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Module 5 (Part H: Step 6—determining net capital gain/loss (Determining…
Module 5
Part H: Step 6—determining net
capital gain/loss
Determining net capital loss
generally be carried forward and offset against any capital gains arising in future years
net capital loss arise when
has only capital loss and no capital gain
capital loss > capital gain
Determining net capital gain—use of capital losses
Current year capital losses
capital losses generally be used to reduce capital gains
but 2 exceptions:
loss related to collectable only reduce gain related to collectable
not satisfy same business test in Module 9
Prior-year capital losses (p.393)
Determining net capital gain—CGT discount
The CGT 12-months rule
Net capital gains of trusts
Taxpayers subject to capital gains tax
Australian residents
liable for CGT on gains arising from a CGT event occurring to a CGT asset acquired
after 19 September 1985
,
regardless of where the assets are located
.
Foreign residents
only apply to ‘taxable Australian property'
50% CGT discount apply or capital gains that accrued prior to
8 May 2012
Administration (p.398)
Records
Asset register
Part G: Step 5—considering rollover
provisions
Disposal of assets to, or creation of assets in, a wholly
owned company
assets transferred retain their previous tax attributes (i.e. the cost base, reduced cost base and pre-CGT status remain the same).
Replacement asset rollover events
Demerger relief
where the original interests in a company or trust demerge and the taxpayer receives new or replacement interests in the demerged entity.
Same asset rollover events
available for individual sole traders, partnerships and trusts that convert to a company structure
must be a ‘small business entity’ in the income year
Part D: Step 2—identifying a CGT asset
Classification of CGT assets
text
Collectables
capital gain/loss is disregarded when 1st element cost base <= $500
if each individual assets of collectable <= 500 but the total of them > 500 then capital gain / loss needs determined
capital losses can
only
be offset against capital gains on other collectables
Definition of collectables (p.371)
Personal use assets
no capital gain/loss if assets costs <= $10,000
capital loss for personal use assets is disregarded and cannot be carry forward
Seperate CGT assets
anything annexed to a principal asset, such as land, becomes part of that principal asset
To prevent this outcome, Subdivision 108-D treats an asset as a separate CGT asset from the principal asset (p.373)
Part E: Step 3—calculating a capital gain or loss
Capital proceeds
Money + property used for trading = capital proceed
regardless of whether actually received at trading time
6 modifications to the determination of capital proceeds (Table 5.2 - p.375-376)
Cost base
non-deductible expenditure incurred in acquiring, maintaining, improving and disposing of a CGT asset.
5 elements can be included in cost base (Table 5.3 - p.377)
cost base - market value substitution
Rules apply
rules not apply
Cost base—becoming a resident
CGT assets owned by the individual/company (except for
assets that are ‘taxable Australian property’) treated as acquired at the time the individual/company becomes an Australian resident for their market value at that time.
Indexed cost base
cost base of the asset can be increased by indexation
conditions for being indexation (p.380)
Choose between
CGT discount: only for an individual, complying superannuation entity or trust
Index cost base
apply for all taxpayers
CGT events after 21 Sept 1999
index to 30 Sept 1999
Calculation of index cost base
Reduced cost base
cost base - adjustment about (p.383)
Part F: Step 4—considering exceptions or exemptions
Pre-CGT acquired assets
Date of acquisition of a CGT asset
Specific CGT exemptions
Part I: Special circumstances
Partnerships
each partner has a separate cost base and reduced cost base for the partner’s interest in each CGT asset held by the partnership
Deceased estates
Part J: CGT concessions and
special rules
Main residence
Main residence exemption
General rules
basic exemption
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.
indicates that the main residence exemption would not be available if a trustee had legal ownership of the dwelling.
there is an exception for trustees of special disability trusts
dwelling
residential accommodation and includes a building, caravan, houseboat or other mobile home.
land that is adjacent to a dwelling will be eligible for the main residence exemption
land is used for private and domestic purposes.
maximum area for the exemption - 2 hectares
The sale of such adjacent land where the residential dwelling is retained will not be eligible for the main residence exemption if that land is sold voluntarily.
main residence
definition of main residence
Absence from main residence
Different main residences
Partial exemption