , in the fourth element of the *cost base of the asset.
If you choose a small business roll-over under Subdivision 152-E for a *CGT event that happens in relation to a *CGT asset in an income year, the replacement asset period is the period:
(a) starting one year before the last CGT event in the income year for which you obtain the roll-over; and
(b) ending at the later of:
(i) 2 years after that last CGT event; and
(ii) if the first-mentioned CGT event happened because you *disposed of the CGT asset - 6 months after the latest time a possible *financial benefit becomes or could become due under a *look-through earnout right relating to the CGT asset and the disposal.
104-190(1)
The replacement asset period is modified if your *capital proceeds for the *CGT event are increased under subsection 116-45(2) or 116-60(3) after the end of that period. Instead, you have until 12 months after you receive those additional proceeds to *acquire a replacement asset, or incur *fourth element expenditure in relation to a *CGT asset, or do both.
Note:
Section 116-45 applies if you do not receive your capital proceeds despite having taken all reasonable steps to get them, and section 116-60 applies if your capital proceeds are misappropriated by your employee or agent.
104-190(2)
The Commissioner may extend the replacement asset period , or that period as modified by subsection (1).
CGT event J4 happens if:
(a) there is a roll-over under Subdivision 124-N for a trust *disposing of a *CGT asset to a company under a trust restructure; and
(b) the trust fails to cease to exist:
(i) within 6 months after the start of the *trust restructuring period; or
(ii) if that is not possible because of circumstances outside the control of the trustee - as soon as practicable after the end of that 6 month period; and
(c) the company owns the asset when the failure happens.
Example:
Circumstances would be outside the control of the trustee if the trustee is involved in litigation concerning the trust and cannot wind up the trust until the litigation is finished.
104-195(2)
CGT event J4 also happens if:
(a) there is a roll-over under Subdivision 124-N for an entity (the shareholding entity ) receiving a *share in a company in exchange for a unit or interest in a trust under a trust restructure; and
(b) the trust fails to cease to exist:
(i) within 6 months after the start of the *trust restructuring period; or
(ii) if that is not possible because of circumstances outside the control of the trustee - as soon as practicable after the end of that 6 month period; and
(c) the shareholding entity owns the share when the failure happens.
104-195(3)
The time of the event is when the failure to cease to exist happens.
104-195(4)
The company makes a capital gain if the *CGT asset ' s *market value at the time the company *acquired the asset is more than its *cost base at that time. The company makes a capital loss if that market value is less than the asset ' s *reduced cost base at that time.
104-195(5)
This Part and Part 3-3 apply to the company from just after the time of the event as if the first element of the *cost base and *reduced cost base of the asset were its *market value at the time the company *acquired the asset.
104-195(6)
The shareholding entity makes a capital gain if the *share ' s *market value at the time the entity *acquired the share is more than its *cost base at that time. The shareholding entity makes a capital loss if that market value is less than the share ' s *reduced cost base at that time.
104-195(7)
This Part and Part 3-3 apply to the shareholding entity from just after the time of the event as if the first element of the *cost base and *reduced cost base of the *share were its *market value at the time the entity *acquired the share.
Exception
104-195(8)
This section does not apply to a *CGT asset acquired under a trust restructure that happened before the day on which the Taxation Laws Amendment Act (No. 4) 2002 received the Royal Assent.
SECTION 104-197 Failure to acquire replacement asset and to incur fourth element expenditure after a roll-over under Subdivision 152-E: CGT event J5 104-197(1)
CGT event J5 happens if you choose a small business roll-over under Subdivision 152-E for a *CGT event that happens in relation to a *CGT asset in an income year and, by the end of the *replacement asset period:
(a) you have not *acquired a replacement asset (the replacement asset ), and have not incurred *fourth element expenditure in relation to a CGT asset (also the replacement asset ); or
(b) the replacement asset does not satisfy the conditions set out in subsection (2).
Note:
You do not have to satisfy the basic conditions in Subdivision 152-A for the gain in relation to CGT event J5 (see subsection 152-305(4) ).
104-197(2)
The conditions are:
(a) the replacement asset must be your *active asset; and
(b) if the replacement asset is a *share in a company or an interest in a trust:
(i) you, or an entity *connected with you, must be a *CGT concession stakeholder in the company or trust; or
(ii) CGT concession stakeholders in the company or trust must have a *small business participation percentage in you of at least 90%.
Example:
Joseph owns 50% of the shares in Company A and Company B. He is therefore a CGT concession stakeholder in the companies: see section 152-60 . The companies are connected with Joseph (see section 328-125 ) because he controls both of them.
Company A owns land which it leases to Joseph for use in a business. It sells the land at a profit and buys shares in Company B.
Subsection (2) is satisfied for the shares because Joseph is connected with Company A and is a CGT concession stakeholder in Company B.
104-197(3)
The time of the event is at the end of the *replacement asset period.
104-197(4)
You make a capital gain equal to the amount of the *capital gain that you disregarded under Subdivision 152-E .
104-197(5)
The *replacement asset period may be modified or extended as mentioned in section 104-190 .
CGT event J6 happens if you choose a small business roll-over under Subdivision 152-E for a *CGT event that happens in relation to a *CGT asset in an income year and:
(a) by the end of the *replacement asset period, you have done either or both of the following:
(i) *acquired a replacement asset (the replacement asset );
(ii) incurred *fourth element expenditure in relation to a CGT asset (also the replacement asset ); and
(b) at the end of the replacement asset period, the replacement asset is your *active asset; and
(c) if the replacement asset is a *share in a company or an interest in a trust, at the end of the replacement asset period:
(i) you, or an entity *connected with you, are a *CGT concession stakeholder in the company or trust; or
(ii) CGT concession stakeholders in the company or trust have a *small business participation percentage in you of at least 90%; and
(d) the total (the amount incurred ) of the following, in relation to each replacement asset that satisfied paragraph (b) and, if applicable, paragraph (c), is less than the amount of the capital gain that you disregarded:
(i) the first element of the *cost base;
(ii) the *incidental costs you incurred (which can include giving property, see section 103-5 );
(iii) the amount of fourth element expenditure incurred.
Note:
You do not have to satisfy the basic conditions in Subdivision 152-A for the gain in relation to CGT event J6 (see subsection 152-305(4) ).
104-198(2)
The time of the event is at the end of the *replacement asset period.
104-198(3)
You make a capital gain equal to the difference between:
(a) the amount of the *capital gain that you disregarded under Subdivision 152-E ; and
(b) the amount incurred.
104-198(4)
The *replacement asset period may be modified or extended as mentioned in section 104-190 .
CGT event K1 happens if:
(a) any of the following conditions is satisfied:
(i) - (ii) (Repealed by No 83 of 2014)
(iii) a *Kyoto unit is transferred from your foreign account (within the meaning of the Australian National Registry of Emissions Units Act 2011 ) to your Registry account (within the meaning of that Act) or your nominee ' s Registry account (within the meaning of that Act);
(iv) a Kyoto unit is transferred from your nominee ' s foreign account (within the meaning of the Australian National Registry of Emissions Units Act 2011 ) to your Registry account (within the meaning of that Act) or your nominee ' s Registry account (within the meaning of that Act);
(v) an *Australian carbon credit unit is transferred from your foreign account (within the meaning of the Carbon Credits (Carbon Farming Initiative) Act 2011 ) to your Registry account (within the meaning of the Australian National Registry of Emissions Units Act 2011 ) or your nominee ' s Registry account (within the meaning of the Australian National Registry of Emissions Units Act 2011 );
(vi) an *Australian carbon credit unit is transferred from your nominee ' s foreign account (within the meaning of the Carbon Credits (Carbon Farming Initiative) Act 2011 ) to your Registry account (within the meaning of the Australian National Registry of Emissions Units Act 2011 ) or your nominee ' s Registry account (within the meaning of the Australian National Registry of Emissions Units Act 2011 ); and
(b) as a result of the transfer, you start to *hold the unit as a *registered emissions unit; and
(c) just before the transfer, the unit was neither your *trading stock nor your *revenue asset.
104-205(2)
The time of the event is when you start to *hold the unit as a *registered emissions unit.
104-205(3)
You make a capital gain if the unit ' s *market value (just before you started to *hold the unit as a *registered emissions unit) is more than its *cost base. You make a capital loss if that market value is less than its *reduced cost base.
CGT event K2 happens if:
(a) you made a *net capital loss for an income year that, because of subsection 102-5(2) , cannot be applied in working out whether you made a *net capital gain for the income year or a later one; and
(b) you make a payment in an income year (the payment year ) in respect of a debt that was taken into account in working out the amount of that net capital loss; and
(c) ignoring subsection 102-5(2) , some part of the net capital loss (the denied part ) would have been applied (if you had made sufficient *capital gains) in working out whether you had made a *net capital gain for the payment year.
The payment can include giving property: see section 103-5 .
104-210(2)
The time of the event is when you make the payment.
104-210(3)
You make a capital loss equal to the smallest of:
(a) the amount you paid; or
(b) that part of it that was taken into account in working out the denied part; or
(c) the denied part less the sum of *capital losses you made as a result of previous payments you made in respect of the debt that was taken into account in working out the denied part.
104-210(4)
In calculating that capital loss , disregard any amount you have received as *recoupment of the payment and that is not included in your assessable income.
SECTION 104-215 Asset passing to tax-advantaged entity: CGT event K3 104-215(1)
CGT event K3 happens if you die and a *CGT asset you owned just before dying *passes to a beneficiary in your estate who (when the asset passes):
(a) is an *exempt entity; or
(b) is the trustee of a *complying superannuation entity; or
(c) is a foreign resident.
(d) (Repealed by No 169 of 1999)
(e) (Repealed by No 41 of 2005)
104-215(2)
If the asset passes to a beneficiary who is a foreign resident, CGT event K3 happens only if:
(a) you were an Australian resident just before dying; and
(b) the asset (in the hands of the beneficiary) is not *taxable Australian property.
104-215(3)
The time of the event is just before you die.
104-215(4)
A capital gain is made if the *market value of the asset on the day you died is more than the asset ' s *cost base. A capital loss is made if that market value is less than the asset ' s *reduced cost base.
Note:
The trustee of the estate must include in the date of death return any net capital gain for the income year when you died.
Exception
104-215(5)
A *capital gain or *capital loss is disregarded if you *acquired the asset before 20 September 1985.
Note:
There is also an exception for certain philanthropic testamentary gifts: see section 118-60 .
CGT event K4 happens if:
(a) you start holding as *trading stock a *CGT asset you already own but do not hold as trading stock; and
(b) you elect under paragraph 70-30(1)(a) to be treated as having sold the asset for its *market value.
Note 1:
Paragraph 70-30(1)(a) allows you to elect the cost of the asset, or its market value, just before it became trading stock.
Note 2:
There is an exemption if you elect its cost: see section 118-25 .
104-220(2)
The time of the event is when you start.
104-220(3)
You make a capital gain if the asset ' s *market value (just before it became *trading stock) is more than its *cost base. You make a capital loss if that market value is less than its *reduced cost base.
Exception
104-220(4)
A *capital gain or *capital loss you make is disregarded if you *acquired the asset before 20 September 1985.
CGT event K5 happens if the requirements in subsections (2), (3) and (4) are satisfied.
104-225(2)
There is a fall in the *market value of a *collectable of a company or trust.
104-225(3)
*CGT event A1, C2 or E8 happens to:
(a) *shares you own in the company (or in a company that is a member of the same *wholly-owned group); or
(b) an interest you have in the trust;
and there is no roll-over for that CGT event.
104-225(4)
As a result of the *capital proceeds from that event being replaced under section 116-80 :
(a) you make a *capital gain that you would not otherwise have made; or
(b) you do not make the *capital loss you would otherwise have made; or
(c) you make a capital loss that is less than you would otherwise have made.
Note:
The capital proceeds from that event are replaced with the market value of the shares or the interest in the trust as if the fall in the market value of collectables and personal use assets had not occurred: see section 116-80 .
104-225(5)
The time of CGT event K5 is the time of *CGT event A1, C2 or E8.
104-225(6)
You make a capital loss from a *collectable equal to:
less:
Example:
You own 50% of the shares in a company. You bought them in 1999 for $60,000. The company owns a painting worth $100,000 and another asset worth $20,000. The painting falls in value to $50,000.
In 1999 you sell your shares for $35,000 (the actual capital proceeds). You would otherwise make a capital loss of $25,000.
However, the actual capital proceeds are replaced with $60,000 (the market value of the shares if the painting had not fallen in value). You do not make a capital loss from selling the shares.
You do make a collectable loss equal to:
$60,000 − $35,000 = $25,000
Note:
You can subtract capital losses from collectables only from your capital gains from collectables: see section 108-10 .
SECTION 104-230 Pre-CGT shares or trust interest: CGT event K6 104-230(1)
CGT event K6 happens if:
(a) you own *shares in a company or an interest in a trust you *acquired before 20 September 1985; and
(b) *CGT event A1, C2, E1, E2, E3, E5, E6, E7, E8, J1 or K3 happens in relation to the shares or interest; and
(c) there is no roll-over for the other CGT event; and
(d) the applicable requirement in subsection (2) is satisfied.
104-230(2)
Just before the other event happened:
(a) the *market value of property of the company or trust (that is not its *trading stock) that was *acquired on or after 20 September 1985; or
(b) the market value of interests the company or trust owned through interposed companies or trusts in property (except trading stock) that was *acquired on or after 20 September 1985;
must be at least 75% of the *net value of the company or trust.
104-230(5)
The time of CGT event K6 is when the other event happens.
104-230(6)
You make a *capital gain equal to that part of the *capital proceeds from the *share or interest that is reasonably attributable to the amount by which the *market value of the property referred to in subsection (2) is more than the sum of the *cost bases of that property.
Note:
You cannot make a capital loss.
104-230(7)
This section applies to property that a company that is a foreign resident *acquired after 15 August 1989 from another company as if it were acquired before 20 September 1985 if:
(a) the other company acquired it before 20 September 1985; and
(b) the companies are members of the same *wholly-owned group; and
(c) the property is not *taxable Australian property.
104-230(8)
In working out the *net value of a company or trust for the purposes of subsection (2), disregard:
(a) the discharge or release of any liabilities; or
(b) the *market value of any *CGT assets acquired;
if the discharge or release, or the *acquisition, was done for a purpose that included ensuring that the requirement in subsection (2) would not be satisfied in a particular situation.
Exceptions
104-230(9)
CGT event K6 does not happen if:
(a) for a company referred to in subsection (2) - some of its *shares were listed for quotation in the official list of a stock exchange in Australia or a foreign country at the time of the other event and at all times in the period of 5 years before the time of the other event; or
(b) for a trust referred to in subsection (2) that is a unit trust - some of its units were so listed, or were ordinarily available to the public for subscription or purchase, at the time of the other event and at all times in that period.
104-230(9A)
Paragraph (9)(a) applies to a case where:
(a) the company referred to in subsection (2) is a *demerged entity; and
(b) *shares in the demerged entity do not satisfy the test referred to in that paragraph; and
(c) the demerger happened not more than 5 years before the other CGT event happened;
as if shares in the demerged entity were listed for quotation in the official list of a stock exchange in Australia or a foreign country at all times when some of the shares in the *head entity of the *demerger group were so listed.
Example:
Louise owns shares in a company which has been listed for 3 years. The company is the head entity of a demerger group. As part of a demerger, she receives new interests in a demerged entity. The demerged entity then lists in its own right.
Since the head entity was listed for only 3 years, the demerged entity must remain listed for 2 years before Louise ' s new interests become eligible for the exception from CGT event K6.
104-230(9B)
Paragraph (9)(b) applies to a case where:
(a) the trust referred to in subsection (2) is a *demerged entity and a unit trust; and
(b) units in the demerged entity do not satisfy the test referred to in that paragraph; and
(c) the demerger happened not more than 5 years before the other CGT event happened;
as if units in the demerged entity were listed for quotation in the official list of a stock exchange in Australia or a foreign country, or were ordinarily available to the public for subscription or purchase, at all times when some of the units in the *head entity of the *demerger group were so listed or available.
104-230(10)
A *capital gain is disregarded for a *share in a company or an interest in a trust to the extent that, had you *acquired it on or after 20 September 1985, you could have chosen a roll-over for the other *CGT event under Subdivision 124-M (scrip for scrip roll-over).
Example:
Bill owns a unit in a trust that he acquired before 20 September 1985. He exchanges the unit for a unit in another trust worth $60 and $40 cash. He makes a capital gain of $50 because of CGT event K6.
Had the unit been acquired after 20 September 1985, Bill would have been entitled to a partial roll-over of the capital gain under Subdivision 124-M to the extent that his capital proceeds constituted a replacement unit.
Bill can therefore disregard 60/100 of the $50 gain ($30). The cost base of Bill ' s replacement unit is reduced by this amount. Bill must include the remaining $20 of the CGT event K6 gain in the calculation of his net capital gain or loss for the year.
Note:
A capital gain or loss made by a demerging entity from CGT event K6 happening as a result of a demerger is also disregarded: see section 125-155 .
SECTION 104-235 Balancing adjustment events for depreciating assets and certain assets used for R & D: CGT event K7 104-235(1)
CGT event K7 happens if:
(a) a *balancing adjustment event occurs for a *depreciating asset you *held; and
(b) at some time when you held the asset, you used it, or had it *installed ready for use, for:
(i) a purpose other than a *taxable purpose; or
(ii) the purpose to which paragraphs 40-27(2)(a) and (b) relate (about second-hand assets in residential property).
104-235(1A)
However, subsection (1) does not apply if:
(a) you are an *R & D entity and you could deduct an amount under section 40-25 for the *depreciating asset if the following assumptions were made:
(i) despite paragraph 40-30(1)(c) and subsection 40-30(2) , all intangible assets were excluded from the definition of depreciating asset in section 40-30 ;
(ii) subsection 40-45(2) did not, except in the case of buildings, prevent Division 40 from applying to capital works to which Division 43 applies, or to which Division43 would apply but for expenditure being incurred, or capital works being started, before a particular day;
(iii) you satisfied any relevant requirement for deductibility under Division 40 ; or
(b) there is roll-over relief for the *balancing adjustment event under section 40-340 of this Act; or
(c) the asset is one for which you or another entity has deducted or can deduct amounts under Subdivision 40-F or 40-G .
104-235(1AA)
Without limiting subsection (1A), if the asset is a vessel for which:
(a) you have a * shipping exempt income certificate; or
(b) you have at any time had such a certificate;
subsection (1) does not apply in relation to the asset to the extent that you are using, or at any time have used, it to produce income that is exempt under section 51-100 .
104-235(1B)
CGT event K7 also happens if:
(a) you are an *R & D entity; and
(b) a *balancing adjustment event occurs for a *depreciating asset you *held; and
(c) when you held the asset, you could deduct an amount under section 40-25 for the asset if the assumptions set out in paragraph (1A)(a) were made; and
(d) at some time when you held the asset:
(i) you used it other than for a taxable purpose or for the purpose of conducting *R & D activities for which you were registered under section 27A of the Industry Research and Development Act 1986 ; or
(ii) you had it installed ready for use other than for a taxable purpose.
Note:
For subparagraph (d)(i), disregard any use of the asset for the purpose of carrying on research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936 ): see section 104-235 of the Income Tax (Transitional Provisions) Act 1997 .
104-235(2)
The time of *CGT event K7 is when the *balancing adjustment event occurs.
104-235(3)
Any *capital gain or *capital loss is worked out:
(a) under section 104-240 ; or
(b) under section 104-245 if the *depreciating asset was allocated to a low-value pool.
104-235(4)
A *capital gain or *capital loss you make is disregarded if:
(a) the *depreciating asset covered by subsection (1) or (1B) is a *pre-CGT asset; or
(b) you can deduct an amount for the asset under Division 328 (about the small business entities) for the income year in which the *balancing adjustment event occurred.
SECTION 104-240 Working out capital gain or loss for CGT event K7: general case 104-240(1)
You make a capital gain if the *termination value of the *depreciating asset covered by subsection 104-235(1) or (1B) is more than its *cost. The amount of the *capital gain is:
where:
sum of reductions
is the sum of:
(a) if the *depreciating asset is covered by subsection 104-235(1) - the reductions in your deductions for the asset under sections 40-25 and 40-27 ; or
(b) if the depreciating asset is covered by subsection 104-235(1B) - the reductions that would have been required under section 40-25 on the assumption that using the asset for a *taxable purpose included using it for the purpose of conducting *R & D activities for which you were registered under section 27A of the Industry Research and Development Act 1986 .
total decline
is the decline in value of the *depreciating asset since you started to *hold it.
Note 1:
This subsection applies in a modified way if you used the asset for the purpose of carrying on research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936 ): see section 104-235 of the Income Tax (Transitional Provisions) Act 1997 .
Note 2:
The CGT concepts of cost base and capital proceeds are not relevant for this event.
104-240(2)
You make a capital loss if the *cost of the *depreciating asset covered by subsection 104-235(1) or (1B) is more than its *termination value. The amount of the *capital loss is:
where:
sum of reductions and total decline have the same meanings as in subsection (1).
104-240(3)
In applying subsection (1) or (2) , reduce the *termination value of the *depreciating asset by so much of an amount misappropriated by your employee or *agent (whether by theft, embezzlement, larceny or otherwise) as represents an amount applicable to you under:
(a) item 8 of the table in subsection 40-300(2) ; or
(b) item 1, 3, 4 or 6 of the table in subsection 40-305(1) ;
in relation to the *balancing adjustment event.
104-240(4)
If you later receive an amount as *recoupment of all or part of the amount misappropriated, the amount applicable under subsection (3) is increased by the amount received.
104-240(5)
Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to this section for an income year if:
(a) you discover the misappropriation, or you receive an amount as *recoupment of all or part of the amount misappropriated, after you lodged your *income tax return for the income year; and
(b) the amendment is made at any time during the period of 4 years starting immediately after you discover the misappropriation or receive the amount.
SECTION 104-245 Working out capital gain or loss for CGT event K7: pooled assets 104-245(1)
You make a capital gain if the *depreciating asset ' s *termination value is more than its *cost. The amount of the *capital gain is:
| [*Termination value − *Cost] × [1 − Taxable use fraction] |
where:
taxable use fraction
is the taxable use percentage (expressed as a fraction) that you estimated for the asset when you allocated it to the pool.
Note:
The CGT concepts of cost base and capital proceeds are not relevant for this event.
104-245(2)
You make a capital loss if the *depreciating asset ' s *cost is more than its *termination value. The amount of the *capital loss is:
| [*Cost − *Termination value] × [1 − Taxable use fraction] |
where:
taxable use fraction
has the same meaning as in subsection (1).
104-245(3)
In applying subsection (1) or (2) , reduce the *termination value of the *depreciating asset by so much of an amount misappropriated by your employee or *agent (whether by theft, embezzlement, larceny or otherwise) as represents an amount applicable to you under:
(a) item 8 of the table in subsection 40-300(2) ; or
(b) item 1, 3, 4 or 6 of the table in subsection 40-305(1) ;
in relation to the *balancing adjustment event.
104-245(4)
If you later receive an amount as *recoupment of all or part of the amount misappropriated, the amount applicable under subsection (3) is increased by the amount received.
104-245(5)
Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to this section for an income year if:
(a) you discover the misappropriation, or you receive an amount as *recoupment of all or part of the amount misappropriated, after you lodged your *income tax return for the income year; and
(b) the amendment is made at any time during the period of 4 years starting immediately after you discover the misappropriation or receive the amount.
SECTION 104-250 Direct value shifts: CGT event K8 104-250(1)
CGT event K8 happens if there is a *taxing event generating a gain for a *down interest under section 725-245 .
Note:
That section sets out some of the CGT consequences of a direct value shift for affected owners of down interests. See also the rest of Division 725 .
104-250(2)
The time of the event is the *decrease time for the *down interest.
104-250(3)
You make a capital gain equal to the gain generated for the taxing event.
Note:
You cannot make a capital loss.
104-250(4)
If, because of the same *direct value shift, there are 2 or more *taxing events generating a gain that are covered by subsection (1), CGT event K8 happens for each of those taxing events, and you make a separate capital gain for each.
Exceptions
104-250(5)
A *capital gain is disregarded if the *down interest is a *pre-CGT asset.
CGT event K9 happens if you become entitled to receive a *payment of a *carried interest of a *general partner in a *VCLP, an *ESVCLP or an *AFOF or a *limited partner in a *VCMP.
104-255(2)
The time of the event is the time you become entitled to receive the *payment.
104-255(3)
You make a capital gain equal to the *capital proceeds from the *CGT event.
Note:
You cannot make a capital loss.
Meaning of carried interest
104-255(4)
The carried interest of a *general partner in a *VCLP, an *ESVCLP or an *AFOF is the partner ' s entitlement to a distribution from the VCLP, ESVCLP or AFOF, to the extent that the distribution is contingent upon the attainment of profits for the *limited partners in the VCLP, ESVCLP or AFOF.
[ CCH Note: Act No 78 of 2007 , s 3 and Sch 8 item 111 inserts " , ESVCLP " after " VCLP " , in s 104-255(4), however there are two instances of " VCLP " in s 104-255(4). CCH has inserted " , ESVCLP " in both instances as it is presumed that this was the intention.]
104-255(5)
The carried interest of a *limited partner in a *VCMP is the partner ' s entitlement to a distribution from the VCMP, to the extent that the distribution is contingent upon the attainment of profits for the *limited partners in the VCLP, ESVCLP or AFOF in which the VCMP is a *general partner.
104-255(6)
The carried interest does not include:
(a) any part of the partner ' s entitlement to that distribution that is attributable to a fee (by whatever name called) for the management of the *VCLP, *ESVCLP, *AFOF or *VCMP; or
(b) any part of the partner ' s entitlement to that distribution that is attributable to the partner ' s *equity interest in the VCLP, ESVCLP, AFOF or VCMP.
Meaning of payment of carried interest
104-255(7)
Payment , of a *carried interest, includes:
(a) a payment that is attributable to the carried interest; or
(b) the giving of property in satisfaction of the carried interest: see section 103-5 ; or
(c) the giving of property in satisfaction of an entitlement that is attributable to the carried interest: see section 103-5 .
CGT event K10 happens if:
(a) you make a *forex realisation gain as a result of forex realisation event 2; and
(b) item 1 of the table in subsection 775-70(1) applies.
104-260(2)
The time of the event is when the forex realisation event happens.
104-260(3)
You make a capital gain equal to the *forex realisation gain.
Note:
You cannot make a capital loss under CGT event K10. However, if you make a forex realisation loss covered by item 1 of the table in subsection 775-75(1) , you will make a capital loss under CGT event K11 (see section 104-265 ).
SECTION 104-265 Certain short-term forex realisation losses: CGT event K11 104-265(1)
CGT event K11 happens if:
(a) you make a *forex realisation loss as a result of forex realisation event 2; and
(b) item 1 of the table in subsection 775-75(1) applies.
104-265(2)
The time of the event is when the forex realisation event happens.
104-265(3)
You make a capital loss equal to the *forex realisation loss.
Note:
You cannot make a capital gain under CGT event K11. However, if you make a forex realisation gain covered by item 1 of the table in subsection 775-70(1) , you will make a capital gain under CGT event K10 (see section 104-260 ).
View history note
SECTION 104-270 Foreign hybrids: CGT event K12 104-270(1)
CGT event K12 happens if, in accordance with paragraph 830-50(2)(b) or (3)(b), you make a *capital loss under this section for an income year.
104-270(2)
The time of the event is just before the end of the income year.
104-270(3)
You make a capital loss equal to the amount applicable under paragraph 830-50(2)(b) or (3)(b).
Subdivision 104-L - Consolidated groups and MEC groups
CGT event L1 happens if, under section 705-57 (including in its application in accordance with Subdivisions 705-B to 705-E ), there is a reduction in the *tax cost setting amount of assets of an entity that becomes a *subsidiary member of a *consolidated group or a *MEC group.
104-500(2)
The time of the event is just after the entity becomes a *subsidiary member of the group.
104-500(3)
For the head company core purposes mentioned in subsection 701-1(2) , the *head company makes a capital loss equal to the reduction.
104-500(4)
The amount of the capital loss that can be applied to reduce the head company ' s *capital gains for the first income year ending after the entity becomes a *subsidiary member of the group (the first income year ) cannot exceed ⅕ of the *capital loss.
104-500(5)
The amount of the *net capital loss from the first income year, to the extent the amount is attributable to the *capital loss (the extent being the event L1 attributable loss ), that can be applied to reduce the head company ' s *capital gains for a later income year cannot exceed the amount worked out for the year using the following table:
| Limit on applying event L1 attributable loss | ||
| Item | For this income year: | The amount of the event L1 attributable loss that can be applied cannot exceed: |
| 1 | For the second income year ending after the entity became a *subsidiary member | The difference between:
(a) ⅖ of the *capital loss; and (b) the amount of the capital loss that was applied in accordance with subsection (4) for the first income year. |
| 2 | For the third income year ending after the entity became a *subsidiary member | The difference between:
(a) ⅗ of the *capital loss; and (b) the sum of the amount mentioned in paragraph (b) of item 1 and the amount of the event L1 attributable loss that was applied to reduce the entity ' s *capital gains for the next income year after the first income year. |
| 3 | For the fourth income year ending after the entity became a *subsidiary member | The difference between:
(a) ⅘ of the *capital loss; and (b) the sum of the amount mentioned in paragraph (b) of item 1 and the amounts of the event L1 attributable loss that were applied to reduce the entity ' s *capital gains for earlier income years ending after the first income year. |
| 4 | For the fifth income year ending after the entity became a *subsidiary member, or for any later income year | The difference between:
(a) the *capital loss; and (b) the sum of the amount mentioned in paragraph (b) of item 1 and the amounts of the event L1 attributable loss that were applied to reduce the entity ' s *capital gains for earlier income years ending after the first income year. |
SECTION 104-505 Where pre-formation intra-group roll-over reduction results in negative allocable cost amount: CGT event L2 104-505(1)
CGT event L2 happens if:
(a) an entity becomes a *subsidiary member of a *consolidated group or a *MEC group; and
(b) in working out the group ' s *allocable cost amount for the entity, the amount remaining after applying step 3A of the table in section 705-60 is negative.
104-505(2)
The time of the event is just after the entity becomes a *subsidiary member of the group.
104-505(3)
For the head company core purposes mentioned in subsection 701-1(2) , the *head company makes a capital gain equal to the amount remaining.
SECTION 104-510 Where tax cost setting amounts for retained cost base assets exceeds joining allocable cost amount: CGT event L3 104-510(1)
CGT event L3 happens if:
(a) an entity becomes a *subsidiary member of a *consolidated group or a *MEC group; and
(b) the sum of the *tax cost setting amounts for all *retained cost base assets that are taken into account under paragraph 705-35(1)(b) in working out the tax cost setting amount of each reset cost base asset of the entity exceeds the group ' s *allocable cost amount for the entity.
104-510(2)
The time of the event is just after the entity becomes a *subsidiary member of the group.
104-510(3)
For the head company core purposes mentioned in subsection 701-1(2) , the *head company makes a capital gain equal to the excess.
SECTION 104-515 Where no reset cost base assets and excess of net allocable cost amount on joining: CGT event L4 104-515(1)
CGT event L4 happens if:
(a) an entity becomes a *subsidiary member of a *consolidated group or a *MEC group; and
(b) in working out the *tax cost setting amount for assets of the entity in accordance with section 705-35 (including in its application in accordance with Subdivisions 705-B to 705-D ), there is an amount that results after applying paragraphs 705-35(1)(b) and (c) (including in their application in accordance with those Subdivisions); and
Note:
Section 705-35 is about the tax cost setting amount for reset cost base assets.
(c) it is not possible to allocate, in accordance with the latter paragraph, the amount that results because there are no reset cost base assets of the kind mentioned in that paragraph.
104-515(2)
The time of the event is just after the entity becomes a *subsidiary member of the group.
104-515(3)
For the head company core purposes mentioned in subsection 701-1(2) , the *head company makes a capital loss equal to the amount that results.
SECTION 104-520 Where amount remaining after step 4 of leaving allocable cost amount is negative: CGT event L5 104-520(1)
CGT event L5 happens if:
(a) an entity ceases to be a *subsidiary member of a *consolidated group or a *MEC group; and
(b) in working out the group ' s *allocable cost amount for the entity, the amount remaining after applying step 4 of the table in section 711-20 is negative.
104-520(2)
The time of the event is when the entity ceases to be a *subsidiary member of the group.
104-520(3)
For the head company core purposes mentioned in subsection 701-1(2) , the *head company makes a capital gain equal to the amount remaining.
Note:
The amount remaining may be reduced under section 707-415 .
SECTION 104-525 Error in calculation of tax cost setting amount for joining entity ' s assets: CGT event L6 104-525(1)
CGT event L6 happens if:
(a) you are the *head company of a *consolidated group or a *MEC group; and
(b) the conditions in section 705-315 (about errors in tax cost setting amounts) are satisfied for a *subsidiary member of the group; and
(c) you have a *net overstated amount or a *net understated amount for the subsidiary member.
104-525(2)
The time of the event is the start of the income year in which the Commissioner becomes aware of the errors.
104-525(3)
You work out whether you have a net overstated amount or net understated amount using this table:
| Meaning of net overstated amount and net understated amount | ||
| Item | In this situation: | There is this result: |
| 1 | There are one or more overstated amounts under section 705-315 for the *subsidiary member but no understated amount under that section for the subsidiary member | There is a net overstated amount . It is the overstated amount, or the sum of the overstated amounts. |
| 2 | There are one or more understated amounts under section 705-315 for the *subsidiary member but no overstated amount under that section for the subsidiary member | There is a net understated amount . It is the understated amount, or the sum of the understated amounts. |
| 3 | There are both one or more overstated amounts and one or more understated amounts under section 705-315 for the *subsidiary member and the sum of the overstated amounts exceeds the sum of the understated amounts | There is a net overstated amount . It is the difference between those sums |
| 4 | There are both one or more overstated amounts and one or more understated amounts under section 705-315 for the *subsidiary member and the sum of the overstated amounts is less than the sum of the understated amounts | There is a net understated amount . It is the difference between those sums |
104-525(4)
If the time when the Commissioner becomes aware of the errors is within the period within which the Commissioner may amend all of the assessments necessary to correct the errors, then, for the head company core purposes mentioned in subsection 701-1(2) :
(a) if you have a *net overstated amount - you make a capital gain equal to that amount; or
(b) if you have a *net understated amount - you make a capital loss equal to that amount.
104-525(5)
If the time when the Commissioner becomes aware of the errors is not within that period, then, for the head company core purposes mentioned in subsection 701-1(2) :
(a) if you have a *net overstated amount - you make a capital gain of the amount worked out under subsection (6); or
(b) if you have a *net understated amount - you make a capital loss of the amount worked out under subsection (6).
104-525(6)
The amount of the *capital gain or *capital loss is worked out as follows:
| Stated amount | × |
Current asset setting amount
Original asset setting amount |
where:
current asset setting amount
means the *tax cost setting amount for all assets referred to in subsection
705-315(2)
as reset cost base assets that the *head company of the *consolidated group or the *MEC group held continuously from the time when the *subsidiary member joined the group until the start of the head company
'
s income year that is the earliest income year for which the Commissioner could amend the head company
'
s assessment to correct any of the errors.
original asset setting amount
means the *tax cost setting amount for all assets referred to in subsection
705-315(2)
as reset cost base assets that the *subsidiary member held at the time it joined the group.
stated amount
means the *net overstated amount or the *net understated amount, as the case requires.
104-530 (Repealed) SECTION 104-530 Discharged amount of liability differs from amount for allocable cost amount purposes: CGT event L7
(Repealed by No 56 of 2010)
CGT event L8 happens if:
(a) an entity becomes a *subsidiary member of a *consolidated group or a *MEC group; and
(b) the *tax cost setting amount for a reset cost base asset of the entity is reduced under subsection 705-40(1) (including in its application in accordance with Subdivisions 705-B to 705-D ); and
(c) some or all (the unallocated amount ) of the reduction cannot be allocated as mentioned in subsection 705-40(2) .
104-535(2)
The time of the event is just after the entity becomes a *subsidiary member of the group.
104-535(3)
For the head company core purposes mentioned in subsection 701-1(2) , the *head company makes a capital loss equal to the unallocated amount.
Division 106 - Entity making the gain or loss
This Division sets out the cases where a capital gain or loss is made by someone other than the entity to which a CGT event happens.
The entities affected are:
Any *capital gain or *capital loss from a *CGT event happening in relation to a partnership or one of its *CGT assets is made by the partners individually.
Each partner ' s gain or loss is calculated by reference to the partnership agreement, or partnership law if there is no agreement.
Example 1:
A partnership creates contractual rights in another entity (CGT event D1). Each partner ' s capital gain or loss is calculated by allocating an appropriate share of the capital proceeds from the event and the incidental costs that relate to the event (according to the partnership agreement, or partnership law if there is no agreement).
