Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

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

Division 112 - Modifications to cost base and reduced cost base  

Subdivision 112-E - Deemed sales just before, and reacquisitions on, 1 July 2027  

SECTION 112-160   Australian resident individuals - defer a gain or loss from the deemed sale until the later realisation event happens  
Application

112-160(1)    
This section applies in relation to a * CGT asset of yours if, under paragraph 112-155(2)(a) , you make:

(a)    a * capital gain (the initial notional gain ); or

(b)    a * capital loss (the initial notional loss );

in respect of the asset (disregarding subsection (2) of this section).

Note:

The initial notional gain or loss is made from the sale that is taken to happen at the end of 30 June 2027 (see paragraph 112-155(2)(a) ), and is disregarded under subsection (2) of this section.

Disregard the initial notional gain or loss because it is to be deferred

112-160(2)    
Disregard the initial notional gain or the initial notional loss, except for the purposes of subsection (3) or (4) .

Deferring an initial notional gain

112-160(3)    
If you made an initial notional gain, then for the purposes of Division 102 :

(a)    in the income year in which the * realisation event happens in relation to the * CGT asset - you are treated as having made a * capital gain ( your deferred gain ):

(i) for the * CGT event that happens under paragraph 112-155(2)(a) (the deemed CGT event ); and

(ii) that is a * discount capital gain if the initial notional gain is a discount capital gain; and

(iii) that is equal to the amount of the initial notional gain; and

(b)    disregard section 102-20 in relation to your deferred gain; and

(c)    for the purposes of subparagraph (a)(ii) of this subsection, in working out whether the initial notional gain is a discount capital gain, treat the deemed CGT event as if it happens on the day the realisation event happens; and

(d)    in working out whether, under step 6 of the method statement in subsection 102-5(1) , your deferred gain qualifies for any of the small business concessions, treat the deemed CGT event as if it happens on the day the realisation event happens.

Note 1:

For paragraph (a) , the realisation event is the CGT event referred to in paragraph 112-155(1)(c) .

Note 2:

Paragraph (c) is relevant for working out whether the 12-month rule in subsection 115-25(1) is satisfied for the initial notional gain.

Note 3:

If the initial notional gain is a discount capital gain, then under step 5 of the method statement in subsection 102-5(1) , the 50% discount mentioned in paragraph 115-100(aa) can apply to your deferred gain.

Deferring an initial notional loss

112-160(4)    
If you made an initial notional loss, then for the purposes of Division 102 :

(a)    in the income year in which the * realisation event happens in relation to the * CGT asset - you are treated as having made a * capital loss ( your deferred loss ) equal to the amount of the initial notional loss; and

(b)    disregard section 102-20 in relation to your deferred loss.

Note:

You may make a separate capital loss from the realisation event for the period starting on 1 July 2027. In working out whether you make a capital loss from the realisation event for this period, you are taken to have acquired the CGT asset at the time, and for the amount, mentioned in paragraph 112-155(2)(b) .

Working out whether concessions are available for a capital gain from the realisation event

112-160(5)    
In working out when you * acquired the * CGT asset for the purposes of working out whether your * capital gain resulting from the * realisation event is a * discount capital gain, disregard the sale and acquisition under subsection 112-155(2) .

Note:

If you make a capital gain from the realisation event in respect of the asset, this subsection is relevant for working out whether the 12-month rule in subsection 115-25(1) is satisfied for the capital gain.

112-160(6)    
In working out whether, under step 6 of the method statement in subsection 102-5(1) , your * capital gain resulting from the * realisation event qualifies for any of the small business concessions, disregard the sale and acquisition under subsection 112-155(2) .

Note:

Subsections (5) and (6) refer to the capital gain from the realisation event for the period starting on 1 July 2027. The sale and reacquisition under subsection 112-155(2) remain relevant for working out the amount of this capital gain, just not for whether this capital gain:

(a) is a discount capital gain; or

(b) qualifies for any of the small business concessions.