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Capital Gains Tax (Wk 7), Post CGT - 20 Sept 1985 - Coggle Diagram
Capital Gains Tax (Wk 7)
STEP 1: Capital Gain or Loss
Has a CGT event happen to the taxpayer?
CGT Event A1 - Disposal
s 140-10(1)
Time of the event is at the time of contract or when ownership changes, FCT v Sara Lee Household
Capital gain = Capital proceeds - Cost base
Capital loss = Reduced cost base - Capital proceeds
CGT Event C1 - End of a CGT asset
s 104-20(1)
Time of the event is when compensation for lost or destruction is received or when first discovered or occurred
CGT Event C2 - End of intangible asset
s 140-25(1)
Time of the event is when contract is entered into
CGT Event D1 - Asset into existence
s 104-35(1)
Time of the event is when contracted is entered into or the right is created
Capital gain = Capital proceeds > Incidental costs relating to the event
Is the asset a CGT asset?
Definition: any kind of property, legal or equitable right
s 108-5(1)
Categories
CGT asset
If not a collectable or personal use asset
Pre-CGT land and post-CGT buildings
s 108-55(2)
Capital improvements
s 108-70
Time of acquisition
s 109-5(1)
Collectibles
Defined in
s 108-10(2)
as:
Artwork, jewellery, antique or coin or medallion
Rare folio, manuscript or book
Postage stamp or first day cover
That is used or kept mainly for person use or enjoyment
4 Special rules
Personal use assets
Defined as an asset (other than collectible) that is used or kept mainly for personal use or enjoyment, excluding land or buildings
s 180-20(2)
4 Special rules
Does an exception or exemption apply?
Exempt gains and losses on certain assets
Cars, motorcycles and valour decorations
s118-5
Collectibles < $500 & person use assets < $10,000
s118-10
Assets used to produce exempt income
s118-12(1)
Shares in a pooled development fund
s118-13
Investments made in start up companies
Subdiv 360-A
Depreciating assets
s118-24(1)
Trading stock
s118-25
Exempt of loss denying transactions
Subdiv
118-A
Disregard capital gain or loss for compensation of damages for wrong, injury, illness suffered
s 118-37(1)(a)and(b)
Anti-overlap provisions
Reduces capital gain to the extent the amount is included in assessable income
s 118-20(1)
Main residence exemption
Taxpayer has to be an individual and the dwelling be the main residence throughout the whole of ownership period
s 118-110(1)
4 Extensions
3 Limitations
2 Partial exemptions
STEP 2: Amount of Capital Gain or Loss
Capital gain
= Capital proceeds - Cost base
Capital loss
= Reduced cost base - Capital proceeds
Neither a gain or loss if the capital proceeds are less than the cost base but more than the reduced cost base
Capital proceeds
amount the taxpayer receives or is entitled to receive
s 116-20
GST is disregarded
s 116-20(5)
Six Modifications:
Market value substitution rule s 116-30
Apportionment rule s 116-40
Non-receipt rule s 116-45
Repaid rule s 116-50
Assumption of liability rule s 116-55
Misappropriation rule s 116-55
Cost base
Is reduced to the extent GST input tax credits have been claimed
5 Elements
s 110-25(1)-(6)
Cost of acquisition
Incidental costs
Non-capital costs
Capital enhancement costs
Capital expenditure incurred to establish, preserve of defend
Capital expenditure that has or can be deducted is not included in the cost base
ss110-40(2) - 110-45(1B)
4 Modifications:
Market value substitution rule
s 112-20
Apportionment rule
s 112-25
Apportionment rules for expenditure
s 112-30
Assumption of liability rule
s 112-35
CGT asset acquired at or before 11.45am 21 Sept 1999 may index its cost base for inflation, if held for more than 12 months
STEP 3: Net Capital Gain or Loss for Income Year
5 Step Process:
Current year capital gains less current year capital losses
Remaining capital gains reduced by any unapplied net capital losses from previous years
Reducing any remaining discount capital gains by the discount percentage
Apply small business concessions
Add up remaining capital gains that are not discount capital gains + remaining discount capital gains
Reduction of capital gains:
Indexation method - if before 11.45am 21 Sept 1999
Discount method if event occurred after 21 Sept 1999
held for more than 12 months
certain events ineligible such as D category events
50% for individuals, 33.3% for superannuation funds, 0% for companies
Capital losses cannot be deducted from assessable income s
102-10(2)
but can be carried forward to later years
s 102-15(1)
Post CGT - 20 Sept 1985