Example 2:
Helen and Clare set up a business in partnership. Helen contributes a block of land to the partnership capital. Their partnership agreement recognises that Helen has a 75% interest in the land and Clare 25%. The agreement is silent as to their interests in other assets and profit sharing.
When the land is sold, Helen ' s capital gain or loss will be determined on the basis of her 75% interest. For other partnership assets, Helen ' s gain or loss will be determined on the basis of her 50% interest (under the relevant Partnership Act).
106-5(2)
Each partner has a separate *cost base and *reduced cost base for the partner ' s interest in each *CGT asset of the partnership.
106-5(3)
If a partner leaves a partnership, a remaining partner *acquires a separate *CGT asset to the extent that the remaining partner acquires a share of the departing partner ' s interest in a partnership asset.
Note:
The remaining partners would not be affected if the departing partner sells its interests to an entity that was not a partner.
Example:
(Indexation is ignored for the purpose of this example).
John, Wil and Patricia form a partnership (in equal shares).
John contributes a building (which is a pre-20 September 1985 asset) having a market value of $200,000. Wil and Patricia contribute $200,000 each in cash.
The partnership buys another asset for $400,000.
John is taken to have disposed of 2/3 of his interest in the building (1/3 to Wil and 1/3 to Patricia). His remaining 1/3 share in the building remains a pre-CGT asset. The 1/3 shares that Wil and Patricia acquire are post-CGT assets.
Wil retires from the partnership when the partnership assets have a market value of $1,200,000 ($500,000 for the building and $700,000 for the other asset). John and Patricia pay Wil $400,000 for his interest in the partnership.
Wil has a capital gain of $100,000 on the building and $100,000 on the other asset. John and Patricia each acquire an additional 1/6 interest in the partnership assets. These additional interests are separate assets and post-CGT assets.
106-5(4)
If a new partner is admitted to a partnership:
(a) the new partner *acquires a share (according to the partnership agreement, or partnership law if there is no agreement) of each partnership asset; and
(b) the existing partners are treated as having *disposed of part of their interest in each partnership asset to the extent that the new partner has acquired it.
Example:
(Indexation is ignored for the purpose of this example).
Lyn and Barry form a partnership, each contributing $15,000 to its capital. The partnership buys land for $30,000.
The land increases in value to $300,000.
Andrew is admitted as an equal partner, paying Lyn and Barry $50,000 each to acquire a 1/3 share in the land. His cost base is $100,000.
Lyn and Barry have each disposed of 1/3 of their interest in the land. Each has a cost base for that interest of $5,000, and capital proceeds of $50,000, leaving them with a capital gain of $45,000 each on Andrew ' s admission to the partnership.
The land is sold for its market value.
Andrew has no capital gain on the land.
Lyn and Barry have disposed of their remaining 2/3 original interest in the land for capital proceeds of $100,000, leaving each of them with a capital gain of:
$100,000 − ($15,000 − $5,000) = $90,000
106-5(5)
(Repealed by No 119 of 2002)
Subdivision 106-B - Bankruptcy and liquidation SECTION 106-30 Effect of bankruptcy 106-30(1)
For the purposes of this Part and Part 3-3 (about capital gains and losses) and Subdivision 328-C (What is a small business entity), the vesting of the individual ' s *CGT assets in the trustee under the Bankruptcy Act 1966 or under a similar foreign law is ignored.
106-30(2)
This Part, Part 3-3 and Subdivision 328-C apply to an act done in relation to a *CGT asset of an individual in these circumstances as if the act had been done by the individual (instead of by the trustee etc.):
(a) as a result of the bankruptcy of the individual by the Official Trustee in Bankruptcy or a registered trustee, or the holder of a similar office under a *foreign law;
(b) by a trustee under a personal insolvency agreement made under Part X of the Bankruptcy Act 1966 , or under a similar instrument under a foreign law;
(c) by a trustee as a result of an arrangement with creditors under that Act or a foreign law.
Example:
A CGT asset of an individual vests in a trustee because of the bankruptcy of the individual. No CGT event happens as a result of the vesting.
The trustee later sells the CGT asset. Any capital gain or loss is made by the individual, not the trustee.
SECTION 106-35 Effect of liquidation 106-35(1)
For the purposes of this Part and Part 3-3 (about capital gains and losses) and Subdivision 328-C (What is a small business entity), the vesting of a company ' s * CGT assets in a liquidator, or the holder of a similar office under a * foreign law , is ignored.
106-35(2)
This Part, Part 3-3 and Subdivision 328-C apply to an act done by a liquidator of a company, or the holder of a similar office under a * foreign law , as if the act had been done by the company (instead of by the liquidator etc.).
Example:
Ben, a liquidator of a company, sells a CGT asset of the company. Any capital gain or loss is made by the company, not by Ben.
Subdivision 106-C - Absolutely entitled beneficiaries
For the purposes of this Part and Part 3-3 (about capital gains and losses) and Subdivision 328-C (What is a small business entity), from just after the time you become absolutely entitled to a * CGT asset as against the trustee of a trust (disregarding any legal disability), the asset is treated as being your asset (instead of being an asset of the trust).
106-50(2)
This Part, Part 3-3 and Subdivision 328-C apply, from just after the time you become absolutely entitled to a * CGT asset as against the trustee of a trust (disregarding any legal disability), to an act done in relation to the asset by the trustee as if the act had been done by you (instead of by the trustee).
Example:
An individual becomes absolutely entitled to a CGT asset of a trust. The trustee later sells the asset. Any capital gain or loss from the sale is made by the individual, not the trustee.
Subdivision 106-D - Securities, charges and encumbrances
For the purposes of this Part and Part 3-3 (about capital gains and losses) and Subdivision 328-C (What is a small business entity):
(a) the vesting of a * CGT asset in an entity is ignored, if:
(i) the vesting is for the purpose of enforcing, giving effect to or maintaining a security, charge or encumbrance over the asset; and
(ii) the security, charge or encumbrance remains over the asset just after the vesting; and
(b) a CGT asset is treated as vesting in an entity at the time a security, charge or encumbrance ceases to be over the asset, if:
(i) the entity holds the asset just after that time because the asset vested in the entity at an earlier time; and
(ii) that earlier vesting was ignored under paragraph (a) because it was for the purpose of enforcing, giving effect to or maintaining the security, charge or encumbrance.
106-60(2)
This Part, Part 3-3 and Subdivision 328-C apply to an act done by an entity (or an * agent of the entity) in relation to a * CGT asset for the purpose of enforcing, giving effect to or maintaining a security, charge or encumbrance over the asset as if the act had been done by the entity that provided the security (instead of by the first-mentioned entity or its agent).
Example:
A CGT asset of a borrower vests in a lender as security for a loan. No CGT event happens as a result of the vesting.
If the borrower fails to make payments on the loan and the lender sells the CGT asset under the security arrangement, any capital gain or loss is made by the borrower, not the lender.
Division 108 - CGT assets
This Division defines the various categories of assets that are relevant to working out your capital gains and losses. They are CGT assets, collectables and personal use assets.
It also tells you how capital losses from collectables and personal use assets are relevant to working out your net capital gain or loss.
It also sets out when land, buildings and capital improvements are taken to be separate CGT assets.
A CGT asset is:
(a) any kind of property; or
(b) a legal or equitable right that is not property.
108-5(2)
To avoid doubt, these are CGT assets :
(a) part of, or an interest in, an asset referred to in subsection (1);
(b) goodwill or an interest in it;
(c) an interest in an asset of a partnership;
(d) an interest in a partnership that is not covered by paragraph (c).
Note 1:
Examples of CGT assets are:
Note 2:
An asset is not a CGT asset if the asset was last acquired before 26 June 1992 and was not an asset for the purposes of former Part IIIA of the Income Tax Assessment Act 1936 : see section 108-5 of the Income Tax (Transitional Provisions) Act 1997 .
SECTION 108-7 108-7 Interest in CGT assets as joint tenants
Individuals who own a *CGT asset as joint tenants are treated as if they each owned a separate CGT asset constituted by an equal interest in the asset and as if each of them held that interest as a tenant in common.
Note:
Section 128-50 contains rules that apply when a joint tenant dies.
In working out your *net capital gain or *net capital loss for the income year, *capital losses from *collectables can be used only to reduce *capital gains from collectables.
Note:
You choose the order in which you reduce your capital gains from collectables by your capital losses from collectables.
Example:
Your capital gains from collectables total $200 and your capital losses from collectables total $400. You have other capital gains of $500. You have a net capital gain of $500 and a net capital loss from collectables of $200.
The losses from collectables cannot be used to reduce the $500 capital gain.
108-10(2)
A collectable is:
(a) *artwork, jewellery, an antique, or a coin or medallion; or
(b) a rare folio, manuscript or book; or
(c) a postage stamp or first day cover;
that is used or kept mainly for your (or your *associate's) personal use or enjoyment.
108-10(3)
These are also collectables :
(a) an interest in any of the things covered by subsection (2); or
(b) a debt that arises from any of those things; or
(c) an option or right to *acquire any of those things.
Note:
Collectables acquired for $500 or less are exempt. However, you get an exemption for an interest in one only if the market value of all the interests combined is $500 or less: see Subdivision 118-A .
108-10(4)
If some or all of a *capital loss from a *collectable cannot be applied in an income year, the unapplied amount can be applied in the next income year for which your *capital gains from *collectables exceed your *capital losses (if any) from collectables.
Example:
You have a capital gain from a collectable for the income year of $200 and a capital loss from another collectable of $600.
Your capital loss from one collectable reduces your capital gain from the other to zero. You cannot apply the remaining $400 of the capital loss in this income year, but you can apply it in a later income year.
108-10(5)
If you have 2 or more unapplied *net capital losses from *collectables, you must apply them in the order you made them.
SECTION 108-15 Sets of collectables 108-15(1)
This section sets out what happens if:
(a) you own *collectables that are a set; and
(b) they would ordinarily be *disposed of as a set; and
(c) you dispose of them in one or more transactions for the purpose of trying to obtain the exemption in section 118-10 .
Example:
You buy a set of 3 books for $900. You apportion the $900 among each book: see section 112-30 . If the books are of equal value, you have acquired each one for $300.
If you dispose of each book individually, you would ordinarily obtain the exemption in section 118-10 , because you acquired each one for less than $500.
108-15(2)
The set of *collectables is taken to be a single *collectable and each of your *disposals is a disposal of part of that collectable.
Example:
To continue the example, the 3 books are taken to be a single collectable. You will not obtain the exemption in section 118-10 , because you acquired the set for more than $500.
You work out if you make a capital gain or loss from a disposal of part of an asset by comparing the capital proceeds from it with the cost base or reduced cost base (as appropriate) of the disposed part.
Note 1:
Section 112-30 tells you how to apportion the cost base and reduced cost base of a CGT asset on a disposal of part of an asset.
Note 2:
This section does not apply to a collectable you last acquired before 16 December 1995: see section 108-15 of the Income Tax (Transitional Provisions) Act 1997 .
SECTION 108-17 108-17 Cost base of a collectable
In working out the *cost base of a *collectable, disregard the third element (about costs of ownership).
In working out your *net capital gain or *net capital loss for the income year, any *capital loss you make from a *personal use asset is disregarded.
108-20(2)
A personal use asset is:
(a) a *CGT asset (except a *collectable) that is used or kept mainly for your (or your *associate's) personal use or enjoyment; or
(b) an option or right to *acquire a *CGT asset of that kind; or
(c) a debt arising from a *CGT event in which the *CGT asset the subject of the event was one covered by paragraph (a); or
(d) a debt arising other than:
(i) in the course of gaining or producing your assessable income; or
(ii) from your carrying on a *business.
Note 1:
There is an exemption for a personal use asset you acquire for $10,000 or less: see section 118-10 .
Note 2:
A debt arising from a CGT event involving a CGT asset kept mainly for your personal use and enjoyment is a personal use asset to prevent any loss arising from the debt being a normal capital loss.
108-20(3)
A personal use asset does not include land, a *stratum unit or a building or structure that is taken to be a separate *CGT asset because of Subdivision 108-D .
SECTION 108-25 Sets of personal use assets 108-25(1)
This section sets out what happens if:
(a) you own *personal useassets that are a set; and
(b) they would ordinarily be *disposed of as a set; and
(c) you dispose of them in one or more transactions for the purpose of trying to obtain the exemption in section 118-10 .
108-25(2)
The set of *personal use assets is taken to be a single *personal use asset and each of your *disposals is a disposal of part of that asset.
SECTION 108-30 108-30 Cost base of a personal use asset
In working out the *cost base of a *personal use asset, disregard the third element (about the costs of ownership).
SECTION 108-50 What this Subdivision is about
For CGT purposes, there are:
Note:
In addition to the circumstances set out in this Subdivision, separate asset treatment can apply under section 124-595 (about a roll-over for a Crown lease) and section 124-725 (about a roll-over for a prospecting or mining entitlement).
| Operative provisions | |
| 108-55 | When is a building a separate asset from land? |
| 108-60 | Depreciating asset that is part of a building is a separate asset |
| 108-65 | Land adjacent to land acquired before 20 September 1985 |
| 108-70 | When is a capital improvement a separate asset? |
| 108-75 | Capital improvements to CGT assets for which a roll-over may be available |
| 108-80 | Deciding if capital improvements are related to each other |
| 108-85 | Meaning of improvement threshold |
SECTION 108-55 When is a building a separate asset from land? 108-55(1)
A building or structure on land that you *acquired on or after 20 September 1985 is taken to be a separate *CGT asset from the land if one of these balancing adjustment provisions applies to the building or structure (whether or not there is a balancing adjustment):
(a) Subdivision 40-D ; or
(b) section 355-315 or 355-525 (about R & D).
Example:
You construct a timber mill building on land you own. The building is subject to a balancing adjustment on its disposal, loss or destruction. It is taken to be a separate CGT asset from the land.
108-55(2)
A building or structure that is constructed on land that you *acquired before 20 September 1985 is taken to be a separate *CGT asset from the land if:
(a) you entered into a contract for the construction on or after that day; or
(b) if there is no contract - the construction started on or after that day.
Example:
You bought a block of land with a building on it on 10 August 1984. On 1 December 1999 you construct another building on the land. The other building is taken to be a separate CGT asset from the land.
A *depreciating asset that is part of a building or structure is taken to be a separate *CGT asset from the building or structure.
Example:
You own a factory from which you carry on a business. You install rest rooms for your employees. The plumbing fixtures and fittings are depreciating assets. These are taken to be a separate CGT asset from the factory.
Land that you *acquire on or after 20 September 1985 that is adjacent to land (the original land ) you acquired before that day is taken to be a separate *CGT asset from the original land if it and the original land are amalgamated into one title.
Example:
On 1 April 1984 you bought a block of land. On 1 June 1999 you bought another block of land adjacent to the first block. You amalgamate the titles to the 2 blocks into 1 title.
The second block is treated as a separate CGT asset. You can make a capital gain or loss from it if you sell the whole area of land.
Improvements to land
108-70(1)
A capital improvement to land is taken to be a separate *CGT asset from the land if one of the balancing adjustment provisions set out in subsection 108-55(1) applies to the improvement (whether or not there is a balancing adjustment).
Example:
You own land that you use for pastoral operations. You build some fences that are destroyed by fire. The fences are depreciating assets and are subject to a balancing adjustment on their destruction under Division 40 . The fences are taken to be a separate CGT asset from the land.
Unrelated improvements to pre-CGT assets
108-70(2)
A capital improvement to a *CGT asset (the original asset ) that you *acquired before 20 September 1985 (that is not related to any other capital improvement to the asset) is taken to be a separate *CGT asset if its *cost base (assuming it were a separate CGT asset) when a *CGT event happens (except one that happens because of your death) in relation to the original asset is:
(a) more than the *improvement threshold for the income year in which the event happened; and
(b) more than 5% of the *capital proceeds from the event.
Example:
In 1983 you bought a boat. In 1999 you install a new mast (a capital improvement) for $30,000. Later, you sell the boat for $150,000.
If the cost base of the improvement in the sale year is $41,000 and the improvement threshold for that year is $96,000, the improvement will not be treated as a separate asset.
Note 1:
Section 108-80 sets out the factors for deciding whether capital improvements are related to each other.
Note 2:
If the improvement is a separate asset, the capital proceeds from the event must be apportioned between the original asset and the improvement: see section 116-40 .
Related improvements to pre-CGT assets
108-70(3)
Capital improvements to a *CGT asset (the original asset ) that you *acquired before 20 September 1985 that are related to each other are taken to be a separate *CGT asset if the total of their *cost bases (assuming each one were a separate CGT asset) when a *CGT event happens in relation to the original asset is:
(a) more than the *improvement threshold for the income year in which the event happened; and
(b) more than 5% of the *capital proceeds from the event.
Note:
If the improvements are a separate asset, the capital proceeds from the event must be apportioned between the original asset and the improvements: see section 116-40 .
Some improvements not relevant
108-70(4)
This section does not apply to a capital improvement:
(a) that took place under a contract that you entered into before 20 September 1985; or
(b) if there is no contract - that started or occurred before that day.
108-70(5)
Subsections (2) and (3) do not apply if the capital improvement is made to:
(a) a *Crown lease; or
(b) a *prospecting entitlement or *mining entitlement; or
(c) a *statutory licence; or
(d) a *depreciating asset to which Subdivision 124-K applies.
Note:
Section 108-75 deals with this situation.
108-70(6)
This section does not apply to a capital improvement consisting of repairs to or restoration of a *CGT asset *acquired before 20 September 1985 in circumstances where there is a roll-over under Subdivision 124-B .
This section is relevant only if a *CGT event happens in relation to a *CGT asset that is:
(a) a *Crown lease; or
(b) a *prospecting entitlement or *mining entitlement; or
(c) a *statutory licence; or
(d) a *depreciating asset to which Subdivision 124-K applies.
You must have *acquired it before 20 September 1985.
Note:
Division 124 treats you as having acquired a CGT asset before that day in some situations.
108-75(2)
There are possible consequences if there has been one or more capital improvements to:
(a) the *CGT asset the subject of the *CGT event; or
(b) any *CGT assets of the same kind that were in existence before the CGT asset and came to an end where a roll-over was obtained under a provision set out in this table:
| Roll-over provisions | ||
| Item | For this CGT asset: | Roll-over is obtained under this provision: |
| 1 | A *Crown lease | Subdivision 124-J |
| . | ||
| 2 | A prospecting or mining entitlement | Subdivision 124-L |
| . | ||
| 3 | A *statutory licence | Subdivision 124-C or former Subdivision 124-O |
| . | ||
| 4 | A *depreciating asset | Subdivision 124-K |
Note:
Roll-overs under former sections 160ZWA , 160ZZF , 160ZZPE and 160ZWC of the Income Tax Assessment Act 1936 are also relevant: see section 108-75 of the Income Tax (Transitional Provisions) Act 1997 .
Example:
In 1984 you acquired a commercial fishing licence. In 1986 you paid $62,000 to get an extra right (a capital improvement) attached to the licence.
In June 1999 the licence expired and you got a new licence. You obtained a roll-over for the old licence expiring. In April 2000 you sold the new fishing licence for $200,000.
108-75(3)
Any capital improvement that is not related to another capital improvement is taken to be a separate *CGT asset if its *cost base (assuming it were a separate CGT asset) when the *CGT event happens is:
(a) more than the *improvement threshold for the income year in which the event happened; and
(b) more than 5% of the *capital proceeds from the event.
Example:
To continue the example, suppose the cost base of the right is $101,000 and the improvement threshold for the 1999-2000 income year is $96,000.
Since the cost base of the right is more than the improvement threshold and more than 5% of the capital proceeds, the right is taken to be a separate CGT asset.
Note 1:
Section 108-80 sets out the factors for deciding whether capital improvements are related to each other.
Note 2:
If the improvement is a separate asset, the capital proceeds from the event must be apportioned between the asset and the improvement: see section 116-40 .
108-75(4)
Any capital improvements that are related to each other are taken to be a separate *CGT asset if the total of their *cost bases (assuming each one were a separate CGT asset) when the *CGT event happens is:
(a) more than the *improvement threshold for the income year in which the event happened; and
(b) more than 5% of the *capital proceeds from the event.
Note:
If the improvements are a separate asset, the capital proceeds from the event must be apportioned between the asset and the improvements: see section 116-40 .
108-75(5)
This section does not apply to any capital improvement:
(a) that took place under a contract that you entered into before 20 September 1985; or
(b) if there is no contract - that started or occurred before that day.
SECTION 108-80 108-80 Deciding if capital improvements are related to each other
In deciding whether capital improvements are related to each other, the factors to be considered include:
(a) the nature of the *CGT asset to which the improvements are made; and
(b) the nature, location, size, value, quality, composition and utility of each improvement; and
(c) whether an improvement depends in a physical, economic, commercial or practical sense on another improvement; and
(d) whether the improvements are part of an overall project; and
(e) whether the improvements are of the same kind; and
(f) whether the improvements are made within a reasonable period of time of each other.
The improvement threshold for the 1997-98 income year is $89,992.
108-85(2)
The *improvement threshold is indexed annually.
Note:
Subdivision 960-M shows you how to index amounts.
108-85(3)
The Commissioner must publish before the beginning of each *financial year the *improvement threshold for that year.
[ CCH Note: The following table sets out the improvement threshold for the specified financial years:
| Financial year | Threshold ($) |
| 1998/99 | 89,992 |
| 1999/2000 | 91,072 |
| 2000/01 | 92,802 |
| 2001/02 | 97,721 |
| 2002/03 | 101,239 |
| 2003/04 | 104,377 |
| 2004/05 | 106,882 |
| 2005/06 | 109,447 |
| 2006/07 | 112,512 |
| 2007/08 | 116,337 |
| 2008/09 | 119,594 |
| 2009/10 | 124,258 |
| 2010/11 | 126,619 |
| 2011/12 | 130,418 |
| 2012/13 | 134,200 |
| 2013/14 | 136,884 |
| 2014/15 | 140,443 |
| 2015/16 | 143,392 |
| 2016/17 | 145,401 |
| 2017/18 | 147,582 |
| 2018/19 | 150,386 |
| 2019/20 | 153,093 |
| 2020/21 | 155,849 |
| 2021/22 | 156,784 |
| 2022/23 | 162,899 |
| 2023/24 | 174,465 |
| 2024/25 | 182,665] |
This Division sets out the ways in which you can acquire a CGT asset and the time of acquisition.
The time of acquisition is important for indexation, and for the exemption of assets acquired before 20 September 1985.
Generally, you acquire a CGT asset when you become its owner. You can also acquire a CGT asset:
This Division also directs you to special acquisition rules in other Divisions.
In general, you acquire a *CGT asset when you become its owner. In this case, the time when you *acquire the asset is when you become its owner.
109-5(2)
This table sets out specific rules for the circumstances in which, and the time at which, you acquire a *CGT asset as a result of a *CGT event happening.
Note:
The full list of CGT events is in section 104-5 .
| Acquisition rules (CGT events) | |||
| Event Number | In these circumstances: | You acquire the asset at this time: | |
| A1
(case 1) |
An entity *disposes of a CGT asset to you (except where you compulsorily acquire it) | when the disposal contract is entered into or, if none, when the entity stops being the asset's owner | |
| . | |||
| A1
(case 2) |
You compulsorily acquire a *CGT asset from another entity | the earliest of: | |
| (a) | when you paid compensation to the entity; or | ||
| (b) | when you became the asset's owner; or | ||
| (c) | when you entered the asset under the power of compulsory acquisition; or | ||
| (d) | when you took possession of it under that power | ||
| . | |||
| B1 | You enter into an agreement to obtain the use and enjoyment of a *CGT asset | when you first obtain the use and enjoyment of the asset (unless title does not pass to you at or before the end of the agreement) | |
| . | |||
| D1 | An entity creates contractual or other rights in you | when the contract is entered into or the right created | |
| . | |||
| D2 | An entity grants an option to you | when the option is granted | |
| . | |||
| D3 | An entity grants you a right to receive *ordinary income from mining | when the contract is entered into or, if none, when the right is granted | |
| . | |||
| D4 | You enter into a *conservation covenant as a covenantee | when the covenant is entered into | |
| . | |||
| E1 | An entity creates a trust over a *CGT asset and you are the trustee | when the trust is created | |
| . | |||
| E2 | An entity transfers a *CGT asset to a trust and you are the trustee | when the asset is transferred | |
| . | |||
| E3 | A trust over a *CGT asset is converted to a unit trust and you are the trustee | when the trust is converted | |
| . | |||
| E5 | You as beneficiary under a trust become absolutely entitled to a *CGT asset of the trust as against the trustee (disregarding any legal disability) | when you become absolutely entitled | |
| . | |||
| E6 | Trustee *disposes of a *CGT asset of the trust to you to satisfy a right you had to receive *ordinary income from the trust | when the *disposal occurs | |
| . | |||
| E7 | Trustee *disposes of a *CGT asset of the trust to you to satisfy your interest, or part of it, in trust capital | when the *disposal occurs | |
| . | |||
| E8 | Beneficiary under a trust *disposes of its interest, or part of it, in trust capital to you | when disposal contract is entered into or, if none, when beneficiary stops being interest's owner | |
| . | |||
| E9 | An entity creates a trust over future property and you are the trustee | when the entity makes the agreement to create the trust | |
| . | |||
| F1 | A lessor grants a lease to you, or renews or extends a lease | for grant of lease
-
when the contract is entered into or, if none, at the start of lease;
for lease renewal or extension - at the start of renewal or extension |
|
| . | |||
| F2 | A lessor grants a lease to you, or renews or extends a lease, and term is at least 50 years | for grant of lease
-
when lessor grants the lease;
for lease renewal or extension - at the start of renewal or extension |
|
| . | |||
| K1 | (Repealed by No 77 of 2001) | ||
| . | |||
| K3 | An individual dies and a *CGT asset of the individual *passes to you (as a tax advantaged entity) | when the individual dies | |
| . | |||
| K6 | A *CGT event happens to *shares or an interest in a trust you own | when the other CGT event happens |
Note 1:
For CGT events E1, E2 and E3, if the circumstances specified in the second column of the table happened to an asset before 12 January 1994, there may be no acquisition: see section 109-5 of the Income Tax (Transitional Provisions) Act 1997 .
Note 2:
The acquisition rule for CGT event E9 in the table does not apply to you as trustee if the agreement to create the trust was made before 12 noon on 12 January 1994: see section 109-5 of the Income Tax (Transitional Provisions) Act 1997 .
SECTION 109-10 109-10 When you acquire a CGT asset without a CGT event
This table sets out some specific rules for the circumstances in which, and the time at which, you acquire a *CGT asset otherwise than as a result of a *CGT event happening.
| Acquisition rules (no CGT event) | ||
| Item | In these circumstances: | You acquire the asset at this time: |
| 1 | You (or your *agent) construct or create a *CGT asset, and you own it when the construction is finished or the asset is created | when the construction, or work that resulted in the creation, started |
| . | ||
| 2 | A company issues or allots *equity interests or *non-equity shares in the company to you | when contract is entered into or, if none, when equity interests or non-equity shares issued or allotted |
| . | ||
| 3 | A trustee of a unit trust issues units in the trust to you | when contract is entered into or, if none, when units issued |
(Repealed by No 119 of 2013)
This Subdivision is a *Guide.
This table sets out other acquisition rules in this Part and Part 3-3. Some of the rules have effect only for limited purposes.
| Other acquisition rules | ||||
| Item | In these circumstances: | You acquire the asset at this time: | See: | |
| 1 | A CGT asset devolves to you as legal personal representative of a deceased individual | when the individual died | section 128-15 | |
| . | ||||
| 2 | A CGT asset passes to you as beneficiary in the estate of a deceased individual | when the individual died | sections 128-15 and 128-25 | |
| . | ||||
| 3 | A surviving joint tenant acquires deceased joint tenant ' s interest in a CGT asset | when the deceased died | section 128-50 | |
| . | ||||
| 4 | You get only a partial exemption under Subdivision 118-B for a CGT event happening to a CGT asset that is a dwelling, but you would have got a full exemption if the CGT event had happened just before the first time the dwelling was used for that purpose | at that time | section 118-192 | |
| . | ||||
| 5 | The trustee of a deceased estate acquires a dwelling under the deceased ' s will for you to occupy, and you obtain an interest in it | when the trustee acquired it | section 118-210 | |
| . | ||||
| 6 | You obtain a replacement-asset roll-over for replacing an asset you acquired before 20 September 1985 | before 20 September 1985 | Divisions 122 and 124 | |
| . | ||||
| 6A | (Repealed by No 109 of 2014) | |||
| . | ||||
| 7 | You obtain a replacement-asset roll-over for a Crown lease, or a prospecting or mining entitlement that is renewed or replaced and part of the new entitlement relates to a part of the old one that you acquired before 20 September 1985 | before 20 September 1985 (for that part of the new entitlement that relates to the pre-CGT part of the old one) | sections 124-595 and 124-725 | |
| . | ||||
| 7A - 7B | (Repealed by No 109 of 2014) | |||
| . | ||||
| 8 | You obtain a same-asset roll-over for a CGT asset the transferor acquired before 20 September 1985 | before 20 September 1985 | Subdivision 124-N and Divisions 122 and 126 | |
| . | ||||
| 8A | There is a same-asset roll-over for a CGT event that happens to a CGT asset (acquired on or after 20 September 1985) because the trust deed of a fund is changed and you are the fund that owns the asset after the CGT event | at the time of the CGT event | Subdivision 126-C | |
| . | ||||
| 8B | There is a same-asset roll-over for a CGT event that happens to a CGT asset | when the entity that owned the asset before the roll-over acquired it | section 115-30 | |
| . | ||||
| 8C | You obtain a replacement-asset roll-over (other than a roll-over covered by section 115-34) for replacing a CGT asset | when you acquired the original asset involved in the roll-over | section 115-30 | |
| . | ||||
| 8D | A CGT asset devolves to you as legal personal representative of a deceased individual | when the deceased acquired the asset (unless it was a pre-CGT asset just before his or her death) | section 115-30 | |
| . | ||||
| 8E | A CGT asset passes to you as beneficiary in the estate of a deceased individual | when the deceased acquired the asset (unless it was a pre-CGT asset just before his or her death) | section 115-30 | |
| . | ||||
| 8F | A surviving joint tenant acquires a deceased joint tenant ' s interest in a CGT asset | when the deceased acquired the interest | section 115-30 | |
| . | ||||
| 8G | You hold a membership interest in the receiving trust involved in a roll-over under Subdivision 126-G | when you acquired the corresponding membership interest in the transferring trust involved in the roll-over | section 115-30 | |
| . | ||||
| 9 | A company or trustee of a unit trust issues you with bonus equities and no amount is included in your assessable income | if the original equities are post-CGT assets, or are pre-CGT assets and fully paid
-
when you acquired the original equities; or
if the original equities are pre-CGT assets and you had to pay an amount for the bonus equities - when the liability to pay arose |
section 130-20 | |
| . | ||||
| 10 | You own shares in a company or units in a unit trust and you exercise rights to acquire new equities in the company or trust | for the rights if you acquired them from the company or trustee
-
when you acquired the original equities; or
for the new equities - whenyou exercise the rights |
section 130-40 | |
| . | ||||
| 11 | You acquire shares in a company or units in a unit trust by converting a convertible interest | when the conversion of the convertible interest happened | section 130-60 | |
| . | ||||
| 11A | You acquire shares in a company in exchange for the disposal of an exchangeable interest, and the disposal of the exchangeable interest was to: | when the disposal of the exchangeable interest happened | section 130-105 | |
| (a) | the issuer of the exchangeable interest; or | |||
| (b) | a connected entity of the issuer of the exchangeable interest | |||
| . | ||||
| 11B | You acquire shares in a company in exchange for the redemption of an exchangeable interest | when the redemption of the exchangeable interest happened | section 130-105 | |
| . | ||||
| 12 | (Repealed by No 133 of 2009) | |||
| . | ||||
| 13 | You (as a lessee of land) acquire the reversionary interest of the lessor and there is no roll-over for the acquisition | if term of lease was for 99 years or more
-
when the lease was granted or assigned to you; or
if term of lease less than 99 years - when the reversionary interest acquired |
section 132-15 | |
| . | ||||
| 14 | You acquired a CGT asset before 20 September 1985, and there has since been a change in the majority underlying interests in the asset | at the time of the change | Division 149 | |
| . | ||||
| 15 | You become an Australian resident (but not a temporary resident) and you owned a CGT asset that you acquired on or after 20 September 1985 and that was not *taxable Australian property | when you become an Australian resident (but not a temporary resident) | section 855-45 | |
| . | ||||
| 15A | You are a temporary resident, you then cease to be a temporary resident (but remain, at that time, an Australian resident) and you owned a CGT asset that you acquired on or after 20 September 1985 and that was not *taxable Australian property | when you cease to be a temporary resident | section 768-955 | |
| . | ||||
| 16 | A trust of which you are trustee becomes a resident trust for CGT purposes and you owned a CGT asset that you acquired on or after 20 September 1985 and that was not *taxable Australian property | when the trust becomes a resident trust for CGT purposes | section 855-50 | |
| . | ||||
| 17 | There is a roll-over under Subdivision 126-B for a CGT event and you are the company owning the roll-over asset just after the roll-over and you stop being a 100% subsidiary of another company in the wholly-owned group | when you stop | section 104-175 |
Note:
Section 115-34 sets out other acquisition rules for certain cases involving replacement-asset roll-overs covered by that section.
[ CCH Note: Act No 173 of 2000, s 3 and Sch 4 item 30, provides for the amendment of s 109-55 (table) by omitting " not " from the column referring to " circumstances " in item 9. This amendment could not be consolidated, as it was previously effected by No 58 of 2000, s 3 and Sch 8 item 19.]
This table sets out other acquisition rules outside this Part and Part 3-3.
Provisions of the Income Tax Assessment Act 1936 are in bold .
| Other acquisition rules | |||
| Item | In these circumstances: | The asset is acquired at this time: | See: |
| 1 | CGT event happens to Cocos (Keeling) Islands asset | 30 June 1991 | subsection 102-25(1) of the Income Tax (Transitional Provisions) Act 1997 |
| . | |||
| 1A | (Repealed by No 20 of 2016) | ||
| . | |||
| 2 | Lender acquires a replacement security | before 20 September 1985 | subsection 26BC(6A) |
| . | |||
| 3 | Trust ceases to be a resident trust for CGT purposes and there is an attributable taxpayer | when it ceases | section 102AAZBA |
| . | |||
| 4 | CGT event happens to CGT asset in connection with the demutualisation of an insurance company except a friendly society health or life insurer | on the demutualisation resolution day | section 121AS |
| . | |||
| 5 | CGT event happens to assets of NSW State Bank | at the first taxing time | section 121EN |
| . | |||
| 6 | You own shares in a company that stops being a PDF | just after it stops | section 124ZR |
| . | |||
| 7 | (Repealed by No 23 of 2018) | ||
| . | |||
| 8 | A CGT asset of a CFC (that it owned on its commencing day) | on the CFC ' s commencing day | section 411 |
| . | |||
| 9 | A CGT asset is owned by a tax exempt entity and it becomes taxable | at the transition time | section 57-25 in Schedule 2D |
| . | |||
| 10 | CGT event happens to CGT asset in connection with the demutualisation of a mutual entity other than an insurance company, health insurer and friendly society health or life insurer | on the demutualisation resolution day | Division 326 in Schedule 2H |
| . | |||
| 11 | You stop holding an item as trading stock | when you stop | paragraph 70-110(1)(b) |
| . | |||
| 11A | You acquire an *ESS interest and Subdivision 83A-C (about employee share schemes) applies to the interest | at the *ESS deferred taxing point for the interest | section 83A-125 |
| . | |||
| 12 | CGT event happens to 30 June 1988 asset of a complying superannuation entity | 30 June 1988 | section 295-90 |
| . | |||
| 13 | You are issued with a share or right under a demutualisation of a health insurer except a friendly society health or life insurer | the time the share or right is issued | sections 315-80, 315-210 and 315-260 |
| . | |||
| 14 | You are transferred a share or right by a lost policy holders trust under a demutualisation of a health insurer except a friendly society health or life insurer | the time the share or right is issued | sections 315-145, 315-210 and 315-260 |
| . | |||
| 14A | You are issued with a share, or a right to acquire shares, under a demutualisation of a friendly society health or life insurer | the time the share or right is issued | section 316-105 |
| . | |||
| 14B | You are transferred a share, or right to acquire shares, by a lost policy holders trust under a demutualisation of a friendly society health or life insurer | the time the share or right is issued to the trustee | section 316-170 |
| . | |||
| 15 | A CGT asset is transferred to or from a life insurance company ' s complying superannuation asset pool | at the time of the transfer | Division 320 |
| . | |||
| 16 | A CGT asset is transferred to or from the segregated exempt assets of a life insurance company | at the time of the transfer | Division 320 |
| . | |||
| 17 | Entity becomes a subsidiary member of a consolidated group | at the time it becomes a subsidiary member | 701-5 |
| . | |||
| 18 | Entity ceases to be a subsidiary member of a consolidated group | at the time it ceases | 701-40 |
This Division tells you how to work out the cost base and reduced cost base of a CGT asset. You need to know these to work out if you make a capital gain or loss from most CGT events.
| 110-5 | Modifications to general rules |
| 110-10 | Rules about cost base not relevant for some CGT events |
After you have read the general rules, you need to know if there are any modifications to them. Division 112 lists each situation that may result in a modification and tells you where you can find the detailed provisions for each situation.
