Tax Law Improvement Act (No. 1) 1998 (Cth)

Tax Law Improvement Act (No. 1) 1998

Act No. 46 of 1998 as amended

This compilation was prepared on 28 October 2003

[This Act was amended by Act No. 57 of 2002

and Act No. 101 of 2003]

Amendments from Act No. 57 of 2002

[Schedule 12 (item 66) amended Item 373 of Schedule 2

Schedule 12 (item 67) amended Item 374 of Schedule 2

Schedule 12 (item 68) amended Heading to Item 519 of Schedule 2

Schedule 12 (item 84) repealed Items 95 and 466 of Schedule 2

Schedule 12 (item 85) repealed Items 3 and 18 of Schedule 3

Schedule 12 (items 66‑68) commenced on 22 June 1998

Schedule 12 (items 84 and 85) commenced on 3 July 2002]

Amendments from Act No. 101 of 2003

[Schedule 6 (item 44) repealed Item 94 of Schedule 2

Schedule 6 (item 45) repealed Item 11 of Schedule 6

Schedule 6 (items 44 and 45) commenced on 22 June 1998]

Prepared by the Office of Legislative Drafting,

Attorney‑General’s Department, Canberra

Contents

An Act to amend the law about income tax, and for related purposes

[Assented to 22 June 1998]

The Parliament of Australia enacts:

1Short title

This Act may be cited as the Tax Law Improvement Act (No. 1) 1998.

2Commencement

(1)
Subject to this section, this Act commences on the day on which it receives the Royal Assent.
(2)
Schedule 2 (except item 3 of it) commences immediately after the commencement of Schedule 1.
(3)
Schedule 3 commences immediately after the commencement of Schedule 2 (except item 4 of it).
(4)
Each of Schedules 4 to 8 commences immediately after the commencement of the immediately preceding Schedule.
(5)
Item 3 of Schedule 2 commences immediately after the commencement of Schedule 8.

3Schedules

Subject to section 2, each Act specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned. Any other item in a Schedule to this Act has effect according to its terms.

4Application of amendments

An amendment made by an item in a Schedule (except an item in Schedule 1 or in Part 1 of any of Schedules 2 to 8) applies to assessments for the 1998‑99 income year and later income years, unless otherwise indicated in the Schedule in which the item appears.

Schedule 1Amendment of the Income Tax Assessment Act 1997

Before Part 3‑5

Insert:

Part 3‑1—Capital gains and losses: general topics

Division 100—A Guide to capital gains and losses

General overview

100‑1What this Division is about

This 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.

Table of sections

100‑5 Effect of this Division
100‑10 Fundamentals of CGT
100‑15 Overview of Steps 1 and 2
Step 1—Have you made a capital gain or a capital loss?
100‑20 What events attract CGT?
100‑25 What are CGT assets?
100‑30 Does an exception or exemption apply?
100‑33 Can there be a roll‑over?
Step 2—Work out the amount of the capital gain or loss
100‑35 What is a capital gain or loss?
100‑40 What factors come into calculating a capital gain or loss?
100‑45 How to calculate the capital gain or loss for most CGT events
Step 3—Work out your net capital gain or loss for the income year
100‑50 How to work out your net capital gain or loss
100‑55 How do you comply with CGT?
Keeping records for CGT purposes
100‑60 Why keep records?
100‑65 What records?
100‑70 How long you need to keep records

100‑5Effect of this Division

This Division is a *Guide.
Note: In interpreting an operative provision, a Guide may be considered only for limited purposes: see section 950‑150.

100‑10Fundamentals of CGT

(1)
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.
(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.
(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 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

100‑15Overview of Steps 1 and 2

Step 1—Have you made a capital gain or a capital loss?

100‑20What events attract CGT?

(1)
You can make a capital gain or loss only if a CGT event happens.
(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
(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.

100‑25What are CGT assets?

(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.
(2)
Some CGT assets are reasonably well‑known:
• land and buildings, for example, a weekender;
• shares;
• units in a unit trust;
• collectables which cost over $500, for example, jewellery or an artwork;
• personal use assets which cost over $10,000, for example, a boat.
(3)
Other CGT assets are not so well‑known. For example:
• your home;
• contractual rights;
• goodwill;
• foreign currency.
For a full explanation of what things are CGT assets: see Division 108.

100‑30Does an exception or exemption apply?

(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.
(2)
There are 4 categories of exemptions:
1.
exempt assets: for example, cars;
2.
exempt receipts: for example, compensation for personal injury;
3.
exempt transactions: for example, your tenancy comes to an end;
4.
anti‑overlap provisions (that reduce your capital gain by the amount that is otherwise assessable).
Note: Most of the exceptions are in Division 104. You will find a full explanation of the possible exemptions in Division 118.
Some exemptions are limited
(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.

100‑33Can there be a roll‑over?

(1)
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 breakdown: see Subdivision 126‑A).
(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.

Step 2—Work out the amount of the capital gain or loss

100‑35What is a capital gain or loss?

For most CGT events:
• You make a capital gain if you receive (or are entitled to receive) capital amounts from the CGT event which exceed your total costs associated with that event.
• You make a capital loss if your total costs associated with the CGT event exceed the capital amounts you receive (or are entitled to receive) from the event.

100‑40What factors come into calculating a capital gain or loss?