This table sets out each CGT event for which you do not need to know what the cost base or reduced cost base of a CGT asset is to work out if you make a capital gain or loss. The section describing the event tells you what amount is relevant instead.
| Rules about cost base not relevant for some CGT events | |||
| Event Number | Description of event: | See section: | |
| C3 | End of option to acquire shares etc. | 104-30 | |
| . | |||
| D1 | Creating contractual or other rights | 104-35 | |
| . | |||
| D2 | Granting an option | 104-40 | |
| . | |||
| D3 | Granting a right to income from mining | 104-45 | |
| . | |||
| E9 | Creating a trust over future property | 104-105 | |
| . | |||
| F1 | Granting a lease | 104-110 | |
| . | |||
| F3 | Lessor pays lessee to get lease changed | 104-120 | |
| . | |||
| F5 | Lessor receives payment for changing lease | 104-130 | |
| . | |||
| H1 | Forfeiture of deposit | 104-150 | |
| . | |||
| H2 | Receipt for event relating to a CGT asset | 104-155 | |
| . | |||
| J5 | Failure to acquire replacement asset and to incur fourth element expenditure after a roll-over | 104-197 | |
| . | |||
| J6 | Cost of acquisition of replacement asset or amount of fourth element expenditure, or both, not sufficient to cover disregarded capital gain | 104-198 | |
| . | |||
| K2 | Bankrupt pays amount in relation to debt | 104-210 | |
| . | |||
| K7 | Balancing adjustment event happens to depreciating asset | 104-235 | |
| . | |||
| K9 | Carried interests | 104-255 | |
| . | |||
| K10 | You make a forex realisation gain covered by item 1 of the table in subsection 775-70(1) | 104-260 | |
| . | |||
| K11 | You make a forex realisation loss covered by item 1 of the table in subsection 775-75(1) | 104-265 | |
| . | |||
| K12 | Foreign hybrid loss exposure adjustment | 104-270 | |
| . | |||
| L1 | Reduction under section 705-57 in tax cost setting amount of assets of entity becoming subsidiary member of consolidated group or MEC group | 104-500 | |
| . | |||
| L2 | Amount remaining after step 3A etc. of joining allocable cost amount is negative | 104-505 | |
| . | |||
| L3 | Tax cost setting amounts for retained cost base assets exceed joining allocable cost amount | 104-510 | |
| . | |||
| L4 | No reset cost base assets against which to apply excess of net allocable cost amount on joining | 104-515 | |
| . | |||
| L5 | Amount remaining after step 4 of leaving allocable cost amount is negative | 104-520 | |
| . | |||
| L6 | Errors in tax cost setting amounts for entity joining consolidated group or MEC group | 104-525 | |
| . | |||
| L7 | (Repealed by No 56 of 2010) | ||
| L8 | Reduction in tax cost setting amount for reset cost base assets on joining cannot be allocated | 104-535 |
The cost base of a *CGT asset consists of 5 elements.
Note 1:
You need to keep records of each element: see Division 121 .
Note 2:
The cost base is reduced by net input tax credits: see section 103-30 .
Note 3:
An amount that makes up all or part of an element of the cost base of an asset may be determined under section 230-505 , if the amount is provided for acquiring a thing, and you start or cease to have a Division 230 financial arrangement as consideration for the acquisition of the thing.
5 elements of the cost base
110-25(2)
The first element is the total of:
(a) the money you paid, or are required to pay, in respect of *acquiring it; and
(b) the *market value of any other property you gave, or are required to give, in respect of acquiring it (worked out as at the time of the acquisition).
Note 1:
There are special rules for working out when you are required to pay money or give other property: see section 103-15 .
Note 2:
This element is replaced with another amount in many situations: see Division 112 .
110-25(3)
The second element is the *incidental costs you incurred. These costs can include giving property: see section 103-5 .
Note:
There is one situation to do with options in which the incidental costs relating to the CGT event are modified: see section 112-85 .
110-25(4)
The third element is the costs of owning the *CGT asset you incurred (but only if you *acquired the asset after 20 August 1991). These costs include:
(a) interest on money you borrowed to acquire the asset; and
(b) costs of maintaining, repairing or insuring it; and
(c) rates or land tax, if the asset is land; and
(d) interest on money you borrowed to refinance the money you borrowed to acquire the asset; and
(e) interest on money you borrowed to finance the capital expenditure you incurred to increase the asset ' s value.
These costs can include giving property: see section 103-5 .
Note:
This element does not apply to personal use assets or collectables: see sections 108-17 and 108-30 .
110-25(5)
The fourth element is capital expenditure you incurred:
(a) the purpose or the expected effect of which is to increase or preserve the asset ' s value; or
(b) that relates to installing or moving the asset.
The expenditure can include giving property: see section 103-5 .
Note:
There are 3 situations involving leases in which this element is modified: see section 112-80 .
110-25(5A)
Subsection (5) does not apply to capital expenditure incurred in relation to goodwill.
110-25(6)
The fifth element is capital expenditure that you incurred to establish, preserve or defend your title to the asset, or a right over the asset. (The expenditure can include giving property: see section 103-5 .)
110-25(7)
(Repealed by No 32 of 2006)
110-25(8)
(Repealed by No 32 of 2006)
110-25(9)
(Repealed by No 32 of 2006)
110-25(10)
(Repealed by No 32 of 2006)
110-25(11)
(Repealed by No 32 of 2006)
Assume a CGT event for purposes of working out cost base at a particular time
110-25(12)
If:
(a) it is necessary to work out the *cost base at a particular time; and
(b) a *CGT event does not happen in relation to the asset at or just after that time;
assume, for the purpose only of working out the cost base at the particular time, that such an event does happen in relation to the asset at or just after that time.
Note 1:
For example, in order to apply subsection 110-37(1) , it is necessary for there to be a CGT event.
Note 2:
The assumption that a CGT event happens does not have any consequence beyond that stated. For example, it does not mean that the asset is afterwards to be treated as having been acquired at the particular time with a first element of cost base equal to all of its former cost base elements.
110-30 (Repealed) SECTION 110-30 Cost base of partnership assets
(Repealed by No 16 of 1999)
There are a number of incidental costs you may have incurred. Except for the ninth , they are costs you may have incurred:
(a) to *acquire a *CGT asset; or
(b) that relate to a *CGT event.
110-35(2)
The first is remuneration for the services of a surveyor, valuer, auctioneer, accountant, broker, *agent, consultant or legal adviser. However, remuneration for professional advice about the operation of this Act is not included unless it is provided by a *recognised tax adviser.
Note:
Expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset: see section 110-35 of the Income Tax (Transitional Provisions) Act 1997 .
110-35(3)
The second is costs of transfer.
110-35(4)
The third is stamp duty or other similar duty.
110-35(5)
The fourth is:
(a) if you *acquired a *CGT asset - costs of advertising or marketing to find a seller; or
(b) if a *CGT event happened - costs of advertising or marketing to find a buyer.
110-35(6)
The fifth is costs relating to the making of any valuation or apportionment for the purposes of this Part or Part 3-3.
110-35(7)
The sixth is search fees relating to a *CGT asset.
110-35(8)
The seventh is the cost of a conveyancing kit (or a similar cost).
110-35(9)
The eighth is borrowing expenses (such as loan application fees and mortgage discharge fees).
110-35(10)
The ninth is expenditure that:
(a) is incurred by the *head company of a *consolidated group or *MEC group to an entity that is not a *member of the group; and
(b) reasonably relates to a *CGT asset *held by the head company; and
(c) is incurred because of a transaction that is between members of the group.
Example:
Land is transferred by one company to another company. The companies are members of a consolidated group. Stamp duty is payable as a result of the transaction.
The transaction has no taxation consequences because of its intra-group nature.
The stamp duty is included in the cost base and reduced cost base of the land.
Note:
Intra-group assets are not held by the head company because of the operation of subsection 701-1(1) (the single entity rule). An example of an intra-group asset is a debt owed by a member of the consolidated group to another member of the group.
110-35(11)
The tenth is termination or other similar fees incurred as a direct result of your ownership of a *CGT asset ending.
SECTION 110-36 Indexation 110-36(1)
The cost base of a *CGT asset *acquired at or before 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 also includes indexation of the elements of the cost base (except the third element) if the requirements of Division 114 are met.
110-36(2)
However, for the purposes of working out the *capital gain of an entity mentioned in an item of the table from a *CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999, the cost base includes indexation only if the entity mentioned in the item chooses that the cost base includes indexation.
| Choice of indexation | ||
| Item | For the purposes of working out the capital gain of this entity: | The cost base includes indexation only if this entity chooses so: |
| 1 | An individual | The individual |
| 2 | A *complying superannuation entity | The trustee of the complying superannuation entity |
| 3 | A trust | The trustee of the trust |
| 4 | A listed investment company | The company |
Note 1:
Section 103-25 specifies when you must make the choice and provides that the way you prepare your income tax return is evidence of your choice.
Note 2:
For each CGT asset whose cost base you need to work out, you may either choose to index the expenditure included in the asset ' s cost base or not make that choice. If you do not choose to index the expenditure, your net capital gain includes only part of your capital gain on the CGT asset as worked out on the basis of the cost base not including indexation and reduced by your capital losses.
110-36(3)
Also, for the purpose of working out the *capital gain of a *life insurance company from a *CGT event happening after 30 June 2000 in respect of a *CGT asset that is a *complying superannuation asset, the cost base includes indexation only if the life insurance company chooses that the cost base includes indexation.
Note:
Section 110-25 of the Income Tax (Transitional Provisions) Act 1997 provides that, in working out the capital gain from a CGT event after 11.45 am on 21 September 1999 and before 1 July 2000 in respect of an asset of a life insurance company or registered organisation, the cost base includes indexation only if the company or organisation chooses it.
SECTION 110-37 Expenditure forming part of cost base or element 110-37(1)
If a later provision of this Subdivision says that:
(a) certain expenditure does not form part of the *cost base of a *CGT asset; or
(b) the cost base is reduced by certain expenditure;
the expenditure is initially included in the cost base, which is then reduced by the amount of the expenditure just before a *CGT event happens in relation to the asset.
Note:
This has the effect of recognising in the cost base any indexed component relating to the expenditure.
110-37(2)
On the other hand, if such a provision says that:
(a) certain expenditure does not form part of one or more elements of the *cost base of a *CGT asset; or
(b) one or more elements of the cost base are reduced by certain expenditure;
the expenditure is never included in the relevant elements of the cost base.
Note:
This has the effect of not recognising to any extent this expenditure in the cost base.
SECTION 110-38 Exclusions 110-38(1)
Expenditure does not form part of any element of the cost base to the extent that section 26-54 prevents it being deducted (even if some other provision also prevents it being deducted).
Note:
Section 26-54 prevents deductions for expenditure related to certain offences.
110-38(2)
Expenditure does not form part of any element of the cost base to the extent that it is a *bribe to a foreign public official or a *bribe to a public official.
110-38(3)
Expenditure does not form part of any element of the cost base to the extent that it is in respect of providing *entertainment.
110-38(4)
Expenditure does not form part of any element of the cost base to the extent that section 26-5 prevents it being deducted (even if some other provision also prevents it being deducted).
Note:
Section 26-5 denies deductions for penalties.
110-38(4A)
Expenditure does not form part of any element of the cost base to the extent that section 26-31 prevents it being deducted.
Note:
Section 26-31 denies deductions for travel related to the use of residential premises as residential accommodation.
110-38(5)
Expenditure does not form part of any element of the cost base to the extent that section 26-47 prevents it being deducted.
Note:
Section 26-47 denies deductions for the excess of boat expenditure over boat income.
110-38(6)
Expenditure does not form part of any element of the cost base to the extent that section 26-22 prevents it being deducted.
Note:
Section 26-22 denies deductions for political contributions and gifts.
110-38(7)
Expenditure does not form any part of any element of the cost base to the extent that section 26-97 prevents it being deducted (even if some other provision also prevents it being deducted).
Note:
Section 26-97 denies deductions for National Disability Insurance Scheme expenditure.
110-38(8)
Expenditure does not form part of any element of the cost base to the extent that section 26-100 prevents it being deducted.
Note:
Section 26-100 denies deductions for certain expenditure on water infrastructure improvements.
110-38(9)
Expenditure does not form part of any element of the cost base to the extent that a provision of Division 832 (about hybrid mismatch rules) prevents it being deducted.
SECTION 110-40 Assets acquired before 7.30 pm on 13 May 1997 110-40(1)
This section prevents some expenditure from forming part of one or more elements of the *cost base of a *CGT asset *acquired at or before 7.30 pm, by legal time in the Australian Capital Territory, on 13 May 1997. (The expenditure mentioned in this section can include giving property: see section 103-5 .)
Note:
For the cost base of a partnership interest you acquire at or before that time, see section 110-43 .
110-40(2)
Expenditure does not form part of the second or third element of the cost base to the extent that you have deducted or can deduct it.
110-40(3)
Expenditure does not form part of any element of the cost base to the extent of any amount you have received as *recoupment of it, except so far as the amount is included in your assessable income.
110-40(4)
Subsection (2) does not apply in relation to amounts that you have deducted or can deduct under Division 243 .
SECTION 110-43 Partnership interests acquired before 7.30 pm on 13 May 1997 110-43(1)
This section prevents some expenditure from forming part of one or more elements of the *cost base of your interest in a *CGT asset of a partnership if you *acquired the interest at or before 7.30 pm, by legal time in the Australian Capital Territory, on 13 May 1997. (The expenditure mentioned in this section can include giving property: see section 103-5 .)
110-43(2)
Expenditure does not form part of the second or third element of the cost base to the extent that you, or a partnership in which you are or were a partner, have deducted or can deduct it.
110-43(3)
Expenditure does not form part of any element of the cost base to the extent of any amount that you, or a partnership in which you are or were a partner, have received as *recoupment of the expenditure, except so far as the amount is included in your assessable income or the partnership's assessable income.
110-43(4)
Subsection (2) does not apply in relation to amounts that you have deducted or can deduct under Division 243 .
SECTION 110-45 Assets acquired after 7.30 pm on 13 May 1997 110-45(1)
This section prevents some expenditure from forming part of the *cost base, or of an element of the cost base, of a *CGT asset *acquired after 7.30 pm, by legal time in the Australian Capital Territory, on 13 May 1997. (The expenditure mentioned in this section can include giving property: see section 103-5 .)
For the cost base of interests in partnership assets acquired after that time, see section 110-50 .
For exceptions to the application of this section, see section 110-53 .
110-45(1A)
This section also applies to expenditure incurred after 30 June 1999 on land or a building if:
(a) the land or building was *acquired at or before the time mentioned in subsection (1); and
(b) the expenditure forms part of the fourth element of the *cost base of the land or building.
Deductible expenditure excluded from second and third elements
110-45(1B)
Expenditure does not form part of the second or third element of the cost base to the extent that you have deducted or can deduct it.
Other deductible expenditure
110-45(2)
Expenditure (except expenditure excluded by subsection (1B)) does not form part of the cost base to the extent that you have deducted or can deduct it for an income year, except so far as:
(a) the deduction has been reversed by an amount being included in your assessable income for an income year by a provision of this Act (outside this Part and Part 3-3 and Division 243 ); or
Note:
Division 20 contains some of the provisions that reverse deductions. Section 20-5 lists some others.
(ab) the deduction is under Division 243 ; or
(b) the deduction would have been so reversed apart from a provision listed in the table (relief from including a balancing charge in your assessable income).
| Provisions for relief from including a balancing charge in your assessable income | ||
| Item | Provision | Subject matter |
| 1 | section 40-340 | Roll-over relief for *depreciating asset |
| . | ||
| 2 | section 40-365 | Involuntary disposal of *depreciating asset |
| . | ||
| 3 | (Repealed by No 93 of 2011) |
Recouped expenditure
110-45(3)
Expenditure does not form part of any element of the cost base to the extent of any amount you have received as *recoupment of it, except so far as the amount is included in your assessable income.
110-45(3A)
(Repealed by No 95 of 2004)
Capital expenditure by previous owner that you can deduct after acquisition
110-45(4)
The cost base is reduced to the extent that you have deducted or can deduct for an income year capital expenditure incurred by another entity in respect of the *CGT asset. (This rule does not apply so far as the deduction is covered by paragraph (2)(a) or (b).)
Example:
Under Division 43 you can deduct expenditure incurred by a previous owner of capital works you own.
Landcare and water facility expenditure giving rise to a tax offset
110-45(5)
Expenditure does not form part of the cost base to the extent that you choose a *tax offset for it under the former section 388-55 (about the landcare and water facility tax offset) instead of deducting it.
Heritage conservation expenditure giving rise to a tax offset
110-45(6)
Expenditure does not form part of the cost base to the extent that:
(a) it is eligible heritage conservation expenditure (as determined under former section 159UO of the Income Tax Assessment Act 1936 ); and
(b) you could have deducted it for an income year under any of these Divisions (about capital works):
(i) Division 43 of this Act;
but for the exclusions in paragraph 43-70(2)(h) of this Act and former subsections 124ZB(4) and 124ZG(5) of that Act.
(ii) former Division 10C or 10D of Part III of that Act;
Note:
Because eligible heritage conservation expenditure is the subject of a tax offset, it is also not deductible.
SECTION 110-50 Partnership interests acquired after 7.30 pm on 13 May 1997 110-50(1)
This section prevents some expenditure from forming part of the *cost base, or of an element of the cost base, of your interest in a *CGT asset of a partnership if you *acquired the interest after 7.30 pm, by legal time in the Australian Capital Territory, on 13 May 1997. (The expenditure mentioned in this section can include giving property: see section 103-5 .)
For exceptions to the application of this section, see section 110-53 .
110-50(1A)
This section also applies to expenditure incurred after 30 June 1999 on land or a building if:
(a) the land or building was *acquired at or before the time mentioned in subsection (1); and
(b) the expenditure forms part of the fourth element of the *cost base of the land or building.
Deductible expenditure excluded from second and third elements
110-50(1B)
Expenditure does not form part of the second or third element of the cost base to the extent that you, or a partnership in which you are or were a partner, have deducted or can deduct it.
Other deductible expenditure
110-50(2)
Expenditure (except expenditure excluded by subsection (1B) does not form part of the cost base to the extent that you, or a partnership in which you are or were a partner, have deducted or can deduct it for an income year, except so far as:
(a) the deduction has been reversed by an amount being included in your assessable income for an income year, or in the assessable income of a partnership in which you are or were a partner, by a provision of this Act (outside this Part and Part 3-3 and Division 243 ); or
Note:
Division 20 contains some of the provisions that reverse deductions. Section 20-5 lists some others.
(ab) the deduction is under Division 243 ; or
(b) the deduction would have been so reversed apart from a provision listed in the table in subsection 110-45(2) (relief from including a balancing charge in your assessable income).
Recouped expenditure
110-50(3)
Expenditure does not form part of any element of the cost base to the extent of any amount that you, or a partnership in which you are or were a partner, have received as *recoupment of it, except so far as the amount is included in your assessable income or the partnership's assessable income.
110-50(3A)
(Repealed by No 95 of 2004)
Capital expenditure by previous owner of the asset
110-50(4)
The cost base is reduced to the extent that you, or a partnership in which you are or were a partner, have deducted or can deduct for an income year capital expenditure incurred by another entity in respect of the *CGT asset. (This rule does not apply so far as the deduction is covered by paragraph (2)(a) or (b).)
Example:
Under Division 43 an entity can deduct expenditure incurred by a previous owner of capital works that the entity owns.
Landcare and water facility expenditure giving rise to a tax offset
110-50(5)
Expenditure does not form part of the cost base to the extent that you choose a *tax offset for it under the former section 388-55 (about the landcare and water facility tax offset) instead of deducting it.
Heritage conservation expenditure giving rise to a tax offset
110-50(6)
Expenditure does not form part of the cost base to the extent that:
(a) it is eligible heritage conservation expenditure (as determined under former section 159UO of the Income Tax Assessment Act 1936 ); and
(b) you, or a partnership in which you are or were a partner, could have deducted it for an income year under any of these Divisions (about capital works):
(i) Division 43 of this Act;
but for the exclusions in paragraph 43-70(2)(h) of this Act and former subsections 124ZB(4) and 124ZG(5) of that Act.
(ii) former Division 10C or 10D of Part III of that Act;
Note:
Because eligible heritage conservation expenditure is the subject of a tax offset, it is also not deductible.
SECTION 110-53 Exceptions to application of sections 110-45 and 110-50 110-53(1)
Subsection 110-45(2), (4), (5) or (6) or 110-50(2), (4), (5) or (6) does not prevent expenditure from forming part of the cost base to the extent that the deduction mentioned in that subsection could reasonably be regarded as arising before 7.30 pm, by legal time in the Australian Capital Territory, on 13 May 1997, or as relating to a period before that time.
110-53(2)
Subsections 110-45(5) and (6) and 110-50(5) and (6) do not apply to expenditure incurred before the day on which the Bill that became the Taxation Laws Amendment Act (No. 1) 1999 was introduced into the House of Representatives.
110-53(3)
(Repealed by No 114 of 2000)
SECTION 110-54 110-54 Debt deductions disallowed by thin capitalisation rules
Expenditure does not form part of the third element of the cost base to the extent that Division 820 (Thin capitalisation rules) prevented or prevents you, or a partnership in which you are or were a partner, from deducting it.
The reduced cost base of a *CGT asset consists of 5 elements. It does not include indexation of those elements.
Note:
The reduced cost base is reduced by net input tax credits: see section 103-30 .
5 elements of the reduced cost base
110-55(2)
All of the elements (except the third one) of the reduced cost base of a *CGT asset are the same as those for the *cost base.
110-55(3)
The third element is:
(a) any amounts worked out under whichever of the following subparagraphs applies:
(i) if Division 58 does not apply to the asset - any amount included in your assessable income for any income year because of a balancing adjustment for the asset;
(ii) if Division 58 applies to the asset and an amount has been included in your assessable income for an income year because of a balancing adjustment for the asset - any part of that amount that was attributable to amounts you have deducted or can deduct for the decline in value of the asset; and
(b) any amount that would have been so included apart from any of these (which provide relief from including a balancing charge in your assessable income):
(i) section 40-365 ; or
(ii) any of these former sections - section 42-285 , 42-290 or 42-293 ; or
(iii) former subsection 59(2A) or (2D) of the Income Tax Assessment Act 1936 .
What does not form part of the reduced cost base
110-55(4)
The reduced cost base does not include an amount to the extent that you have deducted or can deduct it (including because of a balancing adjustment) or could have deducted apart from paragraph 43-70(2)(h) .
Note:
That paragraph excludes from deductibility under Division 43 expenditure that qualifies for the heritage conservation rebate.
110-55(5)
The reduced cost base does not include an amount that you could have deducted for a *CGT asset had you used it wholly for the *purpose of producing assessable income.
110-55(6)
Expenditure does not form part of the reduced cost base to the extent of any amounts you have received as *recoupment of it. However, this rule does not apply to the extent that the amounts are included in your assessable income.
110-55(6A)
Expenditure does not form part of the reduced cost base to the extent that you chose a *tax offset for it under the former section 388-55 (about the landcare and water facility tax offset) instead of deducting it.
110-55(7)
If your *CGT asset is a *share in a company, its reduced cost base is reduced by the amount calculated under subsection (8) if:
(aa) you are a *corporate tax entity; and
(a) the company makes a distribution to you under an *arrangement; and
(b) an amount (the attributable amount ) representing the distribution or part of it is reasonably attributable to profits *derived by the company before you *acquired the share; and
(c) you are entitled to a *tax offset under Division 207 on the part of the distribution that is a *dividend (the dividend amount ); and
(d) you were a *controller (for CGT purposes) of the company, or an *associate of such a controller, when the arrangement was made or carried out.
110-55(8)
The amount of the reduction is:
| Attributable amount | × |
Amount of *tax offset
Dividend amount × *Corporate tax rate |
110-55(9)
The reduced cost base is to be reduced by any amount that you have deducted or can deduct, or could have deducted except for Subdivision 170-D , as a result of a *CGT event that happens in relation to a *CGT asset. However, do not make a reduction for an amount that relates to a cost that could never have formed part of the reduced cost base or is excluded from the reduced cost base as a result of another provision of this section.
110-55(9A)
Expenditure does not form part of the reduced cost base to the extent that section 26-54 prevents it being deducted (even if some other provision also prevents it being deducted).
Note:
Section 26-54 prevents deductions for expenditure related to certain offences.
110-55(9B)
Expenditure does not form part of the reduced cost base to the extent that it is a *bribe to a foreign public official or a *bribe to a public official.
110-55(9C)
Expenditure does not form part of the reduced cost base to the extent that it is in respect of providing *entertainment.
110-55(9D)
Expenditure does not form part of the reduced cost base to the extent that section 26-5 prevents it being deducted (even if some other provision also prevents it being deducted).
Note:
Section 26-5 denies deductions for penalties.
110-55(9E)
Expenditure does not form part of the reduced cost base to the extent that section 26-47 prevents it being deducted.
Note:
Section 26-47 denies deductions for the excess of boat expenditure over boat income.
110-55(9F)
Expenditure does not form part of the reduced cost base to the extent that section 26-22 prevents it being deducted.
Note:
Section 26-22 denies deductions for political contributions and gifts.
110-55(9G)
Expenditure does not form part of the reduced cost base to the extent that section 26-100 prevents it being deducted.
Note:
Section 26-100 denies deductions for certain expenditure on water infrastructure improvements.
110-55(9H)
Expenditure does not form any part of any element of the reduced cost base to the extent that section 26-97 prevents it being deducted (even if some other provision also prevents it being deducted).
Note:
Section 26-97 denies deductions for National Disability Insurance Scheme expenditure.
110-55(9J)
Expenditure does not form part of the reduced cost base to the extent that section 26-31 prevents it being deducted.
Note:
Section 26-31 denies deductions for travel related to the use of residential premises as residential accommodation.
110-55(9K)
Expenditure does not form part of the reduced cost base to the extent that a provision of Division 832 (about hybrid mismatch rules) prevents it being deducted.
Assume a CGT event for purposes of working out reduced cost base at a particular time
110-55(10)
If:
(a) it is necessary to work out the *reduced cost base at a particular time; and
(b) a *CGT event does not happen in relation to the asset at or just after that time;
assume, for the purpose only of working out the reduced cost base at the particular time, that such an event does happen in relation to the asset at or just after that time.
SECTION 110-60 Reduced cost base for partnership assets 110-60(1)
The third element of an entity ' s reduced cost base for its interest in a *CGT asset of a partnership is the entity ' s share of:
(a) any amounts worked out under whichever of the following subparagraphs applies:
(i) if Division 58 does not apply to the asset - any amount included in the assessable income of the partnership for any income year because of a balancing adjustment for the asset;
(ii) if Division 58 applies to the asset and an amount has been included in the assessable income of the partnership for an income year because of a balancing adjustment for the asset - any part of that amount that was attributable to amounts that the partnership has deducted or can deduct for depreciation of the asset; and
(b) any amount that would have been so included apart from any of these (which provide relief from including a balancing charge in your assessable income):
(i) section 40-365 ; or
(ii) any of these former sections - section 42-285 , 42-290 or 42-293 ; or
(iii) former subsection 59(2A) or (2D) of the Income Tax Assessment Act 1936 ;
calculated according to the entity ' s share in the partnership net income or net loss.
110-60(2)
Expenditure does not form part of an entity ' s reduced cost base for its interest in a *CGT asset of a partnership to the extent that a partnership in which the entity is or was a partner has deducted or can deduct it (including because of a balancing adjustment), or could have deducted it apart from paragraph 43-70(2)(h) .
110-60(3)
Expenditure does not form part of an entity ' s reduced cost base for its interest in a *CGT asset of a partnership to the extent that a partnership in which the entity is or was a partner could have deducted an amount for the asset if it had used it wholly for the *purpose of producing assessable income.
110-60(4)
Expenditure does not form part of an entity ' s reduced cost base for its interest in a *CGT asset of a partnership to the extent of any amounts that a partnership in which the entity is or was a partner has received as *recoupment of it and that are not included in the assessable income of the partnership.
110-60(4A)
Expenditure does not form part of an entity ' s reduced cost base for its interest in a *CGT asset of a partnership to the extent that the entity chose a *tax offset for the expenditure under the former section 388-55 (about the landcare and water facility tax offset) instead of deducting it.
110-60(5)
(Repealed by No 23 of 2005)
110-60(6)
(Repealed by No 23 of 2005)
110-60(7)
The reduced cost base of an entity ' s interest in a *CGT asset of a partnership is to be reduced by the entity ' s share of any amount that the partnership has deducted or can deduct, or could have deducted except for Subdivision 170-D , as a result of a *CGT event that happens in relation to the asset. However, a reduction is not to be made for an amount that relates to a cost that could never have formed part of the reduced cost base or is excluded from the reduced cost base as a result of another provision of this section.
Division 112 - Modifications to cost base and reduced cost base
This Division tells you the situations that may modify the general rules about the cost base and reduced cost base of a CGT asset.
Modifications can occur from the time you acquired the CGT asset to when a CGT event happens in relation to it.
Note:
You should keep records of the modifications: see Division 121 .
112-5(2)
Most modifications replace the first element (what you paid for a CGT asset) of the cost base and reduced cost base of the asset.
112-5(3)
Subdivision 112-A contains operative provisions setting out the general situations that may result in a modification to the general rules.
112-5(4)
Subdivision 112-B (which is a guide) has a number of tables (each one covering a specialist topic) that tell you each situation that may result in a modification to the general rules.
112-5(5)
Subdivision 112-C (which is a guide) explains what a replacement-asset roll-over is and how it can modify the cost base or reduced cost base.
112-5(6)
Subdivision 112-D (which is a guide) explains what a same-asset roll-over is and how it can modify the cost base or reduced cost base.
112-5(7)
Section 230-505 provides special rules for working out the amount of consideration for an asset if the asset is a *Division 230 financial arrangement or a Division 230 financial arrangement is involved in that consideration.
If a cost base modification replaces an element of the *cost base of a *CGT asset with an amount, this Part and Part 3-3 apply to you as if you had paid that amount.
Example:
An individual pays $10,000 to acquire an option. The individual dies and the option devolves to his legal personal representative, who exercises the option.
Section 134-1 applies to the legal personal representative as if the representative had paid $10,000 for the option.
The first element of your *cost base and *reduced cost base of a *CGT asset you *acquire from another entity is its *market value (at the time of acquisition) if:
(a) you did not incur expenditure to acquire it, except where your acquisition of the asset resulted from:
(i) *CGT event D1 happening; or
(ii) another entity doing something that did not constitute a CGT event happening; or
(b) some or all of the expenditure you incurred to acquire it cannot be valued; or
(c) you did not deal at *arm ' s length with the other entity in connection with the acquisition.
The expenditure can include giving property: see section 103-5 .
112-20(2)
Despite paragraph (1)(c), if:
(a) you did not deal at *arm ' s length with the other entity; and
(b) your *acquisition of the *CGT asset resulted from another entity doing something that did not constitute a CGT event happening;
the *market value is substituted only if what you paid to acquire the CGT asset was more than its market value (at the time of acquisition).
The payment can include giving property: see section 103-5 .
112-20(3)
There are some situations in which the rule in subsection (1) does not apply. They include the situations set out in this table:
| Exceptions to the market value substitution rule | ||||
| Item | You *acquired this CGT asset: | ...in this situation: | ||
| 1 | A right to receive *ordinary income or *statutory income from a trust (except a unit trust or a trust that arises because of someone ' s death) | (a) | you did not pay or give anything for the right; and | |
| (b) | you did not acquire the right by way of an assignment from another entity | |||
| 2 | A decoration awarded for valour or brave conduct | you did not pay or give anything for it | ||
| 3 | A contractual or other legal or equitable right resulting from *CGT event D1 happening | you did not pay or give anything for it | ||
| 4 | Rights to *acquire: | you did not pay or give anything for the rights | ||
| (a) | *shares, or options to acquire *shares, in a company; or | |||
| (b) | units, or options to acquire units, in a unit trust; | |||
| in a situation covered by Subdivision 130-B | ||||
| 5 | A *share in a company or a right to *acquire a share or *debenture in a company | it was issued or allotted to you by the company and you did not pay or give anything for it | ||
| 6 | A unit in a unit trust or a right to *acquire a unit or debenture in a unit trust | it was issued to you by the trustee of the unit trust and you did not pay or give anything for it | ||
| 7 | A right to *dispose of a *share in a company | it was issued to you by the company and was exercised by you or by another entity who became the owner of the right |
Note 1:
Disregard subsections (2) and (3) for shares or units that you acquired before 16 August 1989: see section 112-20 of the Income Tax (Transitional Provisions) Act 1997 .
Note 2:
This section does not apply to ESS interests acquired under employee share schemes: see subsection 130-80(4) .
SECTION 112-25 Split, changed or merged assets
Split or changed assets
112-25(1)
This section sets out what happens if:
(a) a *CGT asset (the original asset ) is split into 2 or more assets (the new assets ); or
(b) a *CGT asset (also the original asset ) changes in whole or in part into an asset (also the new asset ) of a different nature;
and you are the beneficial owner of the original asset and each new asset.
Example:
You subdivide a block of land into 3 separate blocks. Each of those blocks is a new asset .
112-25(2)
The splitting or change is not a *CGT event.
112-25(3)
You work out the *cost base and *reduced cost base of each new asset as follows: Method statement
Step 1.
Work out each element of the *cost base and *reduced cost base of the original asset at the time of the event referred to in subsection (1).
Step 2.
Apportion in a reasonable way each element to each new asset. The result is each corresponding element of the new asset's *cost base and *reduced cost base.
Merged assets
112-25(4)
If 2 or more *CGT assets (the original assets ) are merged into a single asset (the new asset ) and you are the beneficial owner of the original assets and the new asset:
(a) the merger is not a *CGT event; and
(b) each element of the *cost base and *reduced cost base of the new asset (at the time of the merging) is the sum of the corresponding elements of each original asset.
Apportionment on acquisition of an asset
112-30(1)
If you *acquire a *CGT asset because of a transaction and only part of the expenditure you incurred under the transaction relates to the acquisition of the asset, the first element of your *cost base and *reduced cost base of the asset is that part of the expenditure that is reasonably attributable to the acquisition of the asset.
The expenditure can include giving property: see section 103-5 .
Apportionment of expenditure in other elements
112-30(1A)
If you incur expenditure and only part of it relates to another element of the *cost base or *reduced cost base of a *CGT asset, that element includes that part of the expenditure that is reasonably attributable to that element.
Apportionment for CGT asset that was part of another asset
112-30(2)
The *cost base and *reduced cost base of a *CGT asset is apportioned if a *CGT event happens to some part of the asset, but not to the remainder of it.
Note:
The full list of CGT events is in section 104-5 .
112-30(3)
The *cost base for the *CGT asset representing the part to which the *CGT event happened is worked out using the formula:
| Cost base of the asset | × |
Capital proceeds for the CGT event
happening to the part Those capital proceeds plus the market value of the remainder of the asset |
The *reduced cost base is worked out similarly.
112-30(4)
The remainder of the *cost base and *reduced cost base of the asset is attributed to the part that remains.
Example:
You acquire a truck for $24,000 and sell its motor for $9,000. Suppose the market value of the remainder of the truck is $16,000.
Under subsection (3), the cost base of the motor is:
$24,000 × $9,000
$9,000 + $16,000= $8,640 Under subsection (4), the cost base of the remainder of the truck is:
$24,000 − $8,640 = $15,360
112-30(5)
However, an amount forming part of the *cost base or *reduced cost base of the asset is not apportioned if, on the facts, that amount is wholly attributable to the part to which the *CGT event happened or to the remaining part.
If you *acquire a *CGT asset from another entity that is subject to a liability, the first element of your *cost base and *reduced cost base of the asset includes the amount of the liability you assume.
Example:
You acquire a block of land for $150,000. You pay $50,000 and assume a liability for an outstanding mortgage of $100,000. The first element of your cost base and reduced cost base is $150,000.
Note:
The first element of cost base is dealt with in subsection 110-25(2) . The first element of reduced cost base is the same: see subsection 110-55(2) .
Consequences for cost base and reduced cost base
112-36(1)
If you *acquire a *CGT asset because an entity *disposes of the CGT asset to you, and that disposal causes *CGT event A1 (the first CGT event ) to happen:
(a) neither the *cost base nor the *reduced cost base of the CGT asset includes the value of any *look-through earnout right relating to the CGT asset and the acquisition; and
(b) include in the first element of the CGT asset ' s cost base and reduced cost base any *financial benefit that you provide under such a look-through earnout right; and
(c) reduce the first element of the CGT asset ' s cost base and reduced cost base by an amount equal to the amount of any financial benefit that you receive undersuch a look-through earnout right.
Remaking choices affected by the look-through earnout right
112-36(2)
Despite section 103-25 , you may remake any choice you made under this Part or Part 3-3 for a later *CGT event involving the *CGT asset if:
(a) after the later CGT event, you provide or receive a *financial benefit under such a *look-through earnout right; and
(b) you remake the choice at or before the time you are required to lodge your *income tax return for the income year in which the financial benefit is provided or received.
Amending assessments affected by the look-through earnout right
112-36(3)
The Commissioner may amend an assessment of a *tax-related liability if:
(a) an entity provides or receives a *financial benefit under such a *look-through earnout right; and
(b) the amount of the tax-related liability:
(i) depends on that entity ' s taxable income for an income year in which a *CGT event, involving the *CGT asset, happens after the first CGT event but before the financial benefit is provided or received; or
(ii) is otherwise affected by that right ' s character as a look-through earnout right; and
(c) the Commissioner makes the amendment before the end of the 4-year period starting at the end of the income year in which the last possible financial benefit becomes or could become due under the look-through earnout right.
The tax-related liability need not be a liability of that entity.
Note:
Subparagraph (b)(ii) covers changes to the amount of that tax-related liability that happen directly or indirectly because of subsection (1) or (2).
112-36(4)
If at a particular time a right is taken never to have been a *look-through earnout right because of subsection 118-565(2) , the Commissioner may amend an assessment of a *tax-related liability for up to 4 years after that time if:
(a) an entity provides or receives a *financial benefit under the right; and
(b) the amount of the tax-related liability:
(i) depends on that entity ' s taxable income for an income year in which a *CGT event, involving the *CGT asset, happens after the first CGT event but before the financial benefit is provided or received; or
(ii) was otherwise affected by that right ' s character as a look-through earnout right before subsection 118-565(2) applied.
The tax-related liability need not be a liability of that entity.
Note:
Subsection 118-565(2) restricts look-through earnout rights to rights to financial benefits over a period not exceeding 5 years from the end of the income year in which the first CGT event happens.
112-36(5)
If, after providing or receiving a *financial benefit under a right referred to in subsection (3) or (4):
(a) you are dissatisfied with an assessment referred to in that subsection; and
(b) the Commissioner notifies you that the Commissioner has decided under that subsection not to amend your assessment;
you may object against the assessment, to the extent that it does not take account of that right ' s character (as a *look-through earnout right or not such a right), in the manner set out in Part IVC of the Taxation Administration Act 1953 .
The first element of the *cost base and *reduced cost base of a right to *dispose of a *share in a company that you *acquire as a result of *CGT event D2 happening to the company is the sum of:
(a) the amount that is included in your assessable income as ordinary income as a result of your acquisition of the right; and
(b) the amount (if any) that you paid to acquire the right.
(Repealed by No 96 of 2014)
This Subdivision is a *Guide.
Note:
In interpreting an operative provision, a Guide may be considered only for limited purposes: see section 950-150 .
112-40(2)
It sets out which element of the cost base or reduced cost base of a CGT asset is affected by various situations.
SECTION 112-45 CGT events
| CGT events | |||
| Event number | In this situation: | Element affected: | See section: |
| D4 | A conservation covenant is entered into over land | The total cost base and reduced cost base | 104-47 |
| . | |||
| E1 | A trust is created over a CGT asset | First element of cost base and reduced cost base | 104-55 |
| . | |||
| E2 | A CGT asset is transferred to a trust | First element of cost base and reduced cost base | 104-60 |
| . | |||
| E4 | A trustee makes a capital payment to you in relation to units or an interest in the trust | The total cost base and reduced cost base | 104-70 |
| . | |||
| F4 | A lessee receives payment for changing lease | The total cost base | 104-125 |
| . | |||
| G1 | A company makes a capital payment to you in relation to your shares | The total cost base and reduced cost base | 104-135 |
| . | |||
| G2 | (Repealed by No 90 of 2002) | ||
| . | |||
| G3 | A liquidator or administrator declares shares or financial instruments to be worthless | The total cost base and reduced cost base | 104-145 |
| . | |||
| J4 | Trust fails to cease to exist after a roll-over under Subdivision 124-N | First element of cost base and reduced cost base | 104-195 |
| . | |||
| K1 | (Repealed by No 77 of 2001) | ||
| . | |||
| K8 | Direct value shifts affecting your equity or loan interests in a company or trust | The total cost base and reduced cost base | Subdivision 725-D |
| Annual cost base adjustment for member ' s unit or interest in AMIT | |||
| Item | In this situation: | Element affected: | See section: |
| 1 | Annual cost base adjustment for member ' s unit or interest in AMIT | The total cost base and reduced cost base | 104-107B |
| Gifts acquired by associates | |||
| Item | In this situation: | Element affected: | See section: |
| 1 | A gift of property is covered by subsection 118-60(1) or (2) and the property is later *acquired by an associate for less than market value | First element of cost base and reduced cost base | 118-60 |
| Main residence | |||
| Item | In this situation: | Element affected: | See section: |
| 1 | A dwelling that is your main residence begins to be used for the first time for the purpose of producing assessable income | The total cost base and reduced cost base | 118-192 |
| Scrip for scrip roll-over | |||
| Item | In this situation: | Element affected: | See section: |
| 1 | Interest is acquired by an entity where there is a roll-over under Subdivision 124-M and there is a significant or common stakeholder under an arrangement | First element of cost base and reduced cost base | 124-782 |
| . | |||
| 2 | Equity or debt is acquired by a member of a wholly-owned group under that arrangement from another member of the group | First element of cost base and reduced cost base | 124-784 |
| . | |||
| 2A | Interest is acquired by an entity where there is a roll-over under Subdivision 124-M and the arrangement is taken to be a restructure | First element of cost base and reduced cost base | 124-784B |
| . | |||
| 3 | You exchange an interest you acquired before 20 September 1985 for an interest in another entity | The total cost base and reduced cost base | 124-800 |
| New statutory licence | |||
| Item | In this situation: | Element affected: | See section: |
| 1 | New statutory licences | First element of cost base and reduced cost base | 124-150, 124-155 and 124-160 |
| Change of incorporation | |||
| Item | In this situation: | Element affected: | See section: |
| 1 | Shares in company that has changed its incorporation or has ownership not significantly different from that of a former body incorporated under another law | First element of cost base and reduced cost base | 124-530 |
| MDO roll-over | |||
| Item | In this situation: | Element affected: | See section: |
| 1 | Exchange of an interest in an MDO for an interest in another MDO | First element of cost base and reduced cost base | 124-985 |
| Exchange of stapled ownership interests for units in a unit trust | |||
| Item | In this situation: | Element affected: | See section: |
| 1 | Exchange of stapled ownership interests | First element of cost base and reduced cost base | 124-1055 and 124-1060 |
| Roll-over for water entitlements | |||
| Item | In this situation: | Element affected: | See section: |
| 1 | You replace one or more water entitlements with one or more new water entitlements | First element of cost base and reduced cost base | 124-1120 and 124-1130 |
| 2 | You have a reduction in one or more water entitlements that you own | First element of cost base and reduced cost base | 124-1145 and 124-1150 |
| 3 | A CGT event happens to an asset you own as a result of the replacement of water entitlements | First element of cost base and reduced cost base | 124-1165 |
| Demergers | |||
| Item | In this situation: | Element affected: | See section: |
| 1 | There is a roll-over under Subdivision 125-B after a demerger | First element of cost base and reduced cost base of new interests and remaining original interests | 125-80 |
| 2 | There is a CGT event under a demerger but no roll-over under Subdivision 125-B | First element of cost base and reduced cost base of new interests and remaining original interests | 125-85 |
| 3 | There is a cost base adjustment under Subdivision 125-B but no CGT event under a demerger | First element of cost base and reduced cost base of new interests and remaining original interests | 125-90 |
| Transfer of assets between certain trusts | |||
| Item | In this situation: | Element affected: | See sections: |
| 1 | There is a roll-over under Subdivision 126-G relating to the transfer of a CGT asset between certain trusts | First element of cost base and reduced cost base of the CGT asset | 126-240 |
| 2 | There is a roll-over under Subdivision 126-G relating to the transfer of a CGT asset between certain trusts | Cost base and reduced cost base of membership interests in each trust | 126-245 and 126-250 |
| Effect of an individual dying | |||
| Item | In this situation: | Element affected: | See section: |
| 1 | CGT asset devolves to the legal personal representative | First element of cost base and reduced cost base | 128-15 |
| . | |||
| 2 | CGT asset passes to a beneficiary | First element of cost base and reduced cost base | 128-15 |
| . | |||
| 3 | CGT asset passes to a trustee of a complying superannuation entity | First element of cost base and reduced cost base | 128-25 |
| . | |||
| 4 | Surviving joint tenant acquires deceased joint tenant's interest in CGT asset | First element of cost base and reduced cost base | 128-50 |
| Bonus shares or units | |||
| Item | In this situation: | Element affected: | See section: |
| 1 | A company issues you with bonus shares | First element of cost base and reduced cost base | 130-20 |
| . | |||
| 2 | A unit trust issues you with bonus units | First element of cost base and reduced cost base | 130-20 |
| Exercise of rights | |||
| Item | In this situation: | Element affected: | See section: |
| 1 | You exercise rights to acquire shares, or options to acquire shares, in a company | First element of cost base and reduced cost base | 130-40 |
| . | |||
| 2 | You exercise rights to acquire units, or options to acquire units, in a unit trust | First element of cost base and reduced cost base | 130-40 |
| Convertible interests | |||
| Item | In this situation: | Element affected: | See section: |
| 1 | You acquire shares, or units in a unit trust, by converting a convertible interest | First element of cost base and reduced cost base | 130-60 |
(Repealed by No 133 of 2009)
| Exchangeable interests | |||
| Item | In this situation: | Element affected: | See section: |
| 1 | You acquire shares in a company in exchange for the disposal of an exchangeable interest, and the disposal of the exchangeable interest was to: | First element of cost base and reduced cost base | 130-105 |
| (a) the issuer of the exchangeable interest; or | |||
| (b) a connected entity of the issuer of the exchangeable interest | |||
| 2 | You acquire shares in a company in exchange for the redemption of an exchangeable interest | First element of cost base and reduced cost base | 130-105 |
| Exploration investments | |||
| Item | In this situation: | Element affected: | See section: |
| 1 | An exploration investment in the form of a share is disposed of | The total reduced cost base | 130-110 |
| Leases | |||
| Item | In this situation: | Element affected: | See section: |
| 1 | A lessee incurs expenditure in obtaining the lessor's agreement to vary or waive a term of the lease | Fourth element of cost base and reduced cost base | 132-1 |
| . | |||
| 2 | A lessor pays an amount to the lessee for improvements made by the lessee to the property | Fourth element of cost base and reduced cost base | 132-5 |
| . | |||
| 3 | A lessor of a long-term lease incurs expenditure in obtaining the lessee's agreement to vary or waive a term of the lease or to forfeit or surrender the lease | Fourth element of cost base and reduced cost base | 132-10 |
| . | |||
| 4 | A lessee of land acquires the reversionary interest of the lessor | First element of cost base and reduced cost base | 132-15 |
| Exercise of options | |||
| Item | In this situation: | Element affected: | See section: |
| 1 | Grantee of option acquires the CGT asset the subject of the option | First element of cost base and reduced cost base | 134-1 |
| . | |||
| 2 | Grantor of option acquires the CGT asset the subject of the option | For the grantor
-
the first element of cost base and reduced cost base;
For the grantee - the second element of cost base and reduced cost base |
134-1 |
| Residency | |||
| Item | In this situation: | Element affected: | See section: |
| 1 | An individual or company becomes an Australian resident (but not a temporary resident) | First element of cost base and reduced cost base | 855-45 |
| . | |||
| 1A | A temporary resident ceases to be a temporary resident (but remains, at that time, an Australian resident) | First element of cost base and reduced cost base | 768-955 |
| . | |||
| 2 | A trust becomes a resident trust for CGT purposes | First element of cost base and reduced cost base | 855-50 |
| An asset stops being a pre-CGT asset | |||
| Item | In this situation: | Element affected: | See section: |
| 1 | An asset of a non-public entity stops being a pre-CGT asset | The total cost base and reduced cost base | 149-35 |
| . | |||
| 2 | An asset of a public entity stops being a pre-CGT asset | The total cost base and reduced cost base | 149-75 |
| Demutualisation of certain entities | |||
| Item | In this situation: | Element affected: | See section: |
| 1 | Just before the mutual entity known in New Zealand as Tower Corporation ceased to be a mutual entity, you had membership rights in that entity | The total cost base and reduced cost base | 118-550 |
| Transfer of tax losses and net capital losses within wholly-owned groups of companies | |||
| Item | In this situation: | Element affected: | See section: |
| 1 | An amount of a tax loss is transferred and a company has a direct or indirect equity interest in the loss company | The total cost base and reduced cost base | 170-210 |
| . | |||
| 2 | An amount of a tax loss is transferred and a company has a direct or indirect debt interest in the loss company | The reduced cost base | 170-210 |
| . | |||
| 3 | An amount of a tax loss is transferred and a company has a direct or indirect equity or debt interest in the income company | The total cost base and reduced cost base | 170-215 |
| . | |||
| 4 | An amount of a net capital loss is transferred and a company has a direct or indirect equity interest in the loss company | The total cost base and reduced cost base | 170-220 |
| . | |||
| 5 | An amount of a net capital loss is transferred and a company has a direct or indirect debt interest in the loss company | The reduced cost base | 170-220 |
| . | |||
| 6 | An amount of a net capital loss is transferred and a company has a direct or indirect equity or debt interest in the gain company | The total cost base and reduced cost base | 170-225 |
This table sets out other cost base modifications outside this Part and Part 3-3.
Provisions of the Income Tax Assessment Act 1936 are in bold .
| Modifications outside this Part and Part 3-3 | |||||
| Item | In this situation: | Element affected: | See: | ||
| 1A | You receive, under a *farm-in farm-out arrangement, an *exploration benefit or an entitlement to an exploration benefit | First element of cost base and reduced cost base | Section 40-1120 | ||
| 1 | You stop holding an item as trading stock | First element of cost base and reduced cost base | Paragraph 70-110(1)(b) | ||
| . | |||||
| 2 | CGT event happens to Cocos (Keeling) Islands asset | First element of cost base and reduced cost base | subsection 102-25(1) of the Income Tax (Transitional Provisions) Act 1997 | ||
| . | |||||
| 2AA | (Repealed by No 20 of 2016) | ||||
| . | |||||
| 2A | Lender acquires a replacement security | First element of cost base and reduced cost base | subsection 26BC(6B) | ||
| . | |||||
| 3 | CGT event happens by the borrower disposing of the borrowed security to a third party | First element of cost base and reduced cost base | paragraph 26BC(9)(a) | ||
| . | |||||
| 4 | CGT event happens to replacement security and compensatory payment was incurred by the borrower | Second element of cost base and reduced cost base | subsection 26BC(9A) | ||
| . | |||||
| 5 | CGT event happens to CGT asset in connection with the demutualisation of an insurance company except a friendly society health or life insurer | First element of cost base and reduced cost base | section 121AS | ||
| . | |||||
| 5A | CGT event happens to CGT asset in connection with the demutualisation of a mutual entity other than an insurance company, health insurer and friendly society health or life insurer | First element of cost base and reduced cost base | Division 326 in Schedule 2H | ||
| . | |||||
| 6 | CGT event happens to assets of NSW State Bank | First element of cost base and reduced cost base | section 121EN | ||
| . | |||||
| 7 | Trust ceases to be a resident trust for CGT purposes and there is an attributable taxpayer | The total cost base and reduced cost base | section 102AAZBA | ||
| . | |||||
| 8 | You own shares in a company that stops being a PDF | First element of cost base and reduced cost base | section 124ZR | ||
| . | |||||
| 9 | (Repealed by No 23 of 2018) | ||||
| . | |||||
| 10 | CGT event happens to CGT asset used in gold mining | First element of cost base and reduced cost base | section 112-100 of the Income Tax (Transitional Provisions) Act 1997 | ||
| . | |||||
| 11 | (Repealed by No 101 of 2006 ) | ||||
| . | |||||
| 12 | Shares in a holding company are cancelled | The total cost base and reduced cost base | section 159GZZZH | ||
| . | |||||
| 12A | (Repealed by No 4 of 2018) | ||||
| . | |||||
| 12B | Entity has interest in loss company immediately before alteration time | The total reduced cost base | sections 165-115ZA and 165-115ZB | ||
| . | |||||
| 13 | CGT event happens to 30 June 1988 asset of a complying superannuation entity | First element of cost base and reduced cost base | section 295-85 of the Income Tax (Transitional Provisions) Act 1997 | ||
| . | |||||
| 14 | CGT event happens to CGT asset of a complying superannuation entity | First element of cost base and reduced costbase | section 295-100 of the Income Tax (Transitional Provisions) Act 1997 | ||
| . | |||||
| 15 | A CGT asset of a CFC is taken into account in calculating its attributable income | First element of cost base and reduced cost base | section 412 | ||
| . | |||||
| 16 | A CGT asset of a CFC is taken into account in calculating its attributable income | First element of cost base and reduced cost base | subsection 413(2) | ||
| . | |||||
| 17 | A CGT asset of a CFC is taken into account in calculating its attributable income | First element of cost base and reduced cost base | subsection 413(3) | ||
| . | |||||
| 18 | A CGT asset of a CFC is taken into account in calculating its attributable income | First element of cost base and reduced cost base | section 414 | ||
| . | |||||
| 18A | You cease to hold a registered emissions unit as the result of an outgoing international transfer of a Kyoto unit | First element of cost base and reduced cost base | Section 420-35 | ||
| . | |||||
| 19 | A commercial debt is forgiven | The total cost base and reduced cost base of certain CGT assets of the debtor | sections 245-175 to 245-190 | ||
| . | |||||
| 20 | A tax exempt entity becomes taxable | First element of cost base and reduced cost base | section 57-25 in Schedule 2D | ||
| . | |||||
| 20A | An entity becomes or ceases to be a foreign hybrid | The total cost base and reduced cost base | Sections 830-80 and 830-85 | ||
| . | |||||
| 21 | A CGT asset is transferred to or from a life insurance company ' s complying superannuation asset pool | First element of cost base and reduced cost base | subsection 320-200(2) | ||
| . | |||||
| 22 | A CGT asset is transferred to or from the segregated exempt assets of a life insurance company | First element of cost base and reduced cost base | subsection 320-255(2) | ||
| . | |||||
| 22A | A CGT event happens in relation to forestry interest in a forestry managed investment scheme for a subsequent participant | The total cost base and reduced cost base | Subsection 394-30(9) | ||
| . | |||||
| 22B | You start or cease to have a *Division 230 financial arrangement as consideration for the acquisition of a thing | All elements of cost base and reduced cost base | section 230-505 | ||
| . | |||||
| 23 | The arrangement period for the tax preferred use of an asset ends | The total cost base and reduced cost base | subsection 250-285(3) | ||
| 24 | An entity becomes a subsidiary member of a consolidated group | The total cost base and reduced cost base for the head company of the subsidiary ' s assets | Section 701-10 | ||
| 24A | An entity ceases to be a subsidiary member of a consolidated group | The total cost base and reduced cost base for the head company of membership interests in the subsidiary | Section 701-15 | ||
| 24B | An entity ceases to be a subsidiary member of a consolidated group | The total cost base and reduced cost base for the head company of liabilities owed by the subsidiary | Section 701-20 | ||
| 24C | An entity ceases to be a subsidiary member of a consolidated group and an asset becomes an asset of the entity because the single entity rule ceases to apply | The total cost base and reduced cost base for the entity of a liability owed to the entity | Section 701-45 | ||
| 24D | 2 or more entities cease to be subsidiary members of a consolidated group | The total cost base and reduced cost base of the membership interests that one subsidiary member holds in another | Section 701-50 | ||
| 24E | Determining an asset ' s tax cost setting amount | The total cost base and reduced cost base of the asset | Section 701-55 | ||
| 24F | Eligible tier-1 company ceases to be a subsidiary member of a MEC group or a CGT event happens to a pooled interest in the company | The total cost base and reduced cost base | Section 719-565 | ||
| . | |||||
| 24 | (Repealed by No 41 of 2005) | ||||
| . | |||||
| 25 | You make a forex realisation gain as a result of forex realisation event 4, and: | total cost base and reduced cost base | section 775-70 | ||
| (a) | you incurred the obligation to pay foreign currency: | ||||
| (i) | in return for the acquisition of a CGT asset; or | ||||
| (ii) | as the second, third, fourth or fifth element of the cost base of a CGT asset; and | ||||
| (b) | the foreign currency became due for payment within 12 months after the time when: | ||||
| (i) | in the case of the acquisition of a CGT asset - you acquired the CGT asset; or | ||||
| (ii) | in the case of the second, third, fourth or fifth element of the cost base of a CGT asset - you incurred the relevant expenditure | ||||
| . | |||||
| 26 | You make a forex realisation loss as a result of forex realisation event 4, and: | total cost base and reduced cost base | section 775-75 | ||
| (a) | you incurred the obligation to pay foreign currency: | ||||
| (i) | in return for the acquisition of a CGT asset; or | ||||
| (ii) | as the second, third, fourth or fifth element of the cost base of a CGT asset; and | ||||
| (b) | the foreign currency became due for payment within 12 months after the time when: | ||||
| (i) | in the case of the acquisition of a CGT asset - you acquired the CGT asset; or | ||||
| (ii) | in the case of the second, third, fourth or fifth element of the cost base of a CGT asset - you incurred the relevant expenditure | ||||
| . | |||||
| 27 | You acquire foreign currency as a result of forex realisation event 2 | first element of cost base and reduced cost base | section 775-125 | ||
| 28 | On 10 May 2005, a foreign resident holds certain membership interests | first element of *cost base and *reduced cost base | subsection 855-25(3) | ||
| 29 | You are issued with an asset under a demutualisation of a health insurer except a friendly society health or life insurer | First element of cost base and reduced cost base | sections 315-80, 315-210 and 315-260 | ||
| 30 | You are transferred an asset by a lost policy holders trust under a demutualisation of a health insurer except a friendly society health or life insurer | First element of cost base and reduced cost base | sections 315-145, 315-210 and 315-260 | ||
| 30A | A CGT event occurs under a demutualisation of a friendly society health or life insurer and the capital proceeds from the event include money | All elements of cost base | section 316-60 | ||
| 30B | You are issued with an asset under a demutualisation of a friendly society health or life insurer | First element of cost base and reduced cost base | section 316-105 | ||
| 30C | A CGT event happens to an interest in a lost policy holders trust and the capital proceeds from the event include money | All elements of cost base | section 316-165 | ||
| 30D | You are transferred a share, or right to acquire shares, by a lost policy holders trust under a demutualisation of a friendly society health or life insurer | The total cost base and reduced cost base | section 316-170 | ||
| 31 | An entitlement arises under Division 2AA of Part II of the Banking Act 1959 in connection with an account holder ' s account with an ADI | The total cost base, and reduced cost base, of the entitlement and of the remainder (if any) of the right to be paid by the ADI in connection with the account | Section 253-15 | ||
| 32 | You acquire an *ESS interest and Subdivision 83A-B or 83A-C (about employee share schemes) applies to the interest | First element of cost base and reduced cost base | sections 83A-30 and 83A-125 | ||
| 33 | An entity chooses a roll-over under Subdivision 310-D and the entity chooses section 310-55 to apply to assets | First element of cost base and reduced cost base | section 310-55 | ||
| 34 | An entity chooses a roll-over under Subdivision 310-D, but the entity does not choose section 310-55 to apply to assets | First element of cost base and reduced cost base | section 310-60 | ||
| 35 | A CGT asset is held by a company that has ownership not significantly different from that of a former body that held the asset and was incorporated under another law | First element of cost base and reduced cost base | Section 620-25 | ||
| 36 | (Repealed by No 89 of 2013) | ||||
| 37 | The issuing of a share gives rise to an entitlement to a tax offset under Subdivision 360-A | First element of cost base and reduced cost base | Sections 360-50, 360-55, 360-60 and 360-65 |
This Subdivision is a *Guide.
Note:
In interpreting an operative provision, a Guide may be considered only for limited purposes: see section 950-150 .
A replacement-asset roll-over allows you to defer the making of a capital gain or a capital loss from one CGT event until a later CGT event happens.
112-105(2)
It involves your ownership of one CGT asset (the original asset ) ending and you acquiring another one (the replacement asset ).
112-105(3)
All replacement-asset roll-overs are set out in the table in section 112-115 .
SECTION 112-110 112-110 How is the cost base of the replacement asset modified?
If you acquired the original asset on or after 20 September 1985:
(a) the first element of the replacement asset ' s cost base is replaced by the original asset ' s cost base at the time you acquired the replacement asset; and
(b) the first element of the replacement asset ' s reduced cost base is replaced by the original asset ' s reduced cost base at the time you acquired the replacement asset.
Note 1:
Some replacement-asset roll-overs involve other rules that affect the cost base or reduced cost base of the replacement asset.
Note 2:
If you acquired the original asset before 20 September 1985, you are taken to have acquired the replacement asset before that day: see Subdivision 124-A .
Note 3:
The reduced cost base may be further modified if the replacement asset roll-over happens after a demerger: see section 125-170 .
This table sets out all the replacement-asset roll-overs and tells you where you can find more detail about each one.
Provisions of this Act are in normal text. The other provisions, in bold , are provisions of the Income Tax Assessment Act 1936 .
| Replacement-asset roll-overs | ||
| Item | For the rules about this roll-over: | See: |
| 1 | Disposal or creation of assets by individual or trustee to a wholly-owned company | sections 122-40 to 122-65 |
| . | ||
| 2 | Disposal or creation of assets by partners to a wholly-owned company | sections 122-150 to 122-195 |
| . | ||
| 3 | (Repealed by No 55 of 2007 ) | |
| . | ||
| 4 | Asset compulsorily acquired, lost or destroyed | Subdivision 124-B |
| . | ||
| 5 | New statutory licences | Subdivision 124-C |
| . | ||
| 6 | Strata title conversion | Subdivision 124-D |
| . | ||
| 7 | Exchange of shares in the same company or units in the same unit trust | Subdivision 124-E |
| . | ||
| 8 | Exchange of rights or options to acquire shares in a company or units in a unit trust | Subdivision 124-F |
| . | ||
| 9 | (Repealed by No 133 of 2014) | |
| . | ||
| 10 | (Repealed by No 133 of 2014) | |
| . | ||
| 11 | Change of incorporation | Subdivision 124-I |
| . | ||
| 12 | Crown leases | Subdivision 124-J |
| . | ||
| 13 | Depreciating assets | Subdivision 124-K |
| . | ||
| 14 | Prospecting and mining entitlements | Subdivision 124-L |
| . | ||
| 14A | Scrip for scrip | Subdivision 124-M |
| . | ||
| 14B | Exchange of interests in a trust as a result of a trust restructure | Subdivision 124-N |
| . | ||
| 14BA | (Repealed by No 109 of 2014) | |
| . | ||
| 14BB | Exchange of an interest in an MDO for an interest in another MDO | Subdivision 124-P |
| . | ||
| 14BC | Exchange of stapled ownership interests | Subdivision 124-Q |
| . | ||
| 14BD | Water entitlements | Subdivision 124-R |
| . | ||
| 14C | Demergers | Division 125 |
| . | ||
| 14D | Exchange of shares in one company for shares in an interposed company | Division 615 |
| 14E | Exchange of units in a unit trust for shares in a company | Division 615 |
| 15 | Disposal of a security under a securities lending arrangement | section 26BC |
This Subdivision is a *Guide.
Note:
In interpreting an operative provision, a Guide may be considered only for limited purposes: see section 950-150 .
A same-asset roll-over allows one entity (the transferor ) to disregard a capital gain or loss it makes from disposing of a CGT asset to, or creating a CGT asset in, another entity (the transferee ). Any gain or loss is deferred until another CGT event happens in relation to the asset (in the hands of the transferee).
All same-asset roll-overs are set out in the table in section 112-150 .
If the transferor acquired the asset on or after 20 September 1985:
(a) the first element of the asset ' s cost base (in the hands of the transferee) is replaced by the asset ' s cost base at the time the transferee acquired it; and
(b) the first element of the asset ' s reduced cost base (in the hands of the transferee) is replaced by the asset ' s reduced cost base at the time the transferee acquired it.
Note 1:
If the transferor acquired the asset before 20 September 1985, the transferee is taken to have acquired it before that day: see Subdivision 126-A .
Note 2:
The reduced cost base may be further modified if the same asset roll-over happens after a demerger: see section 125-170 .
This table sets out all the same-asset roll-overs and tells you where you can find more detail about each one.
| Same-asset roll-overs | ||
| Item | For the rules about this roll-over: | See: |
| 1 | Transfer of a CGT asset from one spouse to the other because of a marriage or relationship breakdown | Subdivision 126-A |
| . | ||
| 2 | Transfer of a CGT asset from a company or trust to a spouse because of a marriage or relationship breakdown | Subdivision 126-A |
| . | ||
| 3 | Transfer of a CGT asset to a wholly-owned company | sections 122-70 and 122-75 |
| . | ||
| 4 | Transfer of a CGT asset of a partnership to a wholly-owned company | sections 122-200 and 122-205 |
| . | ||
| 4A | Transfer of a CGT asset of a trust to a company under a trust restructure | Subdivision 124-N |
| . | ||
| 5 | Transfer of a CGT asset between certain related companies | Subdivision 126-B |
| . | ||
| 6 | CGT event happens because a trust deed of a complying approved deposit fund, a complying superannuation fund or a fund that accepts worker entitlement contributions is changed | Subdivision 126-C |
| . | ||
| 7 | Transfer of a CGT asset from a small superannuation fund to another complying superannuation fund because of a marriage or relationship breakdown | Subdivision 126-D |
| . | ||
| 7 | (Repealed by No 58 of 2006) | |
| . | ||
| 8 | Beneficiary becomes absolutely entitled to a share following a roll-over under Subdivision 124-M | Subdivision 126-E |
| . | ||
| 9 | (Repealed by No 109 of 2014) | |
| . | ||
| 10 | Transfer of a CGT asset between certain trusts | Subdivision 126-G |
| . | ||
| 11 | Corporations covered by Subdivision 124-I | sections 620-10, 620-15, 620-20 and 620-25 |
In working out the *cost base of a *CGT asset *acquired at or before 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999, index expenditure incurred at or before that time in each element. (The expenditure can include giving property: see section 103-5 ).
Note 1:
Subdivision 960-M shows you how to index amounts. The indexation does not take account of inflation after 30 September 1999.
Note 2:
You have to work out the cost base of a CGT asset if a CGT event happens in relation to it or if there is a cost base modification.
Note 3:
You cannot index expenditure in the third element (costs of ownership): see subsection 960-275(4) .
Note 4:
Indexation is not relevant to expenditure incurred after 11.45 am on 21 September 1999 or any expenditure relating to a CGT asset acquired after that time.
Example:
Peter purchases a building as an investment on 1 January 1994 for $250,000. This amount forms the first element of his cost base.
He sold the building on 1 February 1996.
The index number for the quarter in which he sold the building (the March quarter 1996) is 119.0. The index number for the quarter in which he purchased the building (the March quarter 1994) is 110.4.
Applying section 960-275 , work out the indexation factor as follows:
119.0
110.4= 1.078 The indexed first element of Peter ' s cost base is:
$250,000 × 1.078 = $269,500
Indexation is only relevant if the *cost base of a *CGT asset is relevant to a *CGT event.
Note 1:
The table in section 110-10 sets out the CGT events for which cost base is not relevant.
Note 2:
Indexation is not relevant to the reduced cost base of a CGT asset.
Indexation for some entities only if indexation chosen
114-5(2)
Indexation is not relevant to the *capital gain of an entity mentioned in an item of the table from a *CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999, unless the relevant entity mentioned in that item has chosen that the *cost base include indexation:
| Entities for which indexation is not relevant unless chosen | ||
| Item | Indexation is not relevant to the capital gain of this entity: | Unless this entity has chosen that the cost base include indexation: |
| 1 | An individual | The individual |
| . | ||
| 2 | A *complying superannuation entity | The trustee of the complying superannuation entity |
| . | ||
| 3 | A trust | The trustee of the trust |
| . | ||
| 4 | A listed investment company | The company |
114-5(3)
Indexation is not relevant to the *capital gain of a *life insurance company from a *CGT event happening after 30 June 2000 in respect of a *CGT asset that is a *complying superannuation asset unless the company has chosen that the *cost base include indexation.
Note:
Section 114-5 of the Income Tax (Transitional Provisions) Act 1997 provides that indexation is not relevant to the capital gain of a life insurance company or registered organisation from a CGT event after 11.45 am on 21 September 1999 and before 1 July 2000 unless the company or organisation chooses it.
You only index expenditure in the *cost base of a *CGT asset for a *CGT event happening in relation to the asset if you, or the entity whose cost base is being worked out, had *acquired the asset at or before 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and at least 12 months before the time of that *CGT event.
Note:
Generally, expenditure is indexed from when it is incurred: see subsection 960-275(2) . The exception is when there is an acquisition that did not result from a CGT event. The first element in this case is indexed from when the expenditure was paid: see subsection 960-275(3) .
114-10(2)
There are 5 exceptions:
CGT event E8
114-10(3)
For *CGT event E8, the beneficiary indexes the *cost bases of the *CGT assets of the trust only if the beneficiary *acquired the *CGT asset that is the interest in the trust capital at least 12 months before *disposing of it.
It does not matter (for indexation from the beneficiary ' s point of view) how long the trustee owned any of the assets of the trust.
Same asset roll-overs
114-10(4)
The 12 month rule is satisfied for both the entity that owned a *CGT asset before a *same-asset roll-over and the entity that owned it after the roll-over if the sum of their periods of ownership of the asset (and the sum of the periods of ownership of the asset of other entities involved in an unbroken series of roll-overs) is at least 12 months.
Replacement asset roll-overs
114-10(5)
The 12 month rule is satisfied for an entity obtaining a *replacement-asset roll-over for a *CGT event happening in relation to a *CGT asset if the period of the entity ' s ownership of the original asset (and of other assets for an unbroken series of replacement-asset roll-overs) and of the replacement asset are together at least 12 months.
Example:
Company A transfers a CGT asset to Company B (which is a member of the same wholly-owned group and a foreign resident) 5 months after acquiring it. There is a roll-over for the transfer under Subdivision 126-B .
Company B sells the asset 8 months after the transfer.
Company A indexes expenditure in its cost base up to the transfer. That cost base becomes the first element of Company B ' s cost base. Company B indexes its cost base from the transfer to the sale.
Deceased estates
114-10(6)
If a *CGT asset you owned just before dying devolves to your *legal personal representative or *passes to a beneficiary in your estate, the 12 month rule applies to the legal personal representative or the beneficiary as if that entity had *acquired the asset when you acquired it.
Surviving joint tenant
114-10(7)
If individuals own a *CGT asset as joint tenants and one of them dies, the 12 month rule applies to the surviving joint tenant as if the surviving joint tenant had *acquired the deceased ' s interest in the asset when the deceased acquired it.
Note:
The surviving joint tenant is taken to have acquired the deceased ' s interest in the asset: see section 128-50 .
CGT event J1
114-10(8)
If *CGT event J1 happens, the company that owns the roll-over asset ignores (for indexation purposes) the acquisition rule in subsection 104-175(8) .
There are a number of modifications to the *cost base of *CGT assets (see sections 112-20 and 112-35 and Subdivisions 112-B , 112-C and 112-D ). These affect the way indexation works.
114-15(2)
If a cost base modification replaces an element of the *cost base of a *CGT asset with an amount, or includes an amount in such an element, you index the element or the amount as if expenditure equal to the amount had been incurred in the *quarter in which the modification occurred.
Example:
A trust is declared over a CGT asset (an example of CGT event E1). The first element of the cost base in the hands of the trustee is its market value. The trustee indexes that market value from the quarter in which the trust was declared.
114-15(3)
A different rule applies if a cost base modification reduces the total *cost base of a *CGT asset. Method statement
Step 1.
Work out the *cost base (all elements) of the asset as at the *quarter in which the modification occurred.
Step 2.
Subtract the amount of the reduction.
Step 3.
The Step 2 amount forms a new first element of your *cost base, and is later indexed as if you had incurred expenditure equal to that amount in the *quarter in which the modification occurred.
Example:
Margaret receives a capital payment of $1,000 for shares (an example of CGT event G1). The first element ofher cost base is $10,250 (indexed to the quarter in which the payment was made) and the second element (similarly indexed) is $210. Add those amounts ($10,460) and subtract the $1,000. Her new first element of the cost base is $9,460. There are no other elements at that time.
114-15(4)
Despite subsection (2), there are different rules for the exercise of an option or the conversion of a *convertible interest.
Exercise of options
114-15(5)
The amount you paid for the option, and the amount you paid to exercise it, are indexed from the *quarter in which the liabilities to pay the amounts were incurred.
Example:
On 1 April 1997, Robyn grants Andrew an option to buy land she owns. The option fee is $10,000, and the option is to buy the land on 30 June 1998 for $100,000.
Andrew exercises the option and acquires the land on 30 June 1998. To work out whether there is a capital gain when Andrew disposes of the land, indexation is available if the land is disposed of 12 months or more after its acquisition.
The $10,000 option fee can be indexed from 1 April 1997 (when the liability to pay it was incurred). The $100,000 exercise price can be indexed from 30 June 1998 (when the liability to pay the price was incurred).
Convertible interests
114-15(6)
If you *acquire *shares in a company or units in a unit trust by converting a *convertible interest, the amount paid for the convertible interest, and the amount paid to convert it, are indexed from the *quarter in which the liabilities to pay the amounts were incurred.
Note:
If shares or units are acquired as a result of the exercise of the option or the conversion of the convertible interest, and an amount is paid to the company or trust on the shares or units after the day of acquisition, that amount is indexed from the time it is paid: see subsection 960-275(3) .
SECTION 114-20 114-20 When expenditure is incurred for roll-overs
If there is a roll-over for a *CGT event happening in relation to a *CGT asset and the first element of the *cost base of the asset is the whole of the cost base of:
(a) for a *replacement-asset roll-over, the original asset; or
(b) for a *same-asset roll-over, the CGT asset;
you index that element as if expenditure equal to the amount in that element had been incurred in the *quarter in which the CGT event happened.
A discount capital gain remaining after the application of any capital losses and net capital losses from previous income years is reduced by the discount percentage when working out your net capital gain.
A capital gain from a CGT asset is a discount capital gain only if the entity making the gain acquired the asset at least a year before the CGT event causing the gain and no choice has been made to include indexation in the cost base of the asset.
Special rules apply to the net income of trusts with net capital gains, to ensure that the appropriate discount percentage is applied and to let beneficiaries apply their capital losses against their share of the trust's capital gains.
Special rules apply to certain capital gains made by listed investment companies to enable shareholders receiving dividends that include these gains to obtain benefits similar to those conferred by the CGT discount.
SECTION 115-5 115-5 What is a discount capital gain ?
A discount capital gain is a *capital gain that meets the requirements of sections 115-10 , 115-15 , 115-20 and 115-25 .
Note:
Sections 115-40 , 115-45 and 775-70 identify capital gains that are not discount capital gains, despite this section.
To be a *discount capital gain, the *capital gain must be made by:
(a) an individual; or
(b) a *complying superannuation entity; or
(c) a trust; or
(d) a *life insurance company in relation to a *discount capital gain from a *CGT event in respect of a *CGT asset that is a *complying superannuation asset.
To be a *discount capital gain, the *capital gain must result from a *CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999.
To be a *discount capital gain, the *capital gain must have been worked out:
(a) using a *cost base that has been calculated without reference to indexation at any time; or
(b) for a capital gain that arose under *CGT event K7 - using the *cost of the *depreciating asset concerned.
Note:
A listed investment company must also calculate capital gains without reference to indexation in order to allow its shareholders to access the concessions in Subdivision 115-D .
115-20(2)
For the purposes of working out whether the *capital gain is a *discount capital gain and the amount of that gain, the *cost base taken into account in working out the capital gain may be recalculated without reference to indexation if the cost base had an element including indexation because of another provision of this Act. This subsection has effect despite that other provision.
Note:
This lets a capital gain of an entity (the gain entity ) on a CGT asset be a discount capital gain even if:
Example:
In 1995 Elizabeth acquired land from her ex-husband under an order made by a court under the Family Law Act 1975 . Former section 160ZZM of the Income Tax Assessment Act 1936 treated her as having paid $56,000 for the land, equal to her ex-husband ' s indexed cost base for it. His cost base for the land then was $40,000.
In 2000, she sold the land for capital proceeds of $150,000.
Her discount capital gain on the land is $110,000 (equal to the capital proceeds less the cost base for the land without indexation).
115-20(3)
This section does not apply to a *capital gain worked out under subsection 104-255(3) (about carried interests).
SECTION 115-25 Discount capital gain must be on asset acquired at least 12 months before 115-25(1)
To be a *discount capital gain, the *capital gain must result from a *CGT event happening to a *CGT asset that was *acquired by the entity making the capital gain at least 12 months before the CGT event.
Note 1:
Even if the capital gain results from a CGT event happening at least a year after the CGT asset was acquired, the gain may not be a discount capital gain, depending on the cause of the CGT event (see section 115-40 ) and the nature of the asset (see sections 115-45 and 115-50 ).
Note 2:
Section 115-30 or 115-34 may affect the time when the entity is treated as having acquired the CGT asset.
115-25(2)
To avoid doubt, subsection (1) applies to the *CGT asset shown in the table for a *CGT event listed in the table.
| CGT assets to which subsection (1) applies | ||
| Item | CGT event | CGT asset to which subsection (1) applies |
| 1A | D4 | the land over which the *conservation covenant is entered into |
| 1 | E8 | the interest or part interest in the trust capital |
| 2 | K6 | the *share or interest *acquired before 20 September 1985 |
115-25(2A)
If the *capital gain results from a *CGT event K9 happening:
(a) subsection (1) does not apply; and
(b) to be a *discount capital gain, the *carried interest to which the CGT event relates must arise under a partnership agreement entered into at least 12 months before the CGT event.
115-25(3)
A *capital gain from one of these *CGT events is not a discount capital gain (despite section 115-5 ):
(a) *CGT event D1;
(b) *CGT event D2;
(c) *CGT event D3;
(d) *CGT event E9;
(e) *CGT event F1;
(f) *CGT event F2;
(g) *CGT event F5;
(h) *CGT event H2;
(ha) *CGT event J2;
(hb) *CGT event J5;
(hc) *CGT event J6;
(i) *CGT event K10.
Note:
Capital gains from the CGT events mentioned in paragraphs (3)(a) to (f) are not discount capital gains because the CGT asset involved in the CGT event comes into existence at the time of the event, so it is impossible to meet the requirement in this section that the asset have been acquired at least 12 months before the event.
SECTION 115-30 Special rules about time of acquisition
Entity is treated as acquiring some CGT assets early
115-30(1)
Sections 115-25 , 115-40 , 115-45 , 115-105 , 115-110 and 115-115 (the affected sections ) apply as if an entity (the acquirer ) had acquired a *CGT asset described in an item of the table at the time mentioned in the item:
| When the acquirer is treated as having acquired a CGT asset | ||||
| Item | The affected sections apply as if the acquirer had acquired this CGT asset: | At this time: | ||
| 1 | A *CGT asset the acquirer *acquired in circumstances giving rise to a *same-asset roll-over | (a) | when the entity that owned the CGT asset before the roll-over *acquired it; or | |
| (b) | if the asset has been involved in an unbroken series of roll-overs - when the entity that owned it before the first roll-over in the series *acquired it | |||
| . | ||||
| 2 | A *CGT asset that the acquirer *acquired as a replacement asset for a *replacement-asset roll-over (other than a roll-over covered by paragraph 115-34(1)(c)) | (a) | when the acquirer acquired the original asset involved in the roll-over; or | |
| (b) | if the acquirer acquired the replacement asset for a roll-over that was the last in an unbroken series of replacement-asset roll-overs (other than roll-overs covered by paragraph 115-34(1)(c)) - when the acquirer acquired the original asset involved in the first roll-over in the series | |||
| . | ||||
| 3 | A *CGT asset the acquirer *acquired as the *legal personal representative of a deceased individual, except one that was a *pre-CGT asset of the deceased immediately before his or her death | When the deceased *acquired the asset | ||
| . | ||||
| 4 | A *CGT asset that *passed to the acquirer as the beneficiary of a deceased individual ' s estate, except one that was a *pre-CGT asset of the deceased immediately before his or her death | When the deceased *acquired the asset | ||
| . | ||||
| 5 | A *CGT asset that: | When the deceased died | ||
| (a) | the acquirer *acquired as the *legal personal representative of a deceased individual; and | |||
| (b) | was a *pre-CGT asset of the deceased immediately before his or her death | |||
| . | ||||
| 6 | A *CGT asset that: | When the deceased died | ||
| (a) | *passed to the acquirer as the beneficiary of a deceased individual ' s estate; and | |||
| (b) | was a *pre-CGT asset of the deceased immediately before his or her death | |||
| . | ||||
| 7 | The interest (or share of an interest) the acquirer is taken under section 128-50 to have *acquired in another *CGT asset that the acquirer and another individual held as joint tenants immediately before he or she died | When the deceased *acquired his or her interest in the other CGT asset | ||
| . | ||||
| 8 | (Repealed by No 133 of 2009) | |||
| . | ||||
| 9 | A *CGT asset that: | |||
| (a) | is a *membership interest in the receiving trust involved in a roll-over under Subdivision 126-G; and | (a) | when the acquirer *acquired the corresponding membership interest (or membership interests) in the transferring trust involved in the roll-over; or | |
| (b) | is held by the acquirer just after the transfer time for the roll-over | (b) | if the roll-over asset for the roll-over has been involved in an unbroken series of roll-overs under Subdivision 126-G - when the acquirer acquired the corresponding membership interest (or membership interests) in the transferring trust involved in the first roll-over in the series | |
| . | ||||
| 9A | A *share the acquirer *acquires by exercising an *ESS interest if: | When the acquirer *acquired the *ESS interest | ||
| (a) | section 83A-33 (about start ups) reduces the amount to be included in the acquirer ' s assessable income in relation to the ESS interest; and | |||
| (b) | exercising the ESS interest causes Subdivision 130-B or Division 134 to apply | |||
| 10 | A *CGT asset that the acquirer *acquired as a received asset for a roll-over under Subdivision 310-D | (a) when the transferring entity for the roll-over acquired the corresponding original asset for the roll-over; or
(b) if that original asset (or any asset corresponding to it) has been involved in an unbroken series of roll-overs - when the entity that owned the applicable asset before the first roll-over in the series acquired it |
||
| . | ||||
| 11 | (Repealed by No 89 of 2013) |
Note:
Under section 128-50 , the acquirer is taken to acquire the interest of a deceased individual in a CGT asset the acquirer and the deceased held as joint tenants immediately before the deceased ' s death (or an equal share of that interest if there are other surviving joint tenants).
115-30(1A)
For the purposes of sections 115-105 , 115-110 and 115-115 , item 2 of the table in subsection (1) applies in relation to all * replacement-asset roll-overs, including those covered by paragraph 115-34(1)(c) .
115-30(1B)
(Repealed by No 133 of 2009)
CGT event E8
115-30(2)
For the purposes of applying sections 115-25 and 115-40 in relation to *CGT event E8and the *CGT asset consisting of a beneficiary ' s interest in trust capital, it does not matter how long the trustee owned any of the assets of the trust.
Note:
Section 115-45 limits the effect of this subsection in some cases.
Relationship with Subdivision 109-A and Division 128
115-30(3)
This section has effect despite Subdivision 109-A and Division 128 (which contain rules about the time when you *acquire a *CGT asset).
This section applies if:
(a) a *CGT event happens to:
(i) your *share in a company; or
(ii) your *trust voting interest, unit or other fixed interest in a trust; and
(b) you *acquired the share or interest as a replacement asset for a *replacement-asset roll-over (other than a roll-over covered by paragraph 115-34(1)(c) ); and
(c) at the time of the CGT event, the company or trust:
(i) owns a *membership interest in an entity (the original entity ); and
(ii) has owned that membership interest for less than 12 months; and
(d) that membership interest is the original asset for the roll-over.
Note:
This section does not affect the time when you are treated as having acquired the replacement asset. That time is worked out under item 2 of the table in subsection 115-30(1) .
Application of tests about the assets of the company or trust
115-32(2)
Subsection 115-45(4) applies as if the company or trust had *acquired the original asset at least 12 months before the *CGT event, if the condition in that subsection would not be met were it to be applied to the original entity and the CGT event.
115-32(3)
Subsection 115-45(6) applies as if the company or trust had *acquired the original asset at least 12 months before the *CGT event, if the condition in subsection 115-45(5) would not be met were it to be applied to the original entity and the CGT event.
This section applies if:
(a) a *CGT event happens to your *share in a company; and
(b) at the time of the CGT event, you had owned the share for less than 12 months; and
(c) you *acquired the share as a replacement asset for:
(i) a *replacement-asset roll-over under Subdivision 122-A (disposal of assets by individuals or trustees to a wholly-owned company) for which you *disposed of a *CGT asset, or all the assets of a *business, to the company; or
(ii) a replacement-asset roll-over under Subdivision 122-B (disposal of assets by partners to a wholly-owned company) for which you disposed of your interests in a CGT asset, or your interests in all the assets of a business, to the company; or
(iii) a replacement-asset roll-over under Subdivision 124-N (disposal of assets by trusts to a company) for which a trust of which you were a beneficiary disposed of all of its CGT assets to the company.
Application of tests about when you acquired the share
115-34(2)
Sections 115-25 and 115-40 apply as if you had *acquired the *share at least 12 months before the *CGT event.
Application of tests about the company's assets
115-34(3)
For each asset mentioned in subparagraph (1)(c)(i), subsections 115-45(4) and (6) apply as if the company had *acquired that asset when you acquired it.
115-34(4)
For each asset mentioned in subparagraph (1)(c)(ii), subsections 115-45(4) and (6) apply as if the company had *acquired that asset when you acquired your interests in it.
115-34(5)
For each asset mentioned in subparagraph (1)(c)(iii), subsections 115-45(4) and (6) apply as if the company had *acquired that asset when the trust acquired it.
Relationship with Subdivision 109-A
115-34(6)
This section has effect despite Subdivision 109-A (which contains rules about the time of acquisition of CGT assets).
SECTION 115-40 115-40 Capital gain resulting from agreement made within a year of acquisition
Your *capital gain on a *CGT asset from a *CGT event is not a discount capital gain (despite section 115-5 ) if the CGT event occurred under an agreement you made within 12 months of *acquiring the CGT asset.
Note:
Section 115-30 or 115-34 may affect the time when you are treated as having acquired the CGT asset.
Purpose of this section
115-45(1)
The purpose of this section is to deny you a *discount capital gain on your *share in a company or interest in a trust if you would not have had *discount capital gains on the majority of *CGT assets (by cost and by value) underlying the share or interest if:
(a) you had owned them for the time the company or trust did; and
(b) *CGT events had happened to them when the CGT event happened to your share or interest.
When a capital gain is not a discount capital gain
115-45(2)
Your *capital gain from a *CGT event happening to:
(a) your *share in a company; or
(b) your *trust voting interest, unit or other fixed interest in a trust;
is not a discount capital gain if the 3 conditions in subsections (3), (4) and (5) are met. This section has effect despite section 115-5 and subsection 115-30(2) .
Note:
This section does not prevent a capital gain from being a discount capital gain if there are at least 300 members or beneficiaries of the company or trust and control of the company or trust is not and cannot be concentrated (see section 115-50 ).
You had at least 10% of the equity in the entity before the event
115-45(3)
The first condition is that, just before the *CGT event, you and your *associates beneficially owned:
(a) at least 10% by value of the *shares in the company (except shares that carried a right only to participate in a distribution of profits or capital to a limited extent); or
(b) at least 10% of the *trust voting interests, issued units or other fixed interests (as appropriate) in the trust.
Cost bases of new assets are more than 50% of all cost bases of entity ' s assets
115-45(4)
The second condition is that the total of the *cost bases of *CGT assets that the company or trust owned at the time of the *CGT event and had *acquired less than 12 months before then is more than half of the total of the *cost bases of the *CGT assets the company or trust owned at the time of the event.
Note:
Sections 115-30 and 115-32 , or section 115-34 , may affect the time when the company or trust is treated as having acquired a CGT asset.
Net capital gain on entity ' s new assets would be more than 50% of net capital gain on all the entity ' s assets
115-45(5)
The third condition is that the amount worked out under subsection (6) is more than half of the amount worked out under subsection (7).
115-45(6)
Work out the amount that would be the *net capital gain of the company or trust for the income year if:
(a) just before the *CGT event, the company or trust had *disposed of all of the *CGT assets that it owned then and had *acquired less than 12 months before the *CGT event; and
(b) it had received the *market value of those assets for the disposal; and
(c) the company or trust did not have any *capital gains or *capital losses from *CGT events other than the disposal; and
(d) the company or trust did not have a *net capital loss for an earlier income year.
Note:
Sections 115-30 and 115-32 , or section 115-34 , may affect the time when the company or trust is treated as having acquired a CGT asset.
115-45(7)
Work out the amount that would be the *net capital gain of the company or trust for the income year if:
(a) just before the *CGT event, the company or trust had *disposed of all of the *CGT assets that it owned then; and
(b) it had received the *market value of those assets for the disposal; and
(c) all of the *capital gains and *capital losses from those assets were taken into account in working out the net capital gain, despite any rules providing that one or more of those capital gains or losses are not to be taken into account in working out the net capital gain; and
(d) the company or trust did not have any *capital gains or *capital losses from *CGT events other than the disposal; and
(e) the company or trust did not have a *net capital loss for an earlier income year.
Capital gain from share in company with 300 members
115-50(1)
Section 115-45 does not prevent a *capital gain from a *CGT event happening to a *share in a company with at least 300 *members from being a *discount capital gain, unless subsection (3) or (6) applies in relation to the company.
Capital gain from interest in fixed trust with 300 beneficiaries
115-50(2)
Section 115-45 does not prevent a *capital gain from a *CGT event happening to an interest in a trust from being a *discount capital gain if:
(a) entities have *fixed entitlements to all of the income and capital of the trust; and
(b) the trust has at least 300 beneficiaries; and
(c) neither subsection (4) nor subsection (6) applies in relation to the trust.
No discount capital gain if ownership is concentrated
115-50(3)
Section 115-45 may prevent a *capital gain from a *share in a company from being a *discount capital gain if an individual owns, or up to 20 individuals own between them, directly or indirectly (through one or more interposed entities) and for their own benefit, *shares in the company:
(a) carrying *fixed entitlements to:
(i) at least 75% of the company's income; or
(ii) at least 75% of the company's capital; or
(b) carrying at least 75% of the voting rights in the company.
115-50(4)
Section 115-45 may prevent a *capital gain from an interest in a trust from being a *discount capital gain if an individual owns, or up to 20 individuals own between them, directly or indirectly (through one or more interposed entities) and for their own benefit, interests in the trust:
(a) carrying *fixed entitlements to:
(i) at least 75% of the trust's income; or
(ii) at least 75% of the trust's capital; or
(b) if beneficiaries of the trust have a right to vote in respect of activities of the trust - carrying at least 75% of those voting rights.
115-50(5)
Subsections (3) and (4) operate as if all of these were a single individual:
(a) an individual, whether or not the individual holds *shares in the company or interests in the trust (as appropriate);
(b) the individual's *associates;
(c) for any *shares or interests in respect of which other individuals are nominees of the individual or of the individual's associates - those other individuals.
No discount capital gain if rights can be varied to concentrate ownership
115-50(6)
Section 115-45 may prevent a *capital gain from a *share in a company, or from an interest in a trust, from being a *discount capital gain if, because of anything listed in subsection (7), it is reasonable to conclude that the rights attaching to any of the *shares in the company or interests in the trust (as appropriate) can be varied or abrogated in such a way that subsection (3) or (4) would be satisfied.
115-50(7)
These are the things:
(a) any provision in the constituent document of the company or trust, or in any contract, agreement or instrument:
(i) authorising the variation or abrogation of rights attaching to any of the *shares in the company or interests in the trust (as appropriate); or
(ii) relating to the conversion, cancellation, extinguishment or redemption of any of those shares or interests;
(b) any contract, *arrangement, option or instrument under which a person has power to acquire any of those shares or interests;
(c) any power, authority or discretion in a person in relation to the rights attaching to any of those shares or interests.
115-50(8)
It does not matter for the purposes of subsection (6) whether or not the rights attaching to any of the *shares or interests are varied or abrogated in the way described in that subsection.
Your *capital gain from a *CGT event is not a discount capital gain if it is affected by section 316-60 or 316-165 .
Note:
Those sections affect capital gains involving the receipt of money as a result of the demutualisation of a friendly society health or life insurer.
(Repealed by No 168 of 2001)
The discount percentage for an amount of a *discount capital gain is:
(a) 50% if the gain is made:
(i) by an individual and neither section 115-105 nor 115-110 (about foreign or temporary residents) applies to the gain; or
(ii) by a trust (other than a trust that is a *complying superannuation entity) and section 115-120 (about foreign or temporary residents) does not apply to the gain; or
(b) 33 ⅓ % if the gain is made:
(i) by a complying superannuation entity; or
(iia) (Repealed by No 70 of 2015)
(ii) by a *life insurance company from a *CGT asset that is a *complying superannuation asset; or
(c) the percentage resulting from section 115-115 if section 115-105 or 115-110 applies to the gain; or
(d) the percentage resulting from section 115-120 if that section applies to the gain; or
(e) the percentage resulting from section 115-125 if that section applies to the gain.
Object
115-105(1)
The object of this section (with section 115-115) is to adjust the discount percentage so as to deny you a discount to the extent that you accrued a * capital gain while a foreign resident or * temporary resident.
When this section applies
115-105(2)
This section applies to a * discount capital gain if:
(a) you are an individual; and
(b) you * acquire a * CGT asset; and
(c) you make the discount capital gain from a * CGT event happening in relation to the CGT asset; and
(d) the period (the discount testing period ):
(i) starting on the day you acquired the CGT asset; and
ends after 8 May 2012; and
(ii) ending on the day the CGT event happens;
(e) you were a foreign resident or * temporary resident during some or all of so much of that period as is after 8 May 2012.
Note:
Section 115-30 has special rules about when assets are acquired.
Changed residency status
115-105(3)
For the purposes of this section and section 115-115 , if:
(a) another individual owned the * CGT asset on a particular day before the discount testing period ends; and
(b) on that day, that individual was one of the following (that individual ' s residency status ):
(i) an Australian resident (but not a * temporary resident);
(ii) a temporary resident;
(iii) a foreign resident; and
(c) section 115-30 treats you as having * acquired the CGT asset when that individual, or an earlier owner of the CGT asset, acquired it;
you are treated as having the same residency status on that day as that individual had on that day.
SECTION 115-110 Foreign or temporary residents - individuals with trust gains
Object
115-110(1)
The object of this section (with section 115-115 ) is to adjust the discount percentage so as to deny you a discount for a * capital gain you make because of section 115-215 to the extent that the gain was accrued while you were a foreign resident or * temporary resident.
When this section applies
115-110(2)
This section applies to a * discount capital gain if:
(a) you are an individual and a beneficiary of a trust ( your trust ); and
(b) because of section 115-215 , Division 102 applies to you as if you had made the discount capital gain on a particular day ( your gain day ) for a * capital gain (the relevant trust gain ) of the trust estate; and
(c) the period (the discount testing period ) worked out from the following table ends after 8 May 2012; and
(d) you were a foreign resident or * temporary resident during some or all of so much of that period as is after 8 May 2012.
| Working out the discount testing period | |||
| Item | Column 1 | Column 2 | |
| If this is the case: | the discount testing period is: | ||
| 1 | your trust is a * fixed trust | the period: | |
| (a) | starting on the most recent day (before your gain day) that you became a beneficiary of your trust; and | ||
| (b) | ending on your gain day. | ||
| 2 | your trust is not a *fixed trust and the relevant trust gain: | the period: | |
| (a) | is made because a * CGT event happened in relation to a * CGT asset * acquired by the trustee of your trust; or | (a) | starting on the day of that acquisition; and |
| (b) | is referable (either directly or indirectly through one or more interposed trusts that are not fixed trusts) to a * capital gain made by the trustee of another trust that is not a fixed trust because a CGT event happened in relation to a CGT asset acquired by that trustee | (b) | ending on your gain day. |
| 3 | your trust is not a * fixed trust and the relevant trust gain is referable (either directly or indirectly through one or more interposed trusts that are not fixed trusts) to a * capital gain made by a fixed trust | the period: | |
| (a) | starting on the most recent day (before your gain day) that the trust whose capital gain is directly referable to the capital gain made by the fixed trust became a beneficiary of the fixed trust; and | ||
| (b) | ending on your gain day. |
Note:
Section 115-30 has special rules about when assets (including membership interests in trusts) are acquired.
Changed residency status
115-110(3)
For the purposes of this section and section 115-115 , if:
(a) your trust is a * fixed trust and another individual owned your * membership interest in your trust on a particular day before the discount testing period ends; and
(b) on that day, that individual was one of the following (that individual ' s residency status ):
(i) an Australian resident (but not a * temporary resident);
(ii) a temporary resident;
(iii) a foreign resident; and
(c) section 115-30 treats you as having * acquired your membership interest in your trust when that individual, or an earlier owner of that membership interest, acquired it;
you are treated as having the same residency status on that day as that individual had on that day.
SECTION 115-115 Foreign or temporary residents - percentage for individuals 115-115(1)
This section applies if section 115-105 or 115-110 applies to a * discount capital gain.
Periods starting after 8 May 2012
115-115(2)
If the discount testing period starts after 8 May 2012, the following (expressed as a percentage) is the percentage resulting from this section:
| Number of days during discount testing period that you
were an Australian resident (but not a *temporary resident) |
| 2 × Number of days in discount testing period |
Note 1:
The percentage will be 0 % if you were a foreign resident or temporary resident during all of the discount testing period.
Note 2:
Subsection 115-105(3) or 115-110(3) may change your residency status for this formula.
Periods starting earlier - Australian residents
115-115(3)
If:
(a) the discount testing period starts on or before 8 May 2012; and
(b) you were an Australian resident (but not a * temporary resident) on 8 May 2012;
the following (expressed as a percentage) is the percentage resulting from this section:
| Number of days in discount testing period | − | Number of apportionable days that you
were a foreign resident or *temporary resident |
|
| 2 × Number of days in discount testing period |
where:
apportionable day
means a day, after 8 May 2012, during the discount testing period.
Note:
Subsection 115-105(3) or 115-110(3) may change your residency status for this formula.
Periods starting earlier - other residents may choose market value
115-115(4)
The percentage resulting from this section is worked out from the following table if:
(a) the discount testing period starts on or before 8 May 2012; and
(b) you were a foreign resident or * temporary resident on 8 May 2012; and
(c) the most recent * acquisition (before the * CGT event) of the * CGT asset happened on or before 8 May 2012; and
(d) the CGT asset ' s * market value on 8 May 2012 exceeds the amount that was its * cost base at the end of that day; and
(e) you choose for this subsection to apply.
Note 1:
The CGT event and CGT asset are those expressly or impliedly referred to in section 115-105 or 115-110 .
Note 2:
Section 115-30 has special rules about when assets are acquired.
| Percentage using market value | ||
| Item | Column 1 | Column 2 |
| If the excess from paragraph (d): | then, the percentage is: | |
| 1 | is equal to or greater than the amount of the * discount capital gain | 50 % . |
| 2 | falls short of the amount of the * discount capital gain | worked out under subsection (5). |
115-115(5)
For the purposes of table item 2 in subsection (4), the following (expressed as a percentage) is the percentage resulting from this section:
where:
apportionable day
means a day, after 8 May 2012, during the discount testing period.
eligible resident
means an Australian resident who is not a
*
temporary resident.
excess
means the excess from paragraph (4)(d).
shortfall
means the amount that the excess falls short of the amount of the
*
discount capital gain.
Note:
Subsection 115-105(3) or 115-110(3) may change your residency status for this formula.
Periods starting earlier - other residents not choosing market value
115-115(6)
If:
(a) the discount testing period starts on or before 8 May 2012; and
(b) you were a foreign resident or * temporary resident on 8 May 2012; and
(c) subsection (4) does not apply;
the following (expressed as a percentage) is the percentage resulting from this section:
| Number of apportionable days that you were an
Australian resident (but not a *temporary resident) |
| 2 × Number of days in discount testing period |
where:
apportionable day
means a day, after 8 May 2012, during the discount testing period.
Note 1:
The percentage will be 0 % if you were a foreign resident or temporary resident on each of the apportionable days.
Note 2:
Subsection 115-105(3) or 115-110(3) may change your residency status for this formula.
SECTION 115-120 Foreign or temporary residents - trusts with certain gains 115-120(1)
The object of this section is to adjust the discount percentage so as to deny a trustee a discount for a * capital gain for which the trustee is liable:
(a) to be assessed; and
(b) to pay tax;
under section 98 of the Income Tax Assessment Act 1936 in relation to the trust estate in respect of a beneficiary to the extent that the beneficiary was a foreign resident or * temporary resident.
115-120(2)
This section applies to a * discount capital gain of a trust estate if:
(a) you are the trustee of that trust; and
(b) section 115-220 applies to you in relation to the discount capital gain and a beneficiary of the trust who is an individual.
115-120(3)
The percentage resulting from this section is the same as the * discount percentage for the corresponding * discount capital gain the beneficiary would have made for the purposes of Division 102 had section 115-215 applied to the beneficiary.
SECTION 115-125 Investors disposing of property used for affordable housing
Object
115-125(1)
The object of this section is to increase the discount percentage to the extent that the *discount capital gain relates to a *dwelling used to *provide affordable housing.
When this section applies
115-125(2)
This section applies to a *discount capital gain if:
(a) you are an individual; and
(b) either:
(i) you make the discount capital gain from a *CGT event happening in relation to a *CGT asset that is your *ownership interest in a *dwelling; or
(ii) because of section 115-215 , Division 102 applies to you as if you had made the discount capital gain for a *capital gain of a trust covered by subsection (3); and
(c) where subparagraph (b)(ii) applies - the trust ' s capital gain was made directly, or indirectly through one or more entities that are all covered by subsection (3), from a CGT event happening in relation to a CGT asset that is an ownership interest in a dwelling; and
(d) the dwelling was used to *provide affordable housing on at least 1095 days:
(i) before the CGT event; and
(ii) during your, or the relevant trustee ' s or partner ' s, *ownership period of that dwelling; and
(iii) on or after 1 January 2018.
The days mentioned in paragraph (d) need not be consecutive.
Note:
1095 days is the same as 3 years.
115-125(3)
This subsection covers the following:
(a) a trust, other than a *superannuation fund or a public unit trust (within the meaning of section 102P of the Income Tax Assessment Act 1936 );
(b) a *managed investment trust;
(c) a partnership.
Discount percentage
115-125(4)
The percentage resulting from this section is the sum of:
(a) the *discount percentage that would apply to the *discount capital gain apart from this section; and
(b) the result (expressed as a percentage) of subsection (5).
115-125(5)
Work out the following:
| *Discount percentage that would apply to the *discount capital gain apart from this section | × | Affordable housing days |
| 5 | Total ownership days |
where:
affordable housing days
means the number of days during that *ownership period (see paragraph (2)(d)) of the *dwelling, and on or after 1 January 2018, on which:
(a) the dwelling was used to *provide affordable housing; and
(b) you were neither a foreign resident nor a *temporary resident.
total ownership days
means the number of days during that *ownership period (see paragraph (2)(d)) of the *dwelling, less the number of days after 8 May 2012 during that ownership period that you were a foreign resident or a *temporary resident.
SECTION 115-200 What this Division is about
This Subdivision sets out rules for dealing with the net income of a trust that has a net capital gain. The rules treat parts of the net income attributable to the trust ' s net capital gain as capital gains made by the beneficiary entitled to those parts. This lets the beneficiary reduce those parts by any capital losses and unapplied net capital losses it has.
If the trust ' s capital gain was reduced by either the general 50% discount in step 3 of the method statement in subsection 102-5(1) or by the small business 50% reduction in Subdivision 152-C (but not both), then the gain is doubled. The beneficiary can then apply its capital losses to the gain before applying the appropriate discount percentage (if any) or the small business 50% reduction.
If the trust ' s capital gain was reduced by both the general 50% discount and the small business 50% reduction, then the gain is multiplied by 4. The beneficiary can then apply its capital losses to the gain before applying the appropriate discount percentage (if any) and the small business 50% reduction.
Division 6E of Part III of the Income Tax Assessment Act 1936 will exclude amounts from the beneficiary ' s assessable income if necessary to prevent it from being taxed twice on the same parts of the trust ' s net income.
| Operative provisions | |
| 115-210 | When this Subdivision applies |
| 115-215 | Assessing presently entitled beneficiaries |
| 115-220 | Assessing trustees under section 98 of the Income Tax Assessment Act 1936 |
| 115-222 | Assessing trustees under section 99 or 99A of the Income Tax Assessment Act 1936 |
| 115-225 | Attributable gain |
| 115-227 | Share of a capital gain |
| 115-228 | Specifically entitled to an amount of a capital gain |
| 115-230 | Choice for resident trustee to be specifically entitled to capital gain |
SECTION 115-210 When this Subdivision applies 115-210(1)
This Subdivision applies if a trust estate has a *net capital gain for an income year that is taken into account in working out the trust estate's net income (as defined in section 95 of the Income Tax Assessment Act 1936 ) for the income year.
115-210(2)
If the trust estate has a beneficiary that is a *complying superannuation entity that is a trust, this Subdivision applies in relation to the complying superannuation entity as a beneficiary but not as a trust estate. This Subdivision does not apply otherwise to a *complying superannuation entity that is a trust.
SECTION 115-215 Assessing presently entitled beneficiaries
Purpose
115-215(1)
The purpose of this section is to ensure that appropriate amounts of the trust estate ' s net income attributable to the trust estate ' s *capital gains are treated as a beneficiary ' s capital gains when assessing the beneficiary, so:
(a) the beneficiary can apply *capital losses against gains; and
(b) the beneficiary can apply the appropriate *discount percentage (if any) to gains.
115-215(2)
(Repealed by No 62 of 2011)
Extra capital gains
115-215(3)
If you are a beneficiary of the trust estate, for each *capital gain of the trust estate, Division 102 applies to you as if you had:
(a) if the capital gain was not reduced under either step 3 of the method statement in subsection 102-5(1) (discount capital gains) or Subdivision 152-C (small business 50% reduction)- a capital gain equal to the amount mentioned in subsection 115-225(1) ; and
(b) if the capital gain was reduced under either step 3 of the method statement or Subdivision 152-C but not both (even if it was further reduced by the other small business concessions) - a capital gain equal to twice the amount mentioned in subsection 115-225(1) ; and
(c) if the capital gain was reduced under both step 3 of the method statement and Subdivision 152-C (even if it was further reduced by the other small business concessions) - a capital gain equal to 4 times the amount mentioned in subsection 115-225(1) .
Note:
This subsection does not affect the amount (if any) included in your assessable income under Division 6 of Part III of the Income Tax Assessment Act 1936 because of the capital gain of the trust estate. However, Division 6E of that Part may have the effect of reducing the amount included in your assessable income under Division 6 of that Part by an amount related to the capital gain you have under this subsection.
115-215(4)
For each *capital gain of yours mentioned in paragraph (3)(b) or (c):
(a) if the relevant trust gain was reduced under step 3 of the method statement in subsection 102-5(1) - Division 102 also applies to you as if your capital gain were a *discount capital gain, if you are the kind of entity that can have a discount capital gain; and
(b) if the relevant trust gain was reduced under Subdivision 152-C - the capital gain remaining after you apply step 3 of the method statement is reduced by 50%.
Note:
This ensures that your share of the trust estate ' s net capital gain is taxed as if it were a capital gain you made (assuming you made the same choices about cost bases including indexation as the trustee).
115-215(4A)
To avoid doubt, subsection (3) treats you as having a *capital gain for the purposes of Division 102 , despite section 102-20 .
Section 118-20 does not reduce extra capital gains
115-215(5)
To avoid doubt, section 118-20 does not reduce a *capital gain that subsection (3) treats you as having for the purpose of applying Division 102 .
115-215(6)
(Repealed by No 62 of 2011)
This section applies if:
(a) you are the trustee of the trust estate; and
(b) on the assumption that there is a share of the income of the trust to which a beneficiary of the trust is presently entitled, you would be liable to be assessed (and pay tax) under section 98 of the Income Tax Assessment Act 1936 in relation to the trust estate in respect of the beneficiary.
115-220(2)
For each *capital gain of the trust estate, increase the amount (the assessable amount ) in respect of which you are actually liable to be assessed (and pay tax) under section 98 ofthe Income Tax Assessment Act 1936 in relation to the trust estate in respect of the beneficiary by:
(a) unless paragraph (b) applies - the amount mentioned in subsection 115-225(1) in relation to the beneficiary; or
(b) if the liability is under paragraph 98(3)(b) or subsection 98(4) , and the capital gain was reduced under step 3 of the method statement in subsection 102-5(1) (discount capital gains) - twice the amount mentioned in subsection 115-225(1) in relation to the beneficiary.
115-220(3)
To avoid doubt, increase the assessable amount under subsection (2) even if the assessable amount is nil.
Subsection (2) applies if:
(a) you are the trustee of the trust estate; and
(b) section 99A of the Income Tax Assessment Act 1936 does not apply in relation to the trust estate in relation to the relevant income year.
115-222(2)
For each *capital gain of the trust estate, increase the amount (the assessable amount ) in respect of which you are liable to be assessed (and pay tax) under section 99 of the Income Tax Assessment Act 1936 in relation to the trust estate by the amount mentioned in subsection 115-225(1) .
115-222(3)
Subsection (4) applies if:
(a) you are the trustee of the trust estate; and
(b) subsection (2) does not apply.
115-222(4)
For each *capital gain of the trust estate, increase the amount (the assessable amount ) in respect of which you are liable to be assessed (and pay tax) under section 99A of the Income Tax Assessment Act 1936 in relation to the trust estate by:
(a) if the capital gain was not reduced under either step 3 of the method statement in subsection 102-5(1) (discount capital gains) or Subdivision 152-C (small business 50% reduction) - the amount mentioned in subsection 115-225(1) ; and
(b) if the capital gain was reduced under either step 3 of the method statement or Subdivision 152-C but not both (even if it was further reduced by the other small business concessions) - twice the amount mentioned in subsection 115-225(1) ; and
(c) if the capital gain was reduced under both step 3 of the method statement and Subdivision 152-C (even if it was further reduced by the other small business concessions) - 4 times the amount mentioned in subsection 115-225(1) .
115-222(5)
To avoid doubt, increase the assessable amount under subsection (2) or (4) even if the assessable amount is nil.
The amount is the product of:
(a) the amount of the *capital gain remaining after applying steps 1 to 4 of the method statement in subsection 102-5(1) ; and
(b) your *share of the capital gain (see section 115-227 ), divided by the amount of the capital gain.
115-225(2)
Subsection (3) applies if the net income of the trust estate (disregarding the amount of any *franking credits) for the relevant income year falls short of the sum of:
(a) the *net capital gain (if any) of the trust estate for the income year; and
(b) the total of all *franked distributions (if any) included in the assessable income of the trust estate for the income year (to the extent that an amount of the franked distributions remained after reducing them by deductions that were directly relevant to them).
115-225(3)
For the purposes of subsection (1), replace paragraph (a) of that subsection with the following paragraph:
(a) the product of:
(i) the amount of the *capital gain remaining after applying steps 1 to 4 of the method statement in subsection 102-5(1) ; and
(ii) the *net income of the trust estate for that income year (disregarding the amount of any *franking credits), divided by the sum mentioned in subsection (2); and
An entity that is a beneficiary or the trustee of a trust estate has a share of a *capital gain that is the sum of:
(a) the amount of the capital gain to which the entity is *specifically entitled; and
(b) if there is an amount of the capital gain to which no beneficiary of the trust estate is specifically entitled, and to which the trustee is not specifically entitled - that amount multiplied by the entity ' s *adjusted Division 6 percentage of the income of the trust estate for the relevant income year.
A beneficiary of a trust estate is specifically entitled to an amount of a *capital gain made by the trust estate in an income year equal to the amount calculated under the following formula:
| *Capital gain | × |
Share of net financial benefit
Net financial benefit |
where:
net financial benefit
means an amount equal to the *financial benefit that is referable to the *capital gain (after any application by the trustee of losses, to the extent that the application is consistent with the application of capital losses against the capital gain in accordance with the method statement in subsection
102-5(1)
).
share of net financial benefit
means an amount equal to the *financial benefit that, in accordance with the terms of the trust:
(a) the beneficiary has received, or can be reasonably expected to receive; and
(b) is referable to the *capital gain (after application by the trustee of any losses, to the extent that the application is consistent with the application of capital losses against the capital gain in accordance with the method statement in subsection 102-5(1) ); and
(c) is recorded, in its character as referable to the capital gain, in the accounts or records of the trust no later than 2 months after the end of the income year.
Note:
A trustee of a trust estate that makes a choice under section 115-230 is taken to be specifically entitled to a capital gain.
115-228(2)
To avoid doubt, for the purposes of subsection (1), something is done in accordance with the terms of the trust if it is done in accordance with:
(a) the exercise of a power conferred by the terms of the trust; or
(b) the terms of the trust deed (if any), and the terms applicable to the trust because of the operation of legislation, the common law or the rules of equity.
115-228(3)
For the purposes of this section, in calculating the amount of the *capital gain, disregard sections 112-20 and 116-30 (Market value substitution rule) to the extent that those sections have the effect of increasing the amount of the capital gain.
Purpose
115-230(1)
The purpose of this section is to allow a trustee of a resident trust to make a choice that has the effect that the trustee will be assessed on a *capital gain of the trust if no trust property representing the capital gain has been paid to or applied for the benefit of a beneficiary of the trust.
Trusts for which choice can be made
115-230(2)
A trustee can only make a choice under this section in relation to a trust estate that is, in the income year in respect of which the choice is made, a resident trust estate (within the meaning of Division 6 of Part III of the Income Tax Assessment Act 1936 ).
Circumstances in which choice can be made
115-230(3)
If:
(a) a *capital gain is taken into account in working out the *net capital gain of a trust for an income year; and
(b) trust property representing all or part of that capital gain has not been paid to or applied for the benefit of a beneficiary of the trust by the end of 2 months after the end of the income year;
(c) (Repealed by No 62 of 2011)
the trustee may, no later than the deadline in subsection (5), make a choice that subsection (4) applies in respect of the capital gain.
Consequences if trustee makes choice
115-230(4)
These are the consequences if the trustee makes a choice that this subsection applies in respect of a *capital gain:
(a) sections 115-215 and 115-220 do not apply in relation to the capital gain;
(b) for the purposes of this Act, the trustee is taken to be *specifically entitled to all of the capital gain.
Deadline for making choice
115-230(5)
The deadline for the purposes of subsection (3) is:
(a) the day 2 months after the last day of the income year; or
(b) a later day allowed by the Commissioner.
Note:
This deadline is an exception to the general rule about choices in section 103-25 .
This Subdivision allows shareholders of certain listed companies to obtain benefits similar to those conferred by discount capital gains.
The benefits accrue where dividends paid by those companies represent capital gains that would be discount capital gains had they been made by an individual, a trust or a complying superannuation entity.
SECTION 115-280 Deduction for certain dividends 115-280(1)
You can deduct an amount for a *dividend paid to you by a company (the payment company ) if:
(a) you are:
(i) an individual, a *complying superannuation entity, a trust or a partnership; or
(ia) (Repealed by No 70 of 2015)
(ii) a *life insurance company where the dividend is in respect of *shares that are *complying superannuation assets; and
(b) when the dividend is paid, either you are an Australian resident or you are an individual who is a foreign resident and carries on business in Australia at or through your permanent establishment in Australia, being a permanent establishment within the meaning of:
(i) a double tax agreement (as defined in Part X of the Income Tax Assessment Act 1936 ) thatrelates to a foreign country and affects the individual; or
(ii) subsection 6(1) of that Act, if there is no such agreement; and
(ba) if, when the dividend is paid, you are an individual who is a foreign resident and has in Australia such a permanent establishment - the dividend is attributable to the permanent establishment; and
(c) all or some part of the dividend is reasonably attributable to a *LIC capital gain made by a *listed investment company; and
(d) in a case where the LIC capital gain was made by a company other than the payment company - the payment company was a listed investment company when it received a dividend part of which is attributable to the LIC capital gain.
Note:
The concession is available for LIC capital gains made directly by a listed investment company, and for LIC capital gains that company receives as a dividend through one or more other listed investment companies.
115-280(2)
The amount you can deduct is:
(a) 50% of your share of the amount (the attributable part ) worked out under subsection (3) if you are an individual, a trust (except a trust that is a *complying superannuation entity) or a partnership; or
(b) 33 ⅓ % of your share of the attributable part if you are a complying superannuation entity or a *life insurance company.
Note 1:
The listed investment company will advise you of your share of the attributable part.
Note 2:
If a shareholder in a listed investment company is a trust or partnership, a beneficiary of the trust or a partner in the partnership has no share of the attributable part.
115-280(3)
The attributable part is worked out using this formula:
where:
after tax gain
is the after tax *LIC capital gain.
Example:
A listed investment company (which is not a base rate entity) disposes of a CGT asset for $30,000. The asset had a cost base of $10,000. The capital gain is therefore $20,000. The company applies a capital loss of $10,000 against the gain. Its net capital gain is $10,000.
The net capital gain is subject to tax at 30%. The after tax gain is therefore $7,000.
The company pays a fully franked dividend to Daryl, one of its shareholders. It advises Daryl that his share of the attributable part of the dividend is:
$7 + [ ($7 × 0.3) ÷ (1 − 0.3)] = $10
Daryl, being an individual, can deduct 50% of $10, which is $5.
115-280(4)
An amount is included in your assessable income if:
(a) a deduction is allowed under subsection (1) to a trust or a partnership; and
(b) you are a beneficiary of the trust or a partner in the partnership and you are not an individual; and
(c) the income of the trust or partnership is reduced by an amount because of that deduction; and
(d) a part of the deduction (the reduction amount ) is reflected in your share of the net income of the trust or partnership.
115-280(5)
The amount included is:
(a) the reduction amount if you are a company, a trust (except a trust that is a *complying superannuation entity) or a partnership; or
(b) one-third of the reduction amount if you are a complying superannuation entity or a *life insurance company.
Example:
The Burnett Partnership received a dividend from a listed investment company. The dividend statement advised that the dividend included a $100 attributable part. The partnership deducted $50 under this section in calculating its net income.
The partnership has 2 equal partners, Amy Burnett and Burnett Consulting Pty Ltd.
Burnett Consulting ' s assessable income includes its share of the net income of the partnership plus $25 (being that part of the $50 deduction allowed to the partnership that is reflected in the company ' s share of the partnership net income).
Subsections (4) and (5) do not apply to Amy because she is an individual.
A LIC capital gain is a *capital gain:
(a) from a *CGT event that happens on or after 1 July 2001; and
(b) that is made by a company that is a *listed investment company from a *CGT asset that is an investment to which paragraph 115-290(1)(c) applies; and
(c) that meets the requirements of sections 115-20 and 115-25 ; and
(d) that is not a capital gain that could not be a *discount capital gain had it been made by an individual because of section 115-40 or 115-45 ; and
(e) that is included in the *net capital gain of the company; and
(f) that is reflected in the taxable income of the company for the income year in which the company had the net capital gain.
Note 1:
The listed investment company must be able to demonstrate that at least some part of the LIC capital gain, whether made by the company itself or by another listed investment company, remains after claiming deductions and losses against that income for the income year.
Note 2:
Section 115-30 may affect the date of acquisition of a CGT asset for the purposes of sections 115-25 , 115-40 and 115-45 .
115-285(2)
However, a *capital gain made by a company is not a LIC capital gain if the company:
(a) became a *listed investment company after 1 July 2001; and
(b) *acquired the *CGT asset concerned before the day on which it became a listed investment company.
115-285(3)
In applying subsection (2), a *CGT asset is treated as if it had been *acquired by the company before it became a *listed investment company if the asset would otherwise be treated as being acquired after that time because of one of these provisions:
(a) section 70-110 (about trading stock);
(b) Subdivision 124-E or 124-F (replacement asset roll-overs for exchange of *shares, units, rights or options);
(ba) Subdivision 124-Q (exchange of stapled ownership interests);
(c) Subdivision 126-B (same-asset roll-over for transfers within certain wholly-owned groups).
SECTION 115-290 Meaning of listed investment company 115-290(1)
A listed investment company is a company: (a) that is an Australian resident; and (b) *shares in which are listed for quotation on the official list of ASX Limited or an *approved stock exchange; and (c) at least 90% of the *market value of whose *CGT assets consists of investments permitted by subsection (4) .
115-290(2)
A company is also a listed investment company if: (a) it is a 100% subsidiary of a company that is a *listed investment company because of subsection (1) ; and (b) the subsidiary would be a listed investment company because of subsection (1) if it were able to comply with paragraph (1)(b) .
115-290(3)
This Subdivision applies to a company that does not comply with paragraph (1)(c) as if it did comply if the failure: (a) was of a temporary nature only; and (b) was caused by circumstances outside its control.
115-290(4)
The permitted investments are: (a) *shares, units, options, rights or similar interests to the extent permitted by subsections (5) , (6) , (7) and (8) ; or (b) financial instruments (such as loans, debts, debentures, bonds, promissory notes, futures contracts, forward contracts, currency swap contracts and a right or option in respect of a share, security, loan or contract); or (c) an asset whose main use by the company in the course of carrying on its *business is to *derive interest, an annuity, rent, royalties or foreign exchange gains unless:
(i) the asset is an intangible asset and has been substantially developed, altered or improved by the company so that its *market value has been substantially enhanced; or
(d) goodwill.
(ii) its main use for deriving rent was only temporary; or
115-290(5)
The company can own a *100% subsidiary if the subsidiary is a listed investment company because of subsection (2) .
115-290(6)
The company can own (directly or indirectly) any percentage of another *listed investment company that is not the company's *100% subsidiary.
115-290(7)
Otherwise, the company cannot own (directly or indirectly) more than 10% of another company or trust.
115-290(8)
In working out whether a company indirectly owns any part of another company or trust: (a) disregard any ownership it has indirectly through a *listed public company or a *publicly traded unit trust; and (b) if the company owns not more than 50% of another *listed investment company - disregard any ownership it has indirectly through the other company.
SECTION 115-295 115-295 Maintaining records
A *listed investment company must maintain records showing the balance of its *LIC capital gains available for distribution.
This Division tells you how to work out what the capital proceeds from a CGT event are. You need to know this to work out if you made a capital gain or loss from the event.
Section 116-20 sets out the general rules about capital proceeds. They are relevant to each CGT event that is listed in the table in section 116-25 .
There are 6 modifications to the general rules that may be relevant. The table in section 116-25 lists which ones may be relevant to each CGT event listed in the table.
Explanation of modifications
116-10(2)
The first is a market value substitution rule. It is relevant if:
116-10(3)
The second is an apportionment rule. It is relevant if a payment you receive in connection with a transaction relates in part only to a CGT event.
Example:
You sell 3 CGT assets for a total of $100,000. The $100,000 needs to be apportioned between the 3 assets.
116-10(4)
The third is a non-receipt rule. It is relevant if you do not receive, or are not likely to receive, some or all of the capital proceeds from a CGT event.
116-10(5)
The fourth is a repaid rule. It is relevant if you are required to repay some or all of the capital proceeds from a CGT event.
116-10(6)
The fifth is relevant only if another entity assumes a liability in connection with a CGT event.
116-10(7)
The sixth relates to misappropriation by an employee or agent. It is relevant if your employee or agent misappropriates all or part of the capital proceeds from a CGT event.
Note 1:
Also, these provisions of the Income Tax Assessment Act 1936 modify capital proceeds:
Note 2:
Section 230-505 of this Act (Division 230 financial arrangement as consideration for provision or acquisition of a thing) also modifies capital proceeds.
General rules SECTION 116-20 General rules about capital proceeds 116-20(1)
The capital proceeds from a *CGT event are the total of:
(a) the money you have received, or are entitled to receive, in respect of the event happening; and
(b) the *market value of any other property you have received, or are entitled to receive, in respect of the event happening (worked out as at the time of the event).
Note 1:
The timing rules for each event are in Division 104 .
Note 2:
In some situations you are treated as having received money or other property, or being entitled to receive it: see section 103-10 .
Note 3:
If you dispose of shares in a buy-back, the capital proceeds are worked out under Division 16K of the Income Tax Assessment Act 1936 .
116-20(2)
This table sets out what the capital proceeds from *CGT events F1, F2, H2 and K9 are:
| General rules about capital proceeds | |||
| Event number | Description of event: | The capital proceeds are: | |
| F1 | Granting, renewing or extending a lease | Any premium paid or payable to you for the grant, renewal or extension | |
| . | |||
| F2 | Granting, renewing or extending a long-term lease | The greatest of: | |
| (a) | the *market value of the estate in fee simple or head lease (worked out when you grant, renew or extend the lease); and | ||
| (b) | what would have been that market value if you had not granted, renewed or extended the lease; and | ||
| (c) | any premium paid or payable to you for the grant, renewal or extension | ||
| . | |||
| H2 | Receipt for event relating to a CGT asset | The money or other consideration you received, or are entitled to receive, because of the act, transaction or event | |
| . | |||
| K9 | Entitlement to receive payment of a *carried interest | The amount of the payment, to the extent that it is a payment of the *carried interest |
116-20(3)
In working out the *market value of the property the subject of the grant, renewal or extension of a long-term lease:
(a) include the market value of any building, part of a building, structure or improvement that is treated as a separate *CGT asset from the property; and
(b) disregard any *depreciating assets for whose decline in value the lessor has deducted or can deduct an amount under this Act.
Note:
Subdivision 108-D sets out when a building, structure or improvement is treated as a separate CGT asset.
116-20(4)
In working out the amount of any premium paid or payable to the lessor for the grant, renewal or extension of a long-term lease, disregard any part of it that is attributable to a *depreciating asset of that kind.
The payment of any premium can include giving property: see section 103-5 .
116-20(5)
In working out the proceeds of a *CGT event that is a *supply, disregard the amount of your *net GST (if any) on the supply.
Modifications to general rules SECTION 116-25 116-25 Table of modifications to the general rules
There are 6 modifications to the general rules that may be relevant to a *CGT event. This table tells you:
| Capital proceeds modifications | |||
| Event number | Description of event: | Only these modifications can apply: | Special rules: |
| A1 | Disposal of a CGT asset | 1, 2, 3, 4, 5, 6 | If the *disposal is because another entity exercises an option: see section 116-65
If the disposal is of *shares or an interest in a trust: see section 116-80 If the disposal is a gift for which a section 30-212 valuation is obtained: see section 116-100 If a roll-over under Subdivision 310-D applies: see section 116-110 If the disposal is a disposal of part of an interest in a *mining, quarrying or prospecting right under a *farm-in farm-out arrangement: see section 116-115 If the disposal involves a *look-through earnout right: see section 116-120 |
| . | |||
| B1 | Use and enjoyment before title passes | 1, 2, 3, 4, 5, 6 | None |
| . | |||
| C1 | Loss or destruction of a CGT asset | 2, 3, 4, 6 | None |
| . | |||
| C2 | Cancellation, surrender and similar endings | 1, 2, 3, 4, 6 | See sections 116-75, 116-80, 116-110 and 116-115 |
| . | |||
| C3 | End of option to acquire shares etc. | 2, 3, 4, 6 | None |
| . | |||
| D1 | Creating contractual or other rights | 1, 2, 3, 4, 6 | None |
| . | |||
| D2 | Granting an option | 1, 2, 3, 4, 6 | See section 116-70 |
| . | |||
| D3 | Granting a right to income from mining | 1, 2, 3, 4, 6 | None |
| . | |||
| D4 | Entering into a conservation covenant | 2, 3, 4, 5, 6 | 116-105 |
| . | |||
| E1 | Creating a trust over a CGT asset | 1, 2, 3, 4, 5, 6 | None |
| . | |||
| E2 | Transferring a CGT asset to a trust | 1, 2, 3, 4, 5, 6 | If a roll-over under Subdivision 310-D applies: see section 116-110 |
| . | |||
| E8 | Disposal by beneficiary of capital interest | 1, 2, 3, 4, 5, 6 | See section 116-80 |
| . | |||
| F1 | Granting a lease | 2, 3, 4, 6 | None |
| . | |||
| F2 | Granting a long-term lease | 2, 3, 4, 6 | None |
| . | |||
| F4 | Lessee receives payment for changing lease | 2, 3, 4, 6 | None |
| . | |||
| F5 | Lessor receives payment for changing lease | 2, 3, 4, 6 | None |
| . | |||
| H2 | Receipt for event relating to a CGT asset | 2, 3, 4, 6 | None |
| . | |||
| K1 | (Repealed by No 77 of 2001) | ||
| . | |||
| K6 | Pre-CGT shares or trust interest | 1, 2, 3, 4, 5, 6 | None |
| . | |||
| K7 | (Repealed by No 119 of 2002) | ||
| . | |||
| K9 | Entitlement to receive payment of a *carried interest | 2, 3, 4, 6 | None |
No capital proceeds
116-30(1)
If you received no *capital proceeds from a *CGT event, you are taken to have received the *market value of the *CGT asset that is the subject of the event. (The market value is worked out as at the time of the event.)
Example:
You give a CGT asset to another entity. You are taken to have received the market value of the CGT asset.
There are capital proceeds
116-30(2)
The *capital proceeds from a *CGT event are replaced with the *market value of the *CGT asset that is the subject of the event if:
(a) some or all of those proceeds cannot be valued; or
(b) those capital proceeds are more or less than the market value of the asset and:
(i) you and the entity that *acquired the asset from you did not deal with each other at *arm ' s length in connection with the event; or
(ii) the CGT event is CGT event C2 (about cancellation, surrender and similar endings).
(The market value is worked out as at the time of the event.)
116-30(2A)
Subsection (2) does not apply if there is a partial roll-over for the *CGT event because of section 124-150 .
116-30(2B)
Subsection (2) does not apply to a situation that would otherwise be covered by paragraph (2)(b) if the *CGT event is *CGT event C2 (about cancellation, surrender and similar endings) and the *CGT asset that is the subject of the event is:
(a) a *share in a company that has at least 300 *members and is not a company that is covered by section 116-35 ; or
(b) a unit in a unit trust that has at least 300 unit holders and is not a trust that is covered by section 116-35 .
Note:
So, for one of these assets, the capital proceeds for the cancellation will be what you actually received.
116-30(2C)
Subsection (2) does not apply if: (a) you are a *complying superannuation fund, a *complying approved deposit fund or a *pooled superannuation trust; and (b) the *capital proceeds from the *CGT event exceed the *market value of the *CGT asset; and (c) assuming the capital proceeds were your *statutory income, the proceeds would be *non-arm ' s length income.
Market value for CGT events C2 and D1
116-30(3)
Subsection (1) does not apply to:
(a) these examples of *CGT event C2:
(i) the expiry of a *CGT asset you own;
(ii) the cancellation of your *statutory licence; or
(b) *CGT event D1 (about creating contractual or other rights).
116-30(3A)
If you need to work out the *market value of a *CGT asset that is the subject of *CGT event C2, work it out as if the event had not occurred and was never proposed to occur.
Example:
A company cancels shares you own in it. You work out the market value of the shares by disregarding the cancellation.
CGT assets the subject of certain events
116-30(4)
To avoid doubt, the *CGT asset that is the subject of a *CGT event specified in this table is the asset so specified.
| *CGT assets the subject of certain events | |
| For this *CGT event: | This asset is the subject of the event: |
| D1 | the right you created |
| . | |
| D2 | the option you granted |
| . | |
| D3 | the right you granted |
| . | |
| E8 | your interest or part interest in the trust capital |
| . | |
| K1 | (Repealed by No 77 of 2001) |
| . | |
| K6 | the *share or interest you *acquired before 20 September 1985 |
Carried interests
116-30(5)
This section does not apply to *CGT event A1 or C2 to the extent that the CGT event is constituted by ceasing to own:
(a) the *carried interest of a *general partner in a *VCLP, an *ESVCLP or an *AFOF or a *limited partner in a *VCMP; or
(b) an entitlement to receive a payment of such a carried interest.
Note:
This section does not apply to ESS interests acquired under employee share schemes: see subsection 130-80(4) .
SECTION 116-35 Companies and trusts that are not widely held
Coverage
116-35(1)
A company is covered by this section if subsection (3) or (5) applies to the company.
116-35(2)
A unit trust is covered by this section if subsection (4) or (5) applies to the trust.
Concentrated ownership
116-35(3)
This subsection applies to a company if an individual owns, or up to 20 individuals own between them, directly or indirectly (through one or more interposed entities) and for their own benefit, *shares in the company:
(a) carrying *fixed entitlements to at least 75% of the company ' s income or at least 75% of the company ' s capital; or
(b) carrying at least 75% of the voting power in the company.
116-35(4)
This subsection applies to a trust if an individual owns, or up to 20 individuals own between them, directly or indirectly (through one or more interposed entities) and for their own benefit, units in the trust:
(a) carrying *fixed entitlements to at least 75% of the trust ' s income or at least 75% of the trust ' s capital; or
(b) if unit holders of the trust have a right to vote in respect of activities of the trust - carrying at least 75% of the voting power in the trust.
Possible variation of rights
116-35(5)
This subsection applies to a company or trust if, because of:
(a) any provision in the entity ' s constituent document, or in any contract, agreement or instrument:
(i) authorising the variation or abrogation of rights attaching to any of the *shares or units in the entity; or
(ii) relating to the conversion, cancellation, extinguishment or redemption of any of those shares or units; or
(b) any contract, *arrangement, option or instrument under which a person has power to acquire any of those shares or units; or
(c) any power, authority or discretion in a person in relation to the rights attaching to any of those shares or units;
it is reasonable to conclude that the rights attaching to any of those shares or units are capable of being varied or abrogated in such a way (even if they are not in fact varied or abrogated in that way) that, directly or indirectly, subsection (3) or (4) would apply to the entity.
Single individual
116-35(6)
For the purposes of subsections (3) and (4) , all of the following are taken to be a single individual:
(a) an individual, whether or not the individual holds *shares or units in the entity concerned;
(b) the individual ' s *associates;
(c)for any shares or units in respect of which other individuals are nominees of the individual or of the individual ' s associates - those other individuals.
If you receive a payment in connection with a transaction that relates to more than one *CGT event, the capital proceeds from each event are so much of the payment as is reasonably attributable to that event.
Example:
You sell a block of land and a boat for a total of $100,000. This transaction involves 2 CGT events.
The $100,000 must be divided among the 2 events. The capital proceeds from the disposal of the land are so much of the $100,000 as is reasonably attributable to it. The rest relates to the boat.
116-40(2)
If you receive a payment in connection with a transaction that relates to one *CGT event and something else, the capital proceeds from the event are so much of the payment as is reasonably attributable to the event.
Example:
You are an architect. You receive $70,000 for selling a block of land and giving advice to the new owner. This transaction involves one CGT event: the disposal of the land.
The capital proceeds from the disposal of the land is so much of the $70,000 as is reasonably attributable to that disposal.
116-40(3)
The payment can include giving property: see section 103-5 .
SECTION 116-45 Non-receipt rule: modification 3 116-45(1)
The *capital proceeds from a *CGT event are reduced if:
(a) you are not likely to receive some or all (the unpaid amount ) of those proceeds; and
(b) this is not because of anything you (or your *associate) have done or omitted to do; and
(c) you took all reasonable steps to get the unpaid amount paid.
The capital proceeds are reduced by the unpaid amount.
Note:
This rule exists because the general rules treat you as having received an amount when you are entitled to receive it.
Example:
You sell a painting to another entity for $5,000 (the capital proceeds). You agree to accept monthly instalments of $100.
You receive $2,000, but then the other entity stops making payments. It becomes clear that you are not likely to receive the remaining $3,000. The capital proceeds are reduced to $2,000.
116-45(2)
There is a further consequence if:
(a) those proceeds are reduced by the unpaid amount; but
(b) you later receive a part of that amount.
Those proceeds are increased by that part.
116-45(3)
This Part and Part 3-3 apply to the debt owed to you (the unpaid amount) as if it were not a *CGT asset.
SECTION 116-50 Repaid rule: modification 4 116-50(1)
The *capital proceeds from a *CGT event are reduced by:
(a) any part of them that you repay; or
(b) any compensation you pay that can reasonably be regarded as a repayment of part of them.
However, the capital proceeds are not reduced by any part of the payment that you can deduct.
Example:
You sell a block of land for $50,000 (the capital proceeds). The purchaser later finds out that you misrepresented a term in the contract. The purchaser sues you and the court orders you to pay $10,000 in damages to the purchaser.
The capital proceeds are reduced by $10,000.
116-50(2)
The payment can include giving property: see section 103-5 .
SECTION 116-55 116-55 Assumption of liability rule: modification 5
The *capital proceeds from a *CGT event are increased if another entity *acquires the *CGT asset (the subject of the event) subject to a liability by way of security over the asset.
They are increased by the amount of the liability the other entity assumes.
Example:
You sell land for $150,000. You receive $50,000 (the capital proceeds) and the buyer becomes responsible for a $100,000 liability under an outstanding mortgage. The capital proceeds are increased by $100,000 to $150,000.
The *capital proceeds from a *CGT event are reduced if your employee or *agent misappropriates (whether by theft, embezzlement, larceny or otherwise) all or part of those proceeds.
Note:
This rule exists because the general rules treat you as having received an amount when you are entitled to receive it.
116-60(2)
The *capital proceeds are reduced by the amount misappropriated.
116-60(3)
There is a further consequence if:
(a) those proceeds are reduced by the amount misappropriated; and
(b) you later receive an amount as *recoupment of all or part of the amount misappropriated.
Those proceeds are increased by the amount received.
116-60(4)
This Part and Part 3-3 apply to the debt owed to you (the amount misappropriated) as if it were not a *CGT asset.
116-60(5)
Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to this section for an income year if:
(a) you discover the misappropriation, or you receive an amount as *recoupment of all or part of the amount misappropriated, after you lodged your *income tax return for the income year; and
(b) the amendment is made at any time during the period of 4 years starting immediately after you discover the misappropriation or receive the amount.
This section applies if:
(a) you granted, renewed or extended an option to create (including grant or issue) or *dispose of a *CGT asset; and
(b) another entity exercises the option; and
(c) because of the exercise of the option, you create (including grant or issue) or dispose of the CGT asset.
116-65(2)
The *capital proceeds from the creation (including grant or issue) or disposal include any payment you received for granting, renewing or extending the option.
116-65(3)
The payment can include giving property: see section 103-5 .
This section applies if:
(a) you granted, renewed or extended an option; and
(b) the option requires you both to *acquire, and to create (including grant or issue) or *dispose of, a *CGT asset.
116-70(2)
The option is treated as 2 separate options and half of the *capital proceeds from the grant, renewal or extension is attributed to each option.
The *capital proceeds from the expiry, surrender or forfeiture of a lease include any payment (because of the lease ending) by the lessor to the lessee for expenditure of a capital nature incurred by the lessee in making improvements to the leased property.
The payment or expenditure can include giving property: see section 103-5 .
This section sets out what happens if:
(a) there is a fall in the *market value of a *personal use asset (other than a car, motor cycle or similar vehicle) or a *collectable of a company or trust; and
(b) *CGT event A1, C2 or E8 happens to:
(i) *shares you own in the company (or in a company that is a member of the same *wholly-owned group); or
(ii) an interest you have in the trust.
Note:
The full list of CGT events is in section 104-5 .
116-80(2)
The *capital proceeds from the event are replaced with the *market value of the *shares, or the interest in the trust.
The market value is worked out as at the time of the event as if the fall in market value of the *personal use asset or *collectable had not occurred.
Note:
You may also make a collectable loss: see CGT event K5.
SECTION 116-85 Section 47A of 1936 Act applying to rolled-over asset 116-85(1)
You reduce the *capital proceeds from a *CGT event that happens in relation to a *CGT asset you have if the conditions in this table are satisfied.
| Conditions for reduction | ||
| Item | Condition | |
| 1 | You must have *acquired the asset from a company or *CFC | |
| 2 | Either: | |
| (a) | the company obtained a roll-over for the *CGT event that resulted in your *acquisition of the asset; or | |
| (b) | the *CFC obtained a roll-over for that event in applying Division 7 of Part X of the Income Tax Assessment Act 1936 for the purpose of working out the *attributable income of a company in relation to any entity except a roll-over under Subdivision 124-J (about Crown leases), 124-K (about depreciating assets) or 124-L (about prospecting and mining entitlements) | |
| 3 | The company or *CFC is taken, under section 47A of the Income Tax Assessment Act 1936 , to have paid you a dividend in relation to that event, and some or all of the dividend is included in your assessable income under section 44 of that Act |
Note:
For roll-overs: see Divisions 122 , 124 and 126 .
116-85(2)
The reduction is the lesser of:
(a) the amount of the dividend; and
(b) the amount of any *capital gain that, apart from the roll-over, the company or *CFC would have made from the *CGT event if its *capital proceeds from the event had been the asset's *market value (at the time of the event).
Note:
This section is disregarded in calculating the attributable income of a CFC: see section 410 of the Income Tax Assessment Act 1936 .
116-85(3)
(Repealed by No 96 of 2004)
This section sets out what happens if:
(a) a *CFC ceases at a time (the residency change time ) to be a resident of an *unlisted country and becomes a resident of a *listed country; and
(aa) subsection 457(3) of the Income Tax Assessment Act 1936 does not apply to the change of residence; and
(b) because of the change in its residency status, an amount is included in an entity ' s assessable income under section 457 of the Income Tax Assessment Act 1936 (including because of paragraph 58(1)(d) of the Taxation Laws Amendment (Foreign Income) Act 1990 ); and
(c) a *CGT event happens in relation to a *CGT asset (the CFC asset ) that is *taxable Australian property and that the CFC owned since the residency change time.
116-95(2)
If the conditions in subsection (3) are satisfied, the *capital proceeds from the *CGT event are reduced by the amount worked out under subsection (4). If the conditions in subsection (5) are satisfied, those capital proceeds are increased by the amount worked out under subsection (6).
Reduction of capital proceeds
116-95(3)
If all the *CFC ' s assets were *disposed of at the residency change time for their *market values in the circumstances mentioned in subparagraph 457(2)(a) (ii) of the Income Tax Assessment Act 1936 :
(a) *distributable profits of the CFC of a particular amount (the distributable profit amount ) would be created, or its distributable profits would be increased by an amount (also the distributable profit amount ); and
(b) the CFC would have made a profit (the CFC asset profit ) on the disposal of the CFC asset.
116-95(4)
The *capital proceeds are reduced by:
| Distributable profit amount | × |
CFC asset profit
Total asset profits |
where:
total asset profits
is the sum of the profits that the CFC would have made if all its assets were *disposed of at the residency change time for their *market values (ignoring disposals that would not result in a profit).
Increase in capital proceeds
116-95(5)
If all the *CFC ' s assets were *disposed of at the residency change time for their *market values in the circumstances mentioned in subparagraph 457(2)(a) (ii) of the Income Tax Assessment Act 1936 :
(a) the *distributable profits of the CFC would be reduced by an amount (the distributable profit reduction amount ); and
(b) the CFC would have made a loss (the CFC asset loss ) on the disposal of the CFC asset.
116-95(6)
The *capital proceeds are increased by:
| Distributable profit
reduction amount |
× |
CFC asset loss
Total asset losses |
where:
total asset losses
is the sum of the losses that the CFC would have made if all its assets were *disposed of at the residency change time for their *market values (ignoring disposals that would not result in a loss).
Note:
This section isdisregarded in calculating the attributable income of a CFC: see section 410 of the Income Tax Assessment Act 1936 .
If CGT event A1 is the giving of a gift of property by you for which a valuation under section 30-212 is obtained, you may choose that the *capital proceeds from the event are replaced with the value of the property as determined under the valuation.
116-100(2)
You can only make this choice if the valuation was made no more than 90 days before or after the CGT event.
SECTION 116-105 116-105 Conservation covenants
If *CGT event D4 happens because you enter into a *conservation covenant over land you own and you can deduct an amount under Division 31 because you enter into the covenant, the *capital proceeds from the event are the amount you can deduct.
Note:
To get a deduction under Division 31 , you must not receive money, property or other material benefit for entering into the covenant.
If a roll-over is chosen under Subdivision 310-D in relation to *CGT event A1, C2 or E2, the *capital proceeds of the transferring entity (within the meaning of that Division) from the event are the amount worked out under subsection 310-55(1) or 310-60(3) .
If:
(a) *CGT event A1 is the *disposal of part of your interest in a *mining, quarrying or prospecting right; and
(b) the part is disposed of under a *farm-in farm-out arrangement; and
(c) you have received an *exploration benefit in respect of the event happening;
in working out the *capital proceeds for the CGT event, treat as zero the *market value of the exploration benefit.
116-115(2)
If:
(a) *CGT event C2 arises as a result of an *exploration benefit being provided to you; and
(b) the exploration benefit is provided under a *farm-in farm-out arrangement;
in working out the *capital proceeds for the CGT event, treat as zero the *market value of the exploration benefit.
Consequences for capital proceeds
116-120(1)
If *CGT event A1 happens because you *dispose of a *CGT asset, your *capital proceeds from the disposal:
(a) do not include the value of any *look-through earnout right relating to the CGT asset and the disposal; and
(b) are increased by any *financial benefit that you receive under such a look-through earnout right; and
(c) are reduced by any financial benefit that you provide under such a look-through earnout right.
Remaking choices affected by the look-through earnout right
116-120(2)
Despite section 103-25 , you may remake any choice you made under this Part or Part 3-3 in relation to the *CGT event if:
(a) you provide or receive a *financial benefit under such a *look-through earnout right; and
(b) you remake the choice at or before the time you are required to lodge your *income tax return for the income year in which the financial benefit is provided or received.
Amending assessments affected by the look-through earnout right
116-120(3)
The Commissioner may amend an assessment of a *tax-related liability if:
(a) an entity provides or receives a *financial benefit under such a *look-through earnout right; and
(b) the amount of the tax-related liability:
(i) depends on that entity ' s taxable income for the income year in which the *CGT event happens; or
(ii) is otherwise affected by that right ' s character as a look-through earnout right; and
(c) the Commissioner makes the amendment before the end of the 4-year period starting at the end of the income year in which the last possible financial benefit becomes or could become due under the look-through earnout right.
The tax-related liability need not be a liability of that entity.
Note:
Subparagraph (b)(ii) covers changes to the amount of that tax-related liability that happen directly or indirectly because of subsection (1) or (2).
116-120(4)
If at a particular time a right is taken never to have been a *look-through earnout right because of subsection 118-565(2) , the Commissioner may amend an assessment of a *tax-related liability for up to 4 years after that time if:
(a) an entity provides or receives a *financial benefit under the right; and
(b) the amount of the tax-related liability:
(i) depends on that entity ' s taxable income for the income year in which the *CGT event happens; or
(ii) was otherwise affected by that right ' s character as a look-through earnout right before subsection 118-565(2) applied.
The tax-related liability need not be a liability of that entity.
Note:
Subsection 118-565(2) restricts look-through earnout rights to rights to financial benefits over a period not exceeding 5 years from the end of the income year in which the CGT event happens.
116-120(5)
If, after providing or receiving a *financial benefit under a right referred to in subsection (3) or (4):
(a) you are dissatisfied with an assessment referred to in that subsection; and
(b) the Commissioner notifies you that the Commissioner has decided under that subsection not to amend your assessment;
you may object against the assessment, to the extent that it does not take account of that right ' s character (as a *look-through earnout right or not such a right), in the manner set out in Part IVC of the Taxation Administration Act 1953 .
This Division sets out various exemptions for many capital gains and losses.
There are other provisions that provide exemptions from CGT liability, for example, Division 104 (exceptions from CGT events), Division 152 (small business relief) and Division 50 (exempt entities).
Note 1:
There are also these exemptions in the Income Tax Assessment Act 1936 :
Note 2:
There are also exemptions in Division 54 .
Note 3:
There are also exemptions in Divisions 315 and 316 (about demutualisation of certain insurers).
SECTION 118-5 118-5 Cars, motor cycles and valour decorations
A *capital gain or *capital loss you make from any of these *CGT assets is disregarded:
(a) a *car, motor cycle or similar vehicle;
(b) a decoration awarded for valour or brave conduct (unless you paid money or gave any other property for it).
A *capital gain or *capital loss you make from a *collectable is disregarded if the first element of its *cost base, or the first element of its *cost if it is a *depreciating asset, is $500 or less.
Example:
On 10 July 2001, Gayle buys a print for $450 and hangs it in her home. On 30 November 2001 she takes the print to her office and hangs it in the lobby. Gayle self assesses the effective life of the print to be 7 years.
Gayle sells the print to Anna for $700 on 2 January 2002.
How much can Gayle deduct for the 2001-02 income year?
The cost of the print is $450. Gayle chooses to use the prime cost method to calculate its decline in value.
The print's decline in value is:
$450 × 177
365× 100%
7 years= $31 Gayle can deduct $6 as the taxable use portion of the decline in value under Division 40 :
34
177× 31 Due to the balancing adjustment event that occurred on 2 January 2002, $54 is included in Gayle's assessable income for the 2001-02 income year under section 40-285 . The amount is reduced for non-taxable use by section 40-290 .
A capital gain of $202 is disregarded under this section because the asset is a collectable acquired for less than $500.
118-10(2)
However, there is a special rule if the *collectable is an interest in one of these *CGT assets:
(a) *artwork, jewellery, an antique, or a coin or medallion;
(b) a rare folio, manuscript or book;
(c) a postage stamp or first day cover.
A *capital gain or *capital loss you make from the interest is disregarded only if the *market value of the asset (when you *acquired the interest) is $500 or less.
Note:
If you last acquired the interest before 16 December 1995, a capital gain or loss is disregarded if you acquired the interest for $500 or less: see section 118-10 of the Income Tax (Transitional Provisions) Act 1997 .
118-10(3)
A *capital gain you make from a *personal use asset, or part of the asset, is disregarded if the first element of the asset's *cost base, or the first element of its *cost if it is a *depreciating asset, is $10,000 or less.
Note:
A capital loss you make from a personal use asset is disregarded: see subsection 108-20(1) .
SECTION 118-12 Assets used to produce exempt income etc. 118-12(1)
A *capital gain or *capital loss you make from a *CGT asset that you used solely to produce your *exempt income or *non-assessable non-exempt income is disregarded.
118-12(2)
However, the exemption does not apply if the asset was used to gain or produce an amount that is *non-assessable non-exempt income because of:
(a) any of these provisions of this Act:
(i) section 59-15 (mining payments);
(ia) section 59-35 (amounts that would be mutual receipts but for prohibition on distributions to members or issue of MCIs);
(ii) subsection 70-90(2) (disposing of trading stock outside the ordinary course of business);
(iii) section 86-30 (income of a personal services entity);
(iv) subsection 86-35(1) (payment by a personal services entity);
(v) subsection 86-35(2) (share of personal services entity ' s net income);
(vi) section 240-40 (treatment of arrangement payments);
(via) section 242-40 (about luxury car lease payments);
(vib) section 768-5 (foreign equity distributions on participation interests);
(vii) section 802-15 (foreign residents - exempting CFI from Australian tax);
(viii) section 840-815 (foreign residents - final withholding tax on managed investment trust income); or
(b) any of these provisions of the Income Tax Assessment Act 1936 :
(i) section 23AH (foreign branch profits of Australian companies);
(ii) section 23AI (amounts paid out of attributed income);
(iii) (Repealed by No 110 of 2014)
(iv) section 23AK (attributed foreign investment fund income);
(v) subsection 23L(1) (fringe benefits);
(vi) subsection 99B(2A) (attributed trust income);
(vii) section 128D (dividends, royalties and interest subject to withholding tax);
(viii) subsection 271-105(3) in Schedule 2F (amounts subject to family trust distribution tax).
(ix) (Repealed by No 79 of 2010 )
Note:
These provisions make amounts non-assessable non-exempt income to prevent them being double taxed rather than to remove them entirely from the taxation system. Therefore, the policy reason for disregarding gains and losses does not apply to assets used to produce those amounts.
SECTION 118-13 118-13 Shares in a PDF
A *capital gain or *capital loss you make from a *CGT event happening in relation to *shares in a *PDF is disregarded.
A *capital gain or *capital loss you make from a *registered emissions unit is disregarded.
118-15(2)
(Repealed by No 83 of 2014)
118-15(3)
A *capital gain or *capital loss you make from a right to receive an *Australian carbon credit unit is disregarded.
SECTION 118-20 Reducing capital gains if amount otherwise assessable 118-20(1)
A *capital gain you make from a *CGT event is reduced if, because of the event, a provision of this Act (outside of this Part) includes an amount (for any income year) in: (a) your assessable income or *exempt income; or (b) if you are a partner in a partnership, the assessable income or exempt income of the partnership.
118-20(1A)
Subsection (1) applies to an amount that, under a provision of this Act (outside of this Part), is included in: (a) your assessable income or *exempt income; or (b) if you are a partner in a partnership, the assessable income or exempt income of the partnership;
in relation to a *CGT asset as if it were so included because of the *CGT event referred to in that subsection if the amount would also be taken into account in working out the amount of a *capital gain you make.
Note:
An example is an amount assessable under Division 16E of Part III of the Income Tax Assessment Act 1936 , which deals with accruals taxation of certain securities.
118-20(1B)
The rule in subsection (1) does not apply to: (a) an amount that is taken to be a dividend under section 159GZZZP of the Income Tax Assessment Act 1936 (which relates to buy-backs of *shares); or (b) an amount included in assessable income under subsection 207-20(1) , 207-35(1) or 207-35(3) of this Act (which relate to franked distributions).
118-20(2)
The gain is reduced to zero if it does not exceed: (a) the amount included; or (b) if you are a partner, your share (the partner ' s share ) of the amount included in the assessable income or *exempt income of the partnership (calculated according to your entitlement to share in the partnership net income or loss).
Example:
Liz bought some land in 1990, as part of a profit-making scheme. In December 1998 she sells it.
Her profit from the sale is $40,000 and is included in her assessable income under section 6-5 (about ordinary income).
Suppose she made a capital gain from the sale of $30,000. It is reduced to zero because it is does not exceed the amount included.
118-20(3)
The gain is reduced by the amount included, or the amount of the partner ' s share, if the gain exceeds that amount.
Note:
These rules are modified for complying superannuation funds that become non-complying and for foreign superannuation funds that become Australian superannuation funds: see Division 295 .
118-20(4)
A *capital gain you make from a *CGT event is reduced by the extent that a provision of this Act (except sections 59-40 and 316-255 ) treats: (a) an amount of your *ordinary income or *statutory income from the event as being *non-assessable non-exempt income; or (b) if you are a partner, your share of the ordinary income or *statutory income of the partnership from the event (calculated according to your entitlement to share in the partnership net income or loss) as being non-assessable non-exempt income of the partnership.
118-20(4A)
A *capital gain the trustee of a *superannuation fund makes from a *CGT event happening in relation to a *CGT asset in an income year is reduced if the asset ' s *market value was taken into account in working out the fund ' s income from previous years under section 295-325 or 295-330 .
118-20(4B)
The gain is reduced to zero if it does not exceed the amount that would have been the *capital gain from the *CGT event if the *capital proceeds from the event were the asset ' s *market value that was taken into account in working out that net previous income.
If the gain exceeds that amount, it is reduced by that amount.
Exceptions
118-20(5)
The gain is not reduced if an amount is included in your assessable income, or the assessable income of the partnership, for any income year because of a balancing adjustment.
118-20(6)
The gain is not reduced if an amount is included in your *non-assessable non-exempt income under section 768-5 (about foreign equity distributions on participation interests) because a company makes a *foreign equity distribution that is: (a) debited against a *share capital account of the company; or
(b) (Omitted by No 63 of 1998) (c) debited against an asset revaluation reserve of the company; or (d) directly or indirectly attributable to amounts transferred from such an account or reserve of the company.
SECTION 118-21 Carried interests
CGT events relating to carried interests not to be treated as income
118-21(1)
The modifications in subsections (2) and (3) apply if *CGT event K9 happens in relation to your entitlement to receive a payment of the *carried interest of a *general partner in a *VCLP, an *ESVCLP or an *AFOF or a *limited partner in a *VCMP.
118-21(2)
These provisions do not apply to the CGT event:
(a) sections 6-5 (about *ordinary income), 8-1 (about amounts you can deduct), 15-15 and 25-40 (about profit-making undertakings or plans) and 118-20 (reducing capital gains if amount otherwise assessable);
(b) sections 25A and 52 of the Income Tax Assessment Act 1936 (about profit-making undertakings or schemes).
118-21(3)
Section 6-10 (about *statutory income) does not apply to the *CGT event except so far as that section applies in relation to section 102-5 (about net capital gains).
In applying section 118-20 , treat a *superannuation lump sum or an *employment termination payment that you receive as being included in your assessable income.
A *capital gain or *capital loss you make from a *CGT event (that is also a *balancing adjustment event) that happens to a *depreciating asset is disregarded if the asset was:
(a) an asset you *held; or
(b) if you are a partner, an asset of the partnership; or
(c) if you are absolutely entitled to the asset as against the trustee of a trust (disregarding any legal disability), an asset of the trustee;
where the decline in value of the asset was worked out under Division 40 (including that Division as it applies under Division 355 ), or the deduction for the asset was calculated under Division 328 , or would have been if the asset had been used.
118-24(2)
However, subsection (1) does not apply to:
(a) a *capital gain or *capital loss you make from *CGT event J2 or *CGT event K7 happening; or
(b) a *depreciating asset for which you or another entity has deducted or can deduct amounts under Subdivision 40-F or 40-G .
SECTION 118-25 Trading stock 118-25(1)
A *capital gain or *capital loss you make from a *CGT asset is disregarded if, at the time of the *CGT event, the asset is:
(a) your *trading stock; or
(b) if you are a partner, trading stock of the partnership; or
(c) if you are absolutely entitled to the asset as against the trustee of a trust (disregarding any legal disability), trading stock of the trustee.
118-25(2)
A *capital gain or *capital loss you make in these circumstances is disregarded:
(a) you start holding as *trading stock a *CGT asset you already own but do not hold as trading stock; and
(b) you elect under paragraph 70-30(1)(a) to be treated as having sold the asset for its cost (worked out under that section).
Note 1:
Paragraph 70-30(1)(a) allows you to elect the cost of the asset, or its market value, just before it became trading stock.
Note 2:
You may make a capital gain or loss if you elect its market value: see CGT event K4.
SECTION 118-27 Division 230 financial arrangements and financial arrangements to which Subdivision 250-E applies 118-27(1)
A *capital gain or *capital loss you make:
(a) from a *CGT asset; or
(b) in creating a CGT asset; or
(c) from the discharge of a liability;
is disregarded if, at the time of the *CGT event, the asset or liability is, or is part of, a *Division 230 financial arrangement.
Note 1:
Paragraph (b) is relevant for CGT event D1.
Note 2:
Paragraph (c) is relevant for CGT event L7.
118-27(2)
Subsection (1) does not apply to the following:
(a) a gain or loss that subsection 230-310(4) (which deals with hedging financial arrangements) provides is to be treated as a *capital gain or *capital loss;
(b) a loss that is reduced under subsection 230-465(2) , to the extent of that reduction (this is the extent to which the loss is of a capital nature).
118-27(3)
Subsection (1) does not apply if the situation that gives rise to the *CGT event does not result in a gain from the arrangement being included in your assessable income under Division 230 , or in a loss from the arrangement entitling you to a deduction under Division 230 .
118-27(4)
A *capital gain or *capital loss you make from a *CGT asset is disregarded if, at the time of the *CGT event, the asset is, or is part of, a *financial arrangement to which Subdivision 250-E applies.
A *capital gain or *capital loss you make from a *CGT event relating to your interest in the copyright in a film is disregarded if an amount is included in your assessable income under section 26AG (about film proceeds) of the Income Tax Assessment Act 1936 because of the event.
118-30(2)
If you are a partner in a partnership, a *capital gain or *capital loss you make from a *CGT event relating to the partnership's interest in the copyright in a film is disregarded if an amount is included in the assessable income of a partner (including you) under section 26AG of that Act because of the event.
118-30(3)
If you are absolutely entitled to an interest in the copyright in a film as against the trustee of a trust (disregarding any legal disability), a *capital gain or *capital loss you make from a *CGT event relating to the interest is disregarded if an amount is included in your assessable income or the net income of the trust under section 26AG of that Act because of the event.
Disregard a *capital gain or *capital loss from a *CGT event if an amount is included in your assessable income in any income year under section 355-410 (about disposal of R & D results) because of that CGT event.
SECTION 118-37 Compensation, damages etc. 118-37(1)
A *capital gain or *capital loss you make from a *CGT event relating directly to any of these is disregarded:
(a) compensation or damages you receive for:
(i) any wrong or injury you suffer in your occupation; or
(ii) any wrong, injury or illness you or your *relative suffers personally;
(b) compensation or damages you receive as the trustee of a trust (other than a trust that is a *complying superannuation entity) for:
(i) any wrong or injury a beneficiary of the trust suffers in his or her occupation; or
(ii) any wrong, injury or illness a beneficiary of the trust, or the beneficiary ' s relative, suffers personally;
(ba) a *CGT asset you receive, as a beneficiary of a trust, from the trustee of the trust to the extent that the CGT asset is attributable to compensation or damages that the trustee receives as described in paragraph (b) for:
(i) any wrong or injury you suffer in your occupation; or
(ii) any wrong, injury or illness you or your relative suffers personally;
(c) gambling, a game or a competition with prizes;
(d) (Repealed by No 13 of 2014)
(e) (Repealed by No 123 of 2008)
(f) (Repealed by No 109 of 2014)
(g) a tobacco industry exit grant that you receive under the program known as the Tobacco Growers Adjustment Assistance Programme 2006 if, as a condition of receiving the grant, you entered into an undertaking not to become the owner or operator of any agricultural *enterprise within 5 years after receiving the grant;
(ga) a * water entitlement, to the extent that the CGT event happens because an entity * derives a * SRWUIP payment that is * non-assessable non-exempt income under section 59-65 ;
(gb) a * SRWUIP payment you derive that is non-assessable non-exempt income under section 59-65 ;
(h) a right or entitlement to a *tax offset, a *deduction, or a similar benefit under an *Australian law, a *foreign law or a law of part of a foreign country;
(i) a variation, transfer or revocation of an allocation (within the meaning of the National Rental Affordability Scheme Act 2008 );
(j) anything of economic value provided to you (whether directly or indirectly, such as through an *NRAS consortium of which you are a *member) by:
(i) a Department of a State or Territory; or
in relation to your participation in the *National Rental Affordability Scheme.
(ii) a body (whether incorporated or not) established for a public purpose by or under a law of a State or Territory;
118-37(2)
A *capital gain or *capital loss is disregarded if you make it as a result of receiving a payment or property as reimbursement or payment of your expenses, or receiving or using a voucher or certificate, under:
(a) a scheme established by an *Australian government agency, a *local governing body or a *foreign government agency under an enactment or an instrument of a legislative character; or
(b) the General Practice Rural Incentives Program or the Rural and Remote General Practice Program; or
(c) the Sydney Aircraft Noise Insulation Project; or
(d) the M4/M5 Cashback Scheme; or
(e) the Unlawful Termination Assistance Scheme or the Alternative Dispute Resolution Assistance Scheme.
118-37(3)
A *capital gain you make from compensation you receive under the *firearms surrender arrangements is disregarded.
118-37(4)
A *capital gain or *capital loss you make from a payment you receive is disregarded if:
(a) you are an Australian resident; and
(b) you receive the payment:
(i) under the program known as the " German Forced Labour Compensation Programme " ; and
(ii) from the Foundation known as " Remembrance, Responsibility and Future " or any of the Foundation ' s partner organisations; and
(c) the payment is in the nature of compensation for:
(i) any wrong or injury; or
that you, or another person, suffered as a result of injustices committed during the National Socialist period.
(ii) any loss of, or damage to, property;
118-37(5)
A *capital gain or *capital loss you make as a result of receiving a payment or property is disregarded if:
(a) you are an individual who is an Australian resident; and
(b) you receive the payment or property from a source in a foreign country; and
(c) you do not receive the payment or property directly or indirectly from an *associate of yours; and
(d) the payment or property you receive is in connection with:
(i) any wrong or injury; or
(ii) any loss of, or damage to, property; or
that you, or another individual, suffered as a result of:
(iii) any other detriment;
(iv) persecution by the National Socialist regime of Germany during the National Socialist period; or
(v) persecution by any other enemy of the Commonwealth during the Second World War; or
(vi) persecution by an enemy-associated regime during the Second World War; or
(vii) flight from persecution mentioned in subparagraph (iv), (v) or (vi); or
(viii) participation in a resistance movement during the Second World War against forces of the National Socialist regime of Germany; or
(ix) participation in a resistance movement during the Second World War against forces of any other enemy of the Commonwealth.
118-37(6)
For the purposes of subsection (5), the duration of the Second World War includes:
(a) the period immediately before the Second World War; and
(b) the period immediately after the Second World War.
118-37(7)
For the purposes of subsection (5), a regime is an enemy-associated regime if, and only if, it was:
(a) in alliance with; or
(b) occupied by; or
(c) effectively controlled by; or
(d) under duress from; or
(e) surrounded by;
either or both of the following:
(f) the National Socialist regime of Germany;
(g) any other enemy of the Commonwealth.
118-37(8)
Subsection (5) applies to a payment or property received by the *legal personal representative of an individual in a corresponding way to the way in which that subsection would have applied if the payment or property had been received by the individual.
118-37(9)
Subsection (5) applies to a payment or property received by:
(a) the *legal personal representative of a deceased individual; or
(b) the trustee of a trust established by the will of a deceased individual;
in a corresponding way to the way in which that subsection would have applied if:
(c) the individual had not died; and
(d) the payment or property had been received by the individual.
SECTION 118-40 118-40 Expiry of a lease
A *capital loss a lessee makes from the expiry, surrender, forfeiture or assignment of a lease (except one granted for 99 years or more) is disregarded if the lessee did not use the lease solely or mainly for the *purpose of producing assessable income.
If:
(a) you own land on which there is a building; and
(b) you subdivide the building into *stratum units; and
(c) you transfer each unit to the entity who had the right to occupy it just before the subdivision;
a *capital gain or *capital loss you make from transferring the unit is disregarded.
A *capital gain or *capital loss you make from the sale, transfer or assignment of your rights to mine in a particular area in Australia is disregarded if you have *exempt income for the income year (because of the former section 330-60 ) from the sale, transfer or assignment.
A *capital gain or *capital loss you make from a contract you entered into solely to reduce the risk of financial loss you may suffer from currency exchange rate fluctuations is disregarded if the contract relates to:
(a) a liability you have to make a payment under another contract; or
(b) a *CGT asset that is a right you *acquired before 20 September 1985 to receive money under another contract.
A *capital gain or *capital loss made from a testamentary gift of property that would have been deductible under section 30-15 if it had not been a testamentary gift is disregarded.
118-60(1A)
If the only reason the gain or loss is not disregarded under subsection (1) is because the property has not been valued by the Commissioner at more than $5,000, then, for the purposes of that subsection, it is taken to have been so valued.
118-60(2)
A *capital gain or *capital loss made from a gift of property that is deductible under section 30-15 because of item 4 or 5 in the table in that section is disregarded.
118-60(3)
However, subsection (2) does not apply if the gift was not a testamentary gift and the property is later *acquired for less than *market value by the person who made the gift or an *associate of that person.
118-60(4)
If the gift was a testamentary gift and the property is later *acquired for less than *market value by the deceased person ' s estate or a person (the deceased ' s associate ) who:
(a) is an *associate of the deceased person ' s estate; or
(b) was an associate of the deceased person immediately before the deceased person ' s death;
the *cost base and the *reduced cost base of the property in the hands of the estate or the deceased ' s associate is worked out under section 128-15 as if the property had passed in the estate to the estate or the deceased ' s associate.
SECTION 118-65 118-65 Later distributions of personal services income
A *capital loss you make from a payment is disregarded if it is a payment to any entity of:
(a) *personal services income included in an individual's assessable income under section 86-15 ; or
(b) any other amount that is attributable to that income.
A *capital loss made by an entity is disregarded if it was an *exempt entity at the time it made the loss.
A *capital gain or *capital loss you make as a result of *CGT event C2 happening is disregarded if:
(a) you make the gain or loss in relation to a right that directly relates to the breakdown of a relationship between *spouses; and
(b) at the time of the CGT event:
(i) you and your spouse or former spouse are separated; and
(ii) there is no reasonable likelihood of cohabitation being resumed.
Example:
Maude receives an amount from Claude by way of a settlement directly related to the breakdown of their marriage. CGT event C2 would happen to Maude on satisfaction of her legally enforceable right to the amount. Any capital gain or loss that Maude makes in these circumstances is disregarded.
118-75(2)
For the purposes of this section, the question whether *spouses or former spouses have separated is to be determined in the same way as it is for the purposes of section 48 of the Family Law Act 1975 (as affected by sections 49 and 50 of that Act).
A * capital gain or * capital loss you make is disregarded if:
(a) you are an * Indigenous person or an * Indigenous holding entity; and
(b) you make the gain or loss because one of the following things happens in relation to a * CGT asset mentioned in subsection (2):
(i) you transfer the CGT asset to one or more entities that are either Indigenous persons or Indigenous holding entities;
(ii) you create a trust, that is an Indigenous holding entity, over the CGT asset;
(iii) your ownership of the CGT asset ends, resulting in * CGT event C2 happening in relation to the CGT asset.
118-77(2)
The * CGT assets are as follows:
(a) * native title;
(b) the right to be provided with a * native title benefit.
Note:
Paragraph (a) does not require a determination of native title under the Native Title Act 1993 .
SECTION 118-80 118-80 Reduction of boat capital gain
A *capital gain you make from a *CGT event happening in relation to a boat for an income year is reduced by an amount that is a quarantined amount for you for the income year under subsection 26-47(2) .
Note:
Section 26-47 denies deductions for the excess of boat expenditure over boat income.
SECTION 118-85 Special disability trusts 118-85(1)
A *capital gain or *capital loss you make is disregarded if you make it from transferring a *CGT asset for no consideration to:
(a) a *special disability trust; or
(b) a trust that becomes a special disability trust as soon as practicable after the transfer.
118-85(2)
In working out whether the transfer was for consideration, disregard any interest in the trust.
You can ignore a capital gain or capital loss you make from a CGT event that happens to a dwelling that is your main residence.
However, this exemption may not apply if you are a foreign resident, and may not apply in full if:
There are special rules for dwellings passed from, or owned by a trustee of, a deceased estate.
There is a similar exemption for a CGT event that is a compulsory acquisition (or similar arrangement) happening to adjacent land but not also to the dwelling itself.
Note:
The exemption may not be available for the main residence of a foreign resident.
SECTION 118-110 Basic case 118-110(1)
A *capital gain or *capital loss you make from a *CGT event that happens in relation to a *CGT asset that is a *dwelling or your *ownership interest in it is disregarded if:
(a) you are an individual; and
(b) the dwelling was your main residence throughout your *ownership period; and
(c) the interest did not *pass to you as a beneficiary in, and you did not *acquire it as a trustee of, the estate of a deceased person.
Note 1:
You may make a capital gain or capital loss even though you comply with this section if the dwelling was used for the purpose of producing assessable income: see section 118-190 .
Note 2:
There is a separate rule for beneficiaries and trustees of deceased estates: see section 118-195 .
Note 3:
There is a separate rule for a CGT event that is a compulsory acquisition (or similar arrangement) happening to adjacent land but not also to the dwelling itself: see section 118-245 .
118-110(2)
Only these *CGT events are relevant:
(a) CGT events A1, B1, C1, C2, E1, E2, F2, K3, K4 and K6 (except one involving the forfeiting of a deposit); and
(b) a CGT event that involves the forfeiting of a deposit as part of an uninterrupted sequence of transactions ending in one of the events specified in paragraph (a) subsequently happening.
Note:
The full list of CGT events is in section 104-5 .
118-110(3)
However, this section does not apply if, at the time the *CGT event happens, you:
(a) are an *excluded foreign resident; or
(b) are a foreign resident who does not satisfy the *life events test.
118-110(4)
You are an excluded foreign resident , at a particular time, if:
(a) you are a foreign resident at that time; and
(b) the continuous period ending at that time for which you have been a foreign resident is more than 6 years.
118-110(5)
You satisfy the life events test , at the time a *CGT event happens, if:
(a) the continuous period ending at that time for which you have been a foreign resident is 6 years or less; and
(b) you are covered by any of the following subparagraphs:
(i) you or your *spouse has had a *terminal medicalcondition that existed at any time during that period of foreign residency;
(ii) your *child has had a terminal medical condition that existed at any time during that period of foreign residency, and that child was under 18 years of age at at least one such time;
(iii) your spouse, or your child who was under 18 years of age at death, has died during that period of foreign residency;
(iv) the CGT event happens because of a matter referred to in a paragraph of subsection 126-5(1) involving you and your spouse (or former spouse).
A dwelling includes:
(a) a unit of accommodation that:
(i) is a building or is contained in a building; and
(ii) consists wholly or mainly of residential accommodation; and
(b) a unit of accommodation that is a caravan, houseboat or other mobile home; and
(c) any land immediately under the unit of accommodation.
118-115(2)
However, except as provided in section 118-120 , a dwelling does not include any land adjacent to a building.
SECTION 118-120 Extension to adjacent land etc.
Adjacent land
118-120(1)
This Subdivision applies to a *dwelling ' s *adjacent land (if the same *CGT event happens to that land or your *ownership interest in it) as if it were a dwelling.
118-120(2)
Land adjacent to a *dwelling is its adjacent land to the extent that the land was used primarily for private or domestic purposes in association with the dwelling.
118-120(3)
The maximum area of *adjacent land covered by the exemption for the *CGT event (the current event ) is 2 hectares, less the area of the land immediately under the *dwelling.
118-120(4)
However, if subsection 118-245(2) applied to you for an earlier *CGT event that happened in relation to:
(a) other land that was part of the *dwelling ' s *adjacent land at the time of the earlier CGT event; or
(b) your *ownership interest in that other land at that time;
the maximum area of land covered by the exemption for the current event is the *maximum exempt area for the current event and the dwelling.
Adjacent structures
118-120(5)
This Subdivision applies to an *adjacent structure of a flat or home unit (if the same *CGT event happens to that structure or your *ownership interest in it) as if it were a *dwelling.
118-120(6)
A garage, storeroom or other structure associated with a flat or home unit is an adjacent structure of the flat or home unit to the extent that the structure was used primarily for private or domestic purposes in association with the flat or home unit.
Your ownership period of a *dwelling is the period on or after 20 September 1985 when you had an *ownership interest in:
(a) the dwelling; or
(b) land (*acquired on or after 20 September 1985) on which the dwelling is later built.
You have an ownership interest in land or a *dwelling if:
(a) for land - you have a legal or equitable interest in it or a right to occupy it; or
(b) for a dwelling that is not a flat or home unit - you have a legal or equitable interest in the land on which it is erected, or a licence or right to occupy it; or
(c) for a flat or home unit - you have:
(i) a legal or equitable interest in a *stratum unit in it; or
(ii) a licence or right to occupy it; or
(iii) a *share in a company that owns a legal or equitable interest in the land on which the flat or home unit is erected and that gives you to a right to occupy it.
118-130(2)
For land or a *dwelling that you *acquire under a contract, you have an ownership interest in it from:
(a) the time when you obtain legal ownership of it; or
(b) if the contract or a related contract gives you a right to occupy it at an earlier time - the earlier time.
118-130(3)
For land or a *dwelling where you have a contract for the happening of the *CGT event, you have an ownership interest in it until your legal ownership of it ends.
Rules that may extend the exemption
SECTION 118-135 118-135 Moving into a dwelling
If a *dwelling becomes your main residence by the time it was first practicable for you to move into it after you *acquired your *ownership interest in it, the dwelling is treated as your main residence from when you acquired the interest until it actually became your main residence.
If you *acquire an *ownership interest in a *dwelling that is to become your main residence and you still have your ownership interest in your existing main residence, both dwellings are treated as your main residence for the shorter of:
(a) 6 months ending when your ownership interest in your existing main residence ends; or
(b) the period between the acquisition of the new ownership interest and the time when the ownership interest referred to in paragraph (a) ends.
118-140(2)
Subsection (1) only applies if:
(a) your existing main residence was your main residence for a continuous period of at least 3 months in the 12 months ending when your ownership interest in it ends; and
(b) your existing main residence was not used for the *purpose of producing assessable income in any part of that 12 month period when it was not your main residence.
SECTION 118-145 Absences 118-145(1)
If a *dwelling that was your main residence ceases to be your main residence, you may choose to continue to treat it as your main residence.
118-145(2)
If you use the part of the *dwelling that was your main residence for the *purpose of producing assessable income, the maximum period that you can treat it as your main residence under this section while you use it for that purpose is 6 years. You are entitled to another maximum period of 6 years each time the dwelling again becomes and ceases to be your main residence.
118-145(3)
If you do not use the *dwelling for that purpose, you can treat it as your main residence under this section indefinitely.
118-145(3A)
This section does not apply if the *dwelling was your main residence because of section 118-147 and ceases to be your main residence because of subsections 118-147(3) and (4) .
118-145(4)
If you make the choice, you cannot treat any other *dwelling as your main residence while you apply this section, except if section 118-140 (about changing main residences) applies.
Example:
You live in a house for 3 years. You are posted overseas for 5 years and you rent it out during your absence. On your return you move back into it for 2 years. You are then posted overseas again for 4 years (again renting it out). You then move back into it for 3 years, after which you sell the house.
You have not treated any other dwelling as your main residence during your absences.
You may choose to continue to treat the house as your main residence during both absences because each absence is less than 6 years.
You can make this choice when preparing your income tax return for the income year in which you sold the house.
This section applies if:
(a) a *dwelling (the old dwelling ) is treated as your main residence because of your choice under section 118-145 ; and
(b) because of an event (the key event ) described in subsection 124-70(1) :
(i) you cease to have any *ownership interest in the old dwelling; or
(ii) the old dwelling is lost or destroyed; and
(c) after the key event you have an ownership interest (the substitute property interest ) in:
(i) a dwelling (the substitute dwelling ); or
(ii) land (the substitute land ) that did not have a dwelling on it at the later of the time just after the key event and the time you *acquired the interest; and
(d) you acquired the substitute property interest at a time (the substitute property acquisition time ) no later than one year, or within such further time as the Commissioner allows in special circumstances, after the end of the income year in which the key event happens.
Note 1:
Subsections 124-70(1) deals with compulsory acquisitions, disposals in circumstances involving powers of compulsory acquisition, expiry of leases granted by Australian government agencies and loss or destruction of a CGT asset.
Note 2:
The substitute property acquisition time may be before, at or after the time the key event happened. The old dwelling and the substitute dwelling may be different or the same. The land on which the old dwelling is erected and the substitute land may be different or the same.
118-147(2)
You may choose to treat the substitute dwelling, or a *dwelling you built on the substitute land within 4 years after the later of the time of the key event and the substitute property acquisition time, as your main residence from the later of the following times (or from either of them if they are the same):
(a) the substitute property acquisition time;
(b) the time one year before the key event happened.
118-147(3)
Subsection (4) limits the time you can treat a *dwelling as your main residence under this section if you use all or part of it or the substitute land, after the later of the key event and the substitute property acquisition time, for the *purpose of producing assessable income.
118-147(4)
The maximum period you can treat the *dwelling that way while you use it or the substitute land as described in subsection (3) is:
(a) 6 years; or
(b) if, just before the key event, you used all or part of the old dwelling for that purpose - so much of the period of 6 years described in subsection 118-145(2) in relation to the old dwelling as had not passed before the event.
118-147(5)
If you do not use the *dwelling or substitute land as described in subsection (3) you can treat the dwelling as your main residence under this section indefinitely.
118-147(6)
If you make the choice:
(a) you cannot treat any other *dwelling as your main residence while you apply this section; and
(b) section 118-140 does not apply in relation to your *acquisition, while you still have an *ownership interest in the old dwelling, of an ownership interest in the dwelling you choose to treat as your main residence under this section; and
(c) section 118-150 does not apply after the key event to the land on which the old dwelling is erected or the substitute land; and
(d) section 118-155 does not apply after the key event in relation to the old dwelling, the substitute dwelling or a dwelling built on the substitute land.
118-147(7)
Paragraph (6)(a) does not prevent the old dwelling from being your main residence at any time before the key event happened.
This section applies to land in which you have an *ownership interest (except a life interest) if you build a *dwelling on the land, or repair, renovate or finish building a dwelling on the land.
118-150(2)
You can choose to apply this Subdivision as if the *dwelling that you are building, repairing or renovating on the land were your main residence from the time you *acquired the *ownership interest.
118-150(3)
You can make the choice only if:
(a) a *dwelling on the land that you construct, repair or renovate becomes your main residence (except because of section 118-147 ) as soon as practicable after the work is finished; and
(b) it continues to be your main residence for at least 3 months.
118-150(4)
There is a time limit during which the choice can operate. This is the shorter of:
(a) 4 years, or a longer time allowed by the Commissioner, before the *dwelling becomes your main residence; and
(b) the period starting when you *acquired your *ownership interest in the land and ending when the dwelling becomes your main residence.
118-150(5)
If there was already a *dwelling on the land when you *acquired your *ownership interest and you or someone else occupied it after that time, the period in subsection (2) and paragraph (4)(b) starts when the dwelling ceased to be occupied.
118-150(6)
Once you make the choice, no other *dwelling can be treated as your main residence during the period referred to in subsection (4), except if section 118-140 (about changing main residences) applies.
SECTION 118-155 Where individual referred to in section 118-150 dies 118-155(1)
This section applies if the individual referred to in subsection 118-150(1) dies:
(a) after the work began, or the individual entered into a contract for it to be done, but before it was finished; or
(b) after the work was finished but before it was practicable for the *dwelling to become the individual's main residence; or
(c) during the period of 3 months referred to in paragraph 118-150(3)(b) .
118-155(2)
If the individual owned the interest in the land as a joint tenant, the surviving joint tenant or, if none, the trustee of the individual's estate, can choose to apply this Subdivision as if the *dwelling were the main residence of the individual:
(a) when the individual died; and
(b) for the shorter of:
(i) 4 years before the individual's death; or
(ii) the period starting when the individual *acquired the interest in the land and ending when the individual died.
118-155(3)
If there was already a *dwelling on the land when the individual *acquired the interest in the land and someone occupied it after that time, the period in subparagraph (2)(b)(ii) starts when the dwelling ceased to be occupied so that it could be repaired or renovated.
118-155(4)
If the *dwelling is treated as the deceased's main residence under this section, no other dwelling can be treated as the deceased's main residence at the same time.
118-155(5)
However, this section does not apply if, just before the individual ' s death, the individual was an *excluded foreign resident.
This section applies if a *dwelling that is your main residence is accidentally destroyed and a *CGT event happens in relation to the land on which it was built without you erecting another dwelling on the land.
118-160(2)
You can choose to apply this Subdivision to the land as if, from the time of the destruction until your *ownership interest in the land ends, the *dwelling had not been destroyed and were your main residence.
118-160(3)
If you do so, you cannot treat any other *dwelling as your main residence during that period, except under section 118-140 (about changing main residences).
Rules that may limit the exemption
SECTION 118-165 118-165 Separate CGT event for adjacent land or other structures
The exemption does not apply to a *CGT event that happens in relation to land, or a garage, storeroom or other structure, to which the exemption can extend under section 118-120 (about adjacent land) if that event does not also happen in relation to the *dwelling or your *ownership interest in it.
Note:
There is a separate rule for a CGT event that is a compulsory acquisition (or similar arrangement) happening to adjacent land but not also to the dwelling itself: see section 118-245 .
If, during a period, a *dwelling is your main residence and another *dwelling is the main residence of your *spouse (except a spouse living permanently separately and apart from you), you and your spouse must either:
(a) choose one of the dwellings as the main residence of both of you for the period; or
(b) nominate the different dwellings as your main residences for the period.
118-170(2)
If you nominate the different *dwellings as your main residences for the period, you split the exemption in accordance with subsections (3) and (4).
118-170(3)
If your interest in the *dwelling you chose was not, during the period, more than half of the total interests in the dwelling, the dwelling is taken to have been your main residence during the period. Otherwise, the dwelling is taken to have been your main residence for half of the period.
118-170(4)
If your *spouse ' s interest in the *dwelling your spouse chose was not, during the period, more than half of the total interests in the dwelling, the dwelling is taken to have been your spouse ' s main residence during the period. Otherwise, the dwelling is taken to have been your spouse ' s main residence for half of the period.
Example:
You and your spouse (who are Australian residents) own a town house as tenants in common in equal shares. You and your spouse also own a beach house as tenants in common, with your interest being 30% and your spouse ' s 70%. From 1 July 1999, you live mainly in the town house and your spouse lives mainly in the beach house. On 1 July 2000 you and your spouse dispose of both dwellings.
For the period 1 July 1999-30 June 2000 you nominate the town house as your main residence and your spouse nominates the beach house. The town house is taken to be your main residence during the period. The beach house is taken to be your spouse ' s main residence during half the period.
If, at a particular time, a *dwelling is your main residence and another *dwelling is the main residence of a *child of yours who is under 18 and is dependent on you for economic support, you must choose one of them as the main residence of both of you.
SECTION 118-178 Previous roll-over under Subdivision 126-A 118-178(1)
This section applies to you if:
(a) you *acquired an *ownership interest in a *dwelling from another person (your former partner ) as a result of a *CGT event (the earlier event ); and
(b) your former partner acquired the ownership interest on or after 20 September 1985; and
(c) there was a roll-over under Subdivision 126-A (marriage or relationship breakdown roll-over) for the earlier event; and
(d) a CGT event (the later event ) happens in relation to the ownership interest.
118-178(2)
This Subdivision applies to the later event in the way that it would if:
(a) your *ownership interest had commenced when your former partner ' s ownership interest commenced (the acquisition time ); and
(b) from the acquisition time until the time your former partner ' s ownership interest ended:
(i) you had used the *dwelling in the same way that your former partner used it; and
EXAMPLES
(ii) the dwelling had been your main residence for the same number of days as it was your former partner ' s main residence.
Example 1:
Peter (the transferor spouse) is the 100% owner of a dwelling that he uses only as a main residence before transferring it to Susan (the transferee spouse). Susan uses the dwelling only as a rental property.
Susan will be eligible for a partial main residence exemption having regard to how both Peter and Susan used the dwelling if, at the time the dwelling is sold, Susan is an Australian resident.
Example 2:
Caroline (the transferor spouse) is the 100% owner of a dwelling that she uses only as a rental property before transferring it to David (the transferee spouse). David uses the dwelling only as a main residence.
David will be eligible for only a partial main residence exemption having regard to how both Caroline and David used the dwelling if, at the time the dwelling is sold, David is an Australian resident.
This Subdivision applies to you as if you owned an *ownership interest in land or a dwelling during a period when it was actually owned by a company or trustee if:
(a) you *acquired the interest from the company or trustee; and
(b) it was acquired by the company or trustee on or after 20 September 1985; and
(c) a roll-over was available to the company or trustee under Subdivision 126-A .
118-180(2)
If subsection (1) applies to a *dwelling, it cannot be treated as your main residence during the period, despite other provisions of this Subdivision that would allow you to treat it as your main residence during the period.
SECTION 118-185 Partial exemption where dwelling was your main residence during part only of ownership period 118-185(1)
You get only a partial exemption for a *CGT event that happens in relation to a *dwelling or your *ownership interest in it if:
(a) you are an individual; and
(b) the dwelling was your main residence for part only of your *ownership period; and
(c) the interest did not *pass to you as a beneficiary in, and you did not *acquire it as a trustee of, the estate of a deceased person.
118-185(2)
You calculate your *capital gain or *capital loss using the formula:
| CG or CL amount | × |
Non-main residence days
Days in your *ownership period |
where:
CG or CL amount
is the *capital gain or *capital loss you would have made from the *CGT event apart from this Subdivision.
non-main residence days
is the number of days in your *ownership period when the *dwelling was not your main residence.
Note:
The capital gain or loss may be further adjusted if the dwelling was used to produce assessable income: see section 118-190 .
Example:
You bought a house in July 2020 and moved in immediately. In July 2023, you moved out and began to rent it. You sold it in July 2030, making (apart from this Subdivision) a capital gain of $10,000. At the time you sold the house, you were an Australian resident.
You choose to continue to treat the dwelling as your main residence under section 118-145 (about absences) for the first 6 of the 7 years during which you rented the house out.
Under this section, you will be taken to have made a capital gain of:
$10,000 × 365
3,650= $1,000
118-185(3)
However, this section does not apply if, at the time the *CGT event happens, you:
(a) are an *excluded foreign resident; or
(b) are a foreign resident who does not satisfy the *life events test.
You get only a partial exemption for a *CGT event that happens in relation to a *dwelling or your *ownership interest in it if:
(a) apart from this section, because the dwelling was your main residence or someone else's during a period:
(i) you would not make a *capital gain or *capital loss from the event; or
(ii) you would make a lesser capital gain or loss than if this Subdivision had not applied; and
(b) the dwelling was used for the *purpose of producing assessable income during all or a part of that period; and
(c) if you had incurred interest on money borrowed to *acquire the dwelling, or your ownership interest in it, you could have deducted some or all of that interest.
Example:
You acquire a house as a beneficiary in a deceased estate, rent it out for 12 months and sell it within 2 years of the deceased's death. You can ignore the rental because the exemption does not require the house to be your main residence during the 2 years after the death.
118-190(2)
The *capital gain or *capital loss that you would have made apart from this section from the *CGT event is increased by an amount that is reasonable having regard to the extent to which you would have been able to deduct that interest.
118-190(3)
However, you ignore any use of the *dwelling for the *purpose of producing assessable income during any period that you continue to treat it as your main residence under section 118-145 (about absences) to the extent that any part of it was not used for that purpose just before it last ceased to be your main residence.
Example:
To continue the example from section 118-185 , assume that, when you moved in, you used ¼ of the house as a doctor's surgery.
Under section 118-185 , your capital gain was $1,000.
Under this section, it would be reasonable to add an amount of:
$10,000 × 9
10× 1
4= $2,250 You have a total capital gain of $3,250 on the sale of the house.
118-190(3A)
Also, you ignore any use of the *dwelling for the *purpose of producing assessable income during any period that you treat it as your main residence under section 118-147 (about absences) to the extent that any part of the old dwelling mentioned in that section was not used for that purpose just before the old dwelling last ceased to be your main residence.
118-190(4)
If a *dwelling or your *ownership interest in a dwelling *passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate, you ignore any use of the *dwelling for the *purpose of producing assessable income before the deceased's death if:
(a) the dwelling was the deceased's main residence just before the death; and
(b) it was not being used for that purpose just before the death, or any use for that purpose just before the death was ignored because of subsection (3).
SECTION 118-192 Special rule for first use to produce income 118-192(1)
There is a special rule if:
(a) you would get only a partial exemption under this Subdivision for a *CGT event happening in relation to a *dwelling or your *ownership interest in it because the dwelling was used for the *purpose of producing assessable income during your *ownership period; and
(aa) that use occurred for the first time after 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; and
(b) you would have got a full exemption under this Subdivision if the CGT event had happened just before the first time (the income time ) it was used for that purpose during your ownership period.
118-192(2)
You are taken to have *acquired the *dwelling or your *ownership interest at the income time for its *market value at that time.
118-192(3)
If your *ownership interest in the *dwelling *passed to you as a beneficiary in a deceased's estate, or you owned it as the trustee of a deceased estate and the *CGT event did not happen within 2 years of the deceased's death, you apply this Subdivision as if:
(a) you had *acquired the interest as an individual and not as a beneficiary or trustee of a deceased estate; and
(b) for applying the formula in section 118-185 , your non-main residence days were the number of days in your *ownership period when the dwelling was not the main residence of an individual referred to in item 2, column 3 of the table in section 118-195 .
Note:
There are special rules for dwellings acquired before 7.30 pm on 20 August 1996: see section 118-195 of the Income Tax (Transitional Provisions) Act 1997 .
Dwellings acquired from deceased estates
SECTION 118-195 Dwelling acquired from a deceased estate 118-195(1)
A *capital gain or *capital loss you make from a *CGT event that happens in relation to a *dwelling or your *ownership interest in it is disregarded if:
(a) you are an individual and the interest *passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate; and
(b) at least one of the items in column 2 and at least one of the items in column 3 of the table are satisfied; and
| Beneficiary or trustee of deceased estate acquiring interest | |||
| Item | One of these items is satisfied | And also one of these items | |
| 1 | the deceased *acquired the *ownership interest on or after 20 September 1985 and the *dwelling was the deceased's main residence just before the deceased's death and was not then being used for the *purpose of producing assessable income | your *ownership interest ends within 2 years of the deceased's death, or within a longer period allowed by the Commissioner | |
| . | |||
| 2 | the deceased *acquired the *ownership interest before 20 September 1985 | the *dwelling was, from the deceased's death until your *ownership interest ends, the main residence of one or more of: | |
| (a) | the spouse of the deceased immediately before the death (except a spouse who was living permanently separately and apart from the deceased); or | ||
| (b) | an individual who had a right to occupy the dwelling under the deceased's will; or | ||
| (c) | if the *CGT event was brought about by the individual to whom the *ownership interest *passed as a beneficiary - that individual |
(c) the deceased was not an *excluded foreign resident just before the deceased ' s death.
Note 1:
You may make a capital gain or capital loss if the dwelling was used for the purpose of producing assessable income: see section 118-190 .
Note 2:
In some cases the use of a dwelling to produce assessable income can be disregarded: see sections 118-145 and 118-190 .
Note 3:
There are special rules for dwellings acquired before 7.30 pm on 20 August 1996. These rules also affect the operation of section 118-192 and subsections 118-190(4) and 118-200(4) : see section 118-195 of the Income Tax (Transitional Provisions) Act 1997 .
118-195(1A)
For the purposes of a provision of this Subdivision that applies the table in subsection (1):
(a) disregard paragraphs (a) and (b) in column 3 of item 2 of the table if, just before the deceased ' s death, the deceased was an *excluded foreign resident; and
(b) disregard paragraph (c) in column 3 of item 2 of the table if, at the time the relevant *CGT event happened, the individual was an excluded foreign resident.
Note:
The other provisions that apply the table include paragraph 118-192(3)(b) , subsection 118-200(2) , paragraph 118-225(3)(c) and section 118-260 .
118-195(2)
Only these *CGT events are relevant:
(a) CGT events A1, B1, C1, C2, E1, E2, F2, K3, K4 and K6 (except one involving the forfeiting of a deposit); and
(b) a CGT event that involves the forfeiting of a deposit as part of an uninterrupted sequence of transactions ending in one of the events specified in paragraph (a) subsequently happening.
Note:
The full list of CGT events is in section 104-5 .
This Subdivision applies to you as if the *ownership interest of another individual in a *dwelling had *passed to you as a beneficiary in a deceased estate if:
(a) you and the other individual owned ownership interests in the dwelling as joint tenants; and
(b) the other individual dies.
You get only a partial exemption (or no exemption) if:
(a) you are an individual and your *ownership interest in a *dwelling *passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate; and
(b) section 118-195 does not apply.
118-200(2)
You calculate your *capital gain or *capital loss using the formula:
| CG or CL amount | × |
Non-main residence days
Total days |
where:
CG or CL amount
is the *capital gain or *capital loss you would have made from the *CGT event apart from this Subdivision.
non-main residence days
is the sum of:
(a) if the deceased *acquired the *ownership interest on or after 20 September 1985 - the number of days in the deceased ' s *ownership period when the *dwelling was not the deceased ' s main residence; and
(aa) if the deceased acquired the ownership interest on or after 20 September 1985 and, just before the deceased ' s death, the deceased was an *excluded foreign resident - the number of remaining days in the deceased ' s ownership period; and
(b) the number of days in the period from the death until your ownership interest ends when the dwelling was not the main residence of an individual referred to in item 2, column 3 of the table in section 118-195 .
(a) if the deceased *acquired the *ownership interest before 20 September 1985 - the number of days in the period from the death until your ownership interest ends; or
(b) if the deceased acquired the ownership interest on or after that day - the number of days in the period from the acquisition of the dwelling by the deceased until your ownership interest ends.
118-200(3)
However, you can adjust the formula by ignoring any non-main residence days and total days in the period from the deceased ' s death until your *ownership interest ended, if:
(a) the deceased *acquired the ownership interest on or after 20 September 1985; and
(b) your ownership interest ends within:
(i) 2 years of the deceased ' s death; or
(ii) a longer period allowed by the Commissioner; and
(c) you get a more favourable result by doing so; and
(d) the deceased was not an *excluded foreign resident just before the deceased ' s death.
Note 1:
The formula in this section will be adjusted (or further adjusted) under section 118-205 if the deceased acquired the dwelling through a deceased estate.
Note 2:
There may be a further adjustment if the dwelling was used for the purpose of producing assessable income: see section 118-190 .
118-200(4)
You ignore any non-main residence days before the deceased ' s death if:
(a) the *dwelling was the deceased ' s main residence just before the death; and
(b) the dwelling was not being used for the *purpose of producing assessable income just before the death, or any use for that purpose just before the death was ignored because of subsection 118-190(3) or (3A) ; and
(c) the deceased was not an *excluded foreign resident just before the deceased ' s death.
You must adjust the formula in subsection 118-200(2) if the *ownership interest of the deceased individual referred to in section 118-200 (the most recently deceased ) *passed to the individual on or after 20 September 1985 as a beneficiary in, or the individual owned it as trustee of, a deceased estate.
Note:
Any gains or losses of individuals earlier in the inheritance chain are included in the gain or loss you would have made apart from this Subdivision. This section adjusts the formula to take account of times when the dwelling was the main residence of the individuals.
118-205(2)
Add to the component total days in the formula the fewer of:
(a) the number of days between 20 September 1985 and the day when the interest *passed to or was *acquired as trustee by the most recently deceased; and
(b) the number of days between the time when an *ownership interest in the *dwelling was last acquired on or after 20 September 1985 by an individual except as a beneficiary in a deceased estate or as trustee of a deceased estate and the day when the interest passed to or was acquired as trustee by the most recently deceased.
118-205(3)
Add to the component non-main residence days in the formula the number of days in the period applicable under subsection (2) that the *dwelling was not the main residence of one or more of:
(a) an individual who owned the dwelling at the time of the individual ' s death; or
(b) an individual who, immediately before the death of an individual referred to in paragraph (a), was the spouse of that individual (except a spouse who was living permanently separately and apart from the individual); or
(c) an individual who had a right to occupy the dwelling under a will; or
(d) an individual to whom an *ownership interest in the dwelling *passed as a beneficiary in, or who *acquired an ownership interest in the dwelling as trustee of, a deceased estate.
118-205(4)
Add to the component non-main residence days in the formula the number of days in the period applicable under subsection (2) that the *dwelling was the main residence of an individual who:
(a) owned the dwelling; and
(b) was an *excluded foreign resident;
just before the individual ' s death.
This section applies if you are the trustee of a deceased estate and, under the deceased's will, you *acquire an *ownership interest in a *dwelling for occupation by an individual.
118-210(2)
If a *CGT event happens to the interest in relation to the individual and you receive no money or property for it:
(a) a *capital gain or *capital loss you make from the event is disregarded; and
(b) the first element of the *dwelling's *cost base and *reduced cost base in the hands of the individual is its cost base and reduced cost base in your hands at the time of the event; and
(c) the individual is taken to have *acquired it when you did.
118-210(3)
If:
(a) you receive money or property for the *CGT event happening or the event happens in relation to another entity; and
(b) the dwelling was the main residence of the individual from the time you *acquired the interest until the time of the event;
you do not make a *capital gain or *capital loss from the CGT event.
118-210(4)
However, if the *dwelling was the main residence of the individual during part only of that period, you make a *capital gain or *capital loss worked out using the formula:
| CG or CL amount | × |
Non-main residence days
Days in that period |
where:
CG or CL amount
is the *capital gain or *capital loss you would have made from the *CGT event apart from this Subdivision.
non-main residence days
is the number of days in that period when the *dwelling was not the individual's main residence.
118-210(5)
Only these *CGT events are relevant:
(a) CGT events A1, B1, C1, C2, E1, E2, E5, F2, K3, K4 and K6 (except one involving the forfeiting of a deposit); and
(b) a CGT event that involves the forfeiting of a deposit as part of an uninterrupted sequence of transactions ending in one of the events specified in paragraph (a) subsequently happening.
Note:
The full list of CGT events is in section 104-5 .
118-210(6)
However, this section does not apply if, just before the deceased ' s death, the deceased was an *excluded foreign resident.
SECTION 118-215 What the following provisions are about
The trustee of a trust that is or has been a special disability trust may be eligible for an exemption to the extent that a dwelling is the main residence of the individualwho is or has been the principal beneficiary of the trust.
Another beneficiary of the trust may be eligible for an exemption if the dwelling is distributed to that other beneficiary at or after the principal beneficiary ' s death.
Note 1:
The following provisions also apply to the exemption about compulsory acquisitions of adjacent land (see section 118-245 ).
Note 2:
The exemptions may not apply if the principal beneficiary of the trust is a foreign resident.
This section applies to you in relation to a *CGT event if:
(a) the CGT event happens in relation to a *CGT asset; and
(b) just before the CGT event happens, you hold the CGT asset as trustee of a trust; and
(c) the trust was a *special disability trust on at least one of the days on which you held the CGT asset.
Note:
This section may not apply if the principal beneficiary of the trust is a foreign resident (see subsection (5)).
118-218(2)
For the purposes of applying this Subdivision in relation to the *CGT event, on each day to which paragraph (1)(c) applies:
(a) treat yourself as holding the *CGT asset personally (and not as trustee of the trust); and
(b) if the *principal beneficiary of the trust uses the applicable *dwelling in a particular way on that day - treat yourself as using the dwelling in that way on that day.
Example:
If the principal beneficiary uses the dwelling as his or her main residence on the day, then treat yourself as using the dwelling as your main residence on that day.
Note 1:
The CGT asset need not be a dwelling (or an ownership interest in a dwelling) if it is land adjacent to a dwelling, an adjacent structure of a flat or home unit, or an ownership interest in such an asset.
Note 2:
If the trustee is an individual, the individual ' s actual circumstances are ignored. Similarly, this subsection does not affect how this Subdivision applies for the individual ' s actual circumstances. See section 960-100 .
118-218(3)
If you are not an individual, treat yourself as being an individual for the purposes of applying this Subdivision in relation to the *CGT event.
118-218(4)
If the *CGT asset, or your *ownership interest in it, *passed to you as a beneficiary in a deceased estate:
(a) treat the deceased as never having used the applicable *dwelling for the *purpose of producing assessable income; and
(b) treat the dwelling as being the deceased ' s main residence on each day during the deceased ' s *ownership period;
for the purposes of applying this Subdivision in relation to the *CGT event.
118-218(5)
Despite subsection (1), this section does not apply if, at the time the *CGT event happens, the *principal beneficiary of the trust:
(a) is an *excluded foreign resident; or
(b) is a foreign resident who does not satisfy the *life events test.
This section applies to you in relation to a *CGT event if:
(a) the trustee of a trust holds a *CGT asset on a particular day (the transition day ); and
(b) on the transition day, or on an earlier day on which the CGT asset was held by the trustee of the trust, the trust is a *special disability trust; and
(c) the individual who is or has been the *principal beneficiary of the trust dies on the transition day; and
(d) the CGT event happens in relation to the CGT asset at or after the deceased ' s death; and
(e) the CGT event happens while you hold the CGT asset:
(i) as trustee of the trust; or
(ii) as trustee of an implied trust arising because of the deceased ' s death.
This section applies to you in relation to a *CGT event if:
(a) the CGT event happens in relation to a *CGT asset; and
(b) you *acquired the CGT asset or your *ownership interest in it:
(i) as a result of an earlier CGT event; and
(ii) as a beneficiary of a trust; and
(c) section 118-220 applied to the trustee of the trust in relation to the earlier CGT event and the CGT asset.
Full exemption for trustee unless sells asset for proceeds etc.
118-225(1)
A *capital gain or *capital loss you make from a *CGT event is disregarded if:
(a) section 118-220 applies to you in relation to the CGT event; and
(b) as a result of the CGT event, an entity *acquires the *CGT asset:
(i) as trustee of an implied trust arising because of the deceased ' s death; or
(ii) as a beneficiary of the relevant trust referred to in paragraph 118-220(e) .
Exemption for beneficiary, or trustee selling asset for proceeds etc.
118-225(2)
If:
(a) section 118-220 applies to you in relation to a *CGT event, but paragraph (1)(b) does not; or
(b) section 118-222 applies to you in relation to a CGT event;
the amount of the *capital gain or *capital loss that you would have made apart from this section from the CGT event is decreased by an amount that is reasonable.
118-225(3)
In determining what is a reasonable decrease:
(a) if section 118-220 applies to you, but paragraph (1)(b) does not - treat yourself as being an individual who owned the *CGT asset as the trustee of the deceased ' s estate; and
(b) if section 118-222 applies to you - treat yourself as being an individual and treat the CGT asset or your *ownership interest in it as having *passed to you as a beneficiary in the deceased ' s estate; and
(c) have regard to the principles in this Subdivision, and to:
(i) the extent that the applicable *dwelling was the deceased ' s main residence for the relevant period; and
(ii) the extent that the dwelling was used for the *purpose of producing assessable income during the relevant period.
118-225(4)
For the purposes of subparagraph (3)(c)(i), assume the *dwelling was not the deceased ' s main residence on each day the trust referred to in paragraph 118-220(b) was not a *special disability trust.
118-225(5)
However, subsection (2) does not apply if, just before the deceased ' s death, the deceased was an *excluded foreign resident.
If section 118-220 applies to you and:
(a) the applicable *dwelling was the deceased ' s main residence just before the deceased ' s death; and
(b) that dwelling was not then being used for the *purpose of producing assessable income; and
(c) the trust referred to in paragraph 118-220(b) was then a *special disability trust; and
(ca) the deceased was not an *excluded foreign resident just before the deceased ' s death;
then:
(d) the first element of the *CGT asset ' s *cost base, in your hands, is the CGT asset ' s *market value just before the deceased ' s death; and
(e) the first element of the CGT asset ' s *reduced cost base, in your hands, is worked out similarly.
118-227(2)
However, if section 118-220 applies to you as trustee of an implied trust arising because of the deceased ' s death, but subsection (1) does not, then:
(a) the first element of the *CGT asset ' s *cost base, in your hands, is the CGT asset ' s cost base just before the deceased ' s death; and
(b) the first element of the CGT asset ' s *reduced cost base, in your hands, is worked out similarly.
118-227(3)
If section 118-222 applies to you:
(a) the first element of the *CGT asset ' s *cost base, in your hands, is the CGT asset ' s cost base just before the earlier *CGT event happened that resulted in you *acquiring the CGT asset or your *ownership interest in it; and
(b) the first element of the CGT asset ' s *reduced cost base, in your hands, is worked out similarly.
If *CGT event E5 or E7 happens in relation to a *CGT asset held by a trust that is or has been a *special disability trust, treat the lists of CGT events in paragraphs 118-110(2)(a) and 118-195(2)(a) as including a reference to that CGT event.
SECTION 118-240 118-240 What the following provisions are about
You can ignore a capital gain or capital loss you make from a compulsory acquisition (or similar arrangement) that happens only to land that is adjacent to:
to the extent that the land was used primarily for private or domestic purposes in association with the dwelling.
There is a limit on the maximum area of land covered by the exemption.
Note 1:
The exemption may not apply in full if the dwelling:
Note 2:
The exemption may not apply at all if you are a foreign resident.
Total adjacent land is 2 hectares or less
118-245(1)
A *capital gain or *capital loss you make from a *CGT event that happens in relation to land (the exempt land ), or your *ownership interest in it, is disregarded if:
(a) you are an individual; and
(b) the exempt land is all or part of a *dwelling ' s *adjacent land at the time of the CGT event; and
(c) the CGT event does not happen in relation to the dwelling and does not happen in relation to your ownership interest in the dwelling; and
(d) one of the following subparagraphs applies:
(i) the dwelling was your main residence throughout all or part of your *ownership period of the dwelling;
(ii) your ownership interest in the dwelling *passed to you as a beneficiary in a deceased estate;
(iii) you own your ownership interest in the dwelling as the trustee of a deceased estate; and
(e) section 118-250 (about compulsory acquisitions of adjacent land) applies to the CGT event and the exempt land; and
(f) the sum of the following is 2 hectares or less:
(i) the area of all of the dwelling ' s adjacent land at the time of the CGT event;
(ii) the area of the land immediately under the dwelling;
(iii) if this section applied to you for an earlier CGT event that involved reducing the area of the dwelling ' s adjacent land at the time of that earlier CGT event - that reduction in area.
Note:
You may get only a partial exemption for the gain or loss (see section 118-260 ).
Total adjacent land is more than 2 hectares
118-245(2)
If:
(a) apart from paragraph (1)(f), subsection (1) would apply to the gain or loss; and
(b) you choose this subsection to apply to the gain or loss;
disregard so much of the gain or loss that relates to land (the exempt land ) within the *maximum exempt area for the *CGT event and the *dwelling.
Note:
You may get only a partial exemption for this portion of the gain or loss (see section 118-260 ).
No exemption if you are an excluded foreign resident
118-245(3)
However, this section does not apply if, at the time the *CGT event happens, you:
(a) are an *excluded foreign resident; or
(b) are a foreign resident who does not satisfy the *life events test.
This section applies to the *CGT event and the exempt land if the CGT event involves:
(a) the compulsory *acquisition of the exempt land by:
(i) an *Australian government agency; or
(ii) an entity under a power conferred by an *Australian law; or
(b) you *disposing of the exempt land to an entity in circumstances meeting all of these conditions:
(i) the disposal takes place after a notice was served on you by or on behalf of the entity;
(ii) the notice invited you to negotiate with the entity with a view to the entity acquiring the exempt land by agreement;
(iii) the notice informed you that if the negotiations were unsuccessful, the exempt land would be compulsorily acquired by the entity;
(iv) the compulsory acquisition would have been under a power of compulsory acquisition conferred by an Australian law.
Note:
For paragraph (b), the entity may be an Australian government agency.
118-250(2)
This section applies to the *CGT event and the exempt land if the CGT event involves:
(a) your *ownership interest in the exempt land being compulsorily cancelled (however described) or varied (however described) by:
(i) an *Australian government agency; or
(ii) an entity under a power conferred by an *Australian law; or
(b) you surrendering (however described) or varying (however described) your ownership interest in the exempt land in circumstances meeting all of these conditions:
(i) the surrender or variation takes place after a notice was served on you by or on behalf of an entity;
(ii) the notice invited you to negotiate with the entity with a view to you agreeing to surrender or vary your ownership interest;
(iii) the notice informed you that if the negotiations were unsuccessful, your ownership interest would be compulsorily cancelled, or varied, under a power conferred by an Australian law.
Note:
For paragraph (b), the entity may be an Australian government agency.
118-250(3)
This section applies to the *CGT event and the exempt land if the CGT event involves:
(a) an interest or right in or relating to the exempt land being compulsorily conferred on:
(i) an *Australian government agency; or
(ii) an entity under a power conferred by an *Australian law; or
(b) you conferring on an entity an interest or right in or relating to the exempt land in circumstances meeting all of these conditions:
(i) the conferral takes place after a notice was served on you by or on behalf of an entity;
(ii) the notice invited you to negotiate with the entity with a view to you agreeing to confer an interest or right in or relating to the exempt land;
(iii) the notice informed you that if the negotiations were unsuccessful, an interest or right in or relating to the exempt land would be compulsorily conferred on the entity under a power conferred by an Australian law.
Note:
For paragraph (b), the entity may be an Australian government agency.
118-250(4)
This section applies to the *CGT event and the exempt land if:
(a) your *ownership interest in the exempt land:
(i) was conferred on you by an *Australian government agency; and
(ii) had a limited, but renewable, period of operation; and
(b) the CGT event involves that ownership interest not being renewed by that agency.
Your maximum exempt area for the *CGT event and the *dwelling is 2 hectares less the amount worked out as follows: Method statement
Step 1.
Identify each earlier *CGT event (if any) that:
for which you made a *capital gain or *capital loss that was wholly or partly disregarded because of the application of subsection 118-245(2) .
Step 2.
For each earlier *CGT event covered by step 1, work out the area of the exempt land for that application of subsection 118-245(2) .
Step 3.
Add the results from step 2 to the area of the land immediately under the *dwelling.
If section 118-245 applies to a *CGT event, the amount of the *capital gain or *capital loss that you would have made apart from this section from the CGT event is increased by an amount that is reasonable having regard to the following:
(a) the extent that the *dwelling was not a main residence for the relevant period;
(b) the extent that the dwelling was used for the *purpose of producing assessable income during the relevant period.
118-260(2)
In determining what is a reasonable increase, have regard to the principles in this Subdivision applicable to *CGT events happening in relation to a *dwelling or your *ownership interest in it.
Sections 118-245 to 118-260 (with appropriate modifications) apply to an *adjacent structure of a flat or home unit in a corresponding way to the way they apply to a *dwelling ' s *adjacent land.
A *capital gain or *capital loss you make from a *CGT event happening in relation to a *CGT asset that is your interest in rights under a *general insurance policy, a *life insurance policy or an *annuity instrument is disregarded in the situations set out in this table.
| Insurance policies | ||
| Item | The *CGT event happens to this type of policy: | … and you are |
| 1 | Any insurance policy or *annuity instrument | the insurer or the entity that issued the instrument |
| . | ||
| 2 | A *general insurance policy for property where, if a *CGT event happened in relation to the property, any *capital gain or *capital loss would be disregarded | the insured |
| . | ||
| 3 | A policy of insurance on the life of an individual or an *annuity instrument | the original owner of the policy or instrument (other than the trustee of a *complying superannuation entity) |
| . | ||
| 4 | A policy of insurance on the life of an individual or an *annuity instrument | an entity that *acquired the interest in the policy or instrument for no consideration |
| . | ||
| 5 | A policy of insurance on the life of an individual or an *annuity instrument | the trustee of a *complying superannuation entity for the income year in which the *CGT event happened |
| . | ||
| 6 | A policy of insurance on the life of an individual or an *annuity instrument, where the *life insurance company ' s liabilities under the policy or instrument are to be discharged out of *complying superannuation assets or *segregated exempt assets | the life insurance company |
| . | ||
| 7 | A policy of insurance against an individual suffering an illness or injury | the trustee of a *complying superannuation entity for the income year in which the *CGT event happened |
Example 1:
Brian (as the insured) receives an insurance payment from his insurer for the destruction of a building he owned as an investment. The payment constitutes capital proceeds on the destruction (CGT event C1). The discharge of the insurance policy (CGT event C2) has no CGT consequences.
Example 2:
Peter is the original beneficial owner of the rights under a policy of insurance on the life of an individual. He transfers the rights to his spouse for nothing. There are no CGT consequences for him, and none for his spouse if he dies.
Payment to trust beneficiary (or representative) if trustee owns the policy or instrument
118-300(1A)
A *capital gain or *capital loss you make from a *CGT event happening because you receive a *CGT asset from the trustee of a trust is disregarded if:
(a) you receive the CGT asset as:
(i) a beneficiary of the trust; or
(ii) a *legal personal representative of a beneficiary of the trust; and
(b) the CGT asset is attributable to another CGT event and CGT asset to which table item 3 in subsection (1) applies for the trustee.
118-300(2)
Only these *CGT events are relevant: CGT events A1, B1, C2, E1, E2, E3, E5, E6, E7, E8, I1, I2, K3 and K4.
Note:
The full list of CGT events is in section 104-5 .
A *capital gain or *capital loss is disregarded if you make it from a *CGT event happening in relation to any of the following:
(a) a right to an allowance, annuity or capital amount payable out of a *superannuation fund or *approved deposit fund;
(b) a right to an asset of such a fund;
(c) a right to any part of such an allowance, annuity, capital amount or asset.
Example:
Angela retires from her employment and receives a lump sum payment from her superannuation fund. This is an example of CGT event C2 (her rights to receive the payment ending). There are no CGT consequences for Angela.
118-305(2)
However, this exemption is not available if:
(a) you are the trustee of the fund and a *CGT event happens in relation to a *CGT asset of the fund; or
(b) an entity receives a payment or property where:
(i) the entity was not a member of the fund; and
(ii) the entity *acquired the right to the payment or property for consideration.
118-305(3)
Subsection (2) does not apply if:
(a) a *payment split applies to a *splittable payment; and
(b) as a result, a payment is made to the *non-member spouse (or to his or her *legal personal representative if the non-member spouse has died).
SECTION 118-310 118-310 RSA's
A *capital gain or *capital loss you make from a *CGT event happening in relation to a right to, or any part of, an *RSA is disregarded.
A *capital gain or *capital loss you make from *CGT event C2 or D1 relating directly to any of the following is disregarded: (a) the making of a superannuation agreement (within the meaning of Part VIIIB or VIIIC of the Family Law Act 1975 ); (b) the termination, or setting aside, of such an agreement; (c) such an agreement otherwise coming to an end.
A *capital gain or *capital loss that a *life insurance company makes from a *CGT event happening in relation to a *segregated exempt asset is disregarded.
A *capital gain or *capital loss that a *complying superannuation entity makes from a *CGT event happening in relation to a *segregated current pension asset is disregarded.
118-320(2)
However, subsection (1) does not apply to a *capital gain if the capital gain would, if it were an amount of *ordinary income or *statutory income received by the *complying superannuation fund, be *non-arm ' s length income.
A *capital gain or *capital loss an entity makes from a *CGT event happening in relation to a unit in a unit trust is disregarded if:
(a) the trust is a *pooled superannuation trust for the income year in which the event happened; and
(b) one of the conditions in subsection (2) is satisfied.
118-350(2)
The entity must be:
(a) the trustee of a *complying superannuation entity for the income year in which the *CGT event happened; or
(b) a *life insurance company and, just before the event happened, the unit must have been a *complying superannuation asset or a *segregated exempt asset of the company.
(Repealed by No 58 of 2006 )
You can ignore capital gains and capital losses from CGT events that relate to investments, in Australian companies and unit trusts (and in some cases foreign holding companies), that meet the requirements of this Subdivision.
These investments are made:
However, unless investments are made through early stage venture capital limited partnerships, you must be a foreign resident for this Subdivision to apply.
Note:
Registration of a limited partnership under Part 2 of that Act also leads to its income and losses being assessed under Division 5 of Part III of the Income Tax Assessment Act 1936 on the basis that it is a partnership.
This is an exception to the general rule, under Division 5A of that Part, that limited partnerships are assessed as companies.