Capital proceeds
(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
(2)
For most CGT events, your total costs associated with the event are worked out in 2 different ways:
• For the purpose of working out a capital gain, those costs are called the cost base of the CGT asset.
• For the purpose of working out a capital loss, those costs are called the reduced cost base of the asset.
One of the main differences is that the costs are indexed for inflation in working out a capital gain (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.

100‑45How 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.

Step 3—Work out your net capital gain or loss for the income year

100‑50How to work out your net capital gain or loss

1.
Add up your capital gains for the income year. Then add up your capital losses for the income year.
2.
Subtract the total losses from the total gains.
3.
If the gains exceed the losses, then also subtract any unapplied net capital losses for previous income years. If the result is still more than zero, then this is your net capital gain.
4.
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.)
For the rules on working out your net capital gain or loss:
see Division 102.

100‑55How do you comply with CGT?

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.

Keeping records for CGT purposes

100‑60Why 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.

100‑65What records?

Keeping full records will make it easier for you to comply. For example, keep records of:
• receipts of purchase or transfer;
• interest on money you borrowed;
• costs of agents, accountants, legal, advertising etc.;
• insurance costs and land rates or taxes;
• any market valuations;
• costs of maintenance, repairs or modifications;
• brokerage on shares;
• legal costs.

100‑70How long you need to keep records

The law requires you to keep records for 5 years after a CGT event has happened.

Division 102—Assessable income includes net capital gain

Guide to Division 102

102‑1What this Division is about

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.)

Table of sections

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

Operative provisions

102‑5Assessable income includes net capital gain

(1)
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. Add up the *capital gains you made during the income year. Also add up the *capital losses you made.
Step 2. Subtract your *capital losses from your *capital gains. (If your capital losses exceed your capital gains, you have no net capital gain for the income year.)
Note:
You do have a net capital loss if your capital losses exceed your capital gains: see section 102‑10.
Step 3. If the Step 2 amount is more than zero, reduce it by applying any unapplied *net capital losses from previous income years. (If this reduces it to zero, you have no net capital gain for the income year.)
Note:
To apply net capital losses: see section 102‑15.
Step 4. If the Step 3 amount is more than zero, it is your net capital gain for the income year.

Note: For exceptions and modifications to these rules: see section 102‑30.

(2)
However, if during the income year:
1. (a)
  you became bankrupt; or
2. (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.

(3)
Subsection (2) applies even though your bankruptcy is annulled if:
1. (a)
  the annulment happens under section 74 of the Bankruptcy Act 1966; and
2. (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.

102‑10How to work out your net capital loss

(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.

(2)
You cannot deduct from your assessable income a *net capital loss for any income year.
Note: However, it can be applied against your capital gains for a later income year: see section 102‑5 and subsection 102‑15(3).

102‑15How to apply net capital losses

(1)
In working out if you have a *net capital gain, your *net capital losses are applied in the order in which you made them.
(2)
A *net capital loss can be applied only to the extent that it has not already been applied.
(3)
To the extent that a *net capital loss cannot be applied in an income year, it can be carried forward to a later income year.
Example: You have capital gains for the income year of $1,000 and capital losses for the income year of $600. Your capital losses are subtracted from your capital gains to leave a balance of $400.
You have available net capital losses of $300 (for last year) and $200 (for the year before that).
The $400 is reduced to zero by applying the available net capital losses in the order in which you made them. This leaves $100 of the $300 to be carried forward and extinguishes the $200.
Note: 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.

102‑20Ways you can make a capital gain or a capital loss

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: These Divisions of Part IIIA of the Income Tax Assessment Act 1936 continue to have effect for the purposes of working out capital gains and capital losses under this Part and Part 3‑3:
·
Division 17A (about roll‑over relief on certain disposals of assets of small businesses);
·
Division 17B (about disposal of small business assets where the proceeds are used for retirement);
·
Division 19A (about transfers of assets between companies under common ownership).
See sections 160ZZPJA, 160ZZPZAA and 160ZZRAAAA of that Act.

102‑22Amounts of capital gains and losses

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.

102‑23CGT event still happens even if gain or loss disregarded

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.

102‑25Order of application of CGT events

(1)
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.
(2)
However, there is an exception for *CGT event K5 (which depends on CGT event A1, C2 or E8 happening). In that case, CGT event K5 happens in addition to the other event.
(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.

102‑30Exceptions 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.	section 108‑10
2	All entities	Disregard capital losses you make from personal use assets.	section 108‑20
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 of Schedule 2C to the Income Tax Assessment Act 1936
4	A company	If it has a change of ownership or control during the income year, and has not carried on the same business, 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: the same people owned the company during both the loss year and the income 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; or the company has carried on the same business and commenced no additional business or new transactions.

Subdivision 165‑CA
6	A company	If one or more of these things happen: 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.	Division 175
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
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
11	A life assurance company	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.	section 116CD
12	A registered organisation	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.	section 116GB
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

Division 103—General rules

Guide to Division 103

103‑1What this Division is about

This Division sets out some general rules that apply to the provisions dealing with capital gains and capital losses.

Table of sections

Operative provisions
103‑5 Giving property as part of a transaction
103‑10 Entitlement to receive money or property
103‑15 Requirement to pay money or give property
103‑20 Amounts to be expressed in Australian currency
103‑25 Choices

Operative provisions

103‑5Giving property as part of a transaction

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 one does, use the market value of the property in working out the amount of the payment, cost or expenditure.

103‑10Entitlement to receive money or property

(1)
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.
(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.

103‑15Requirement 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.

103‑20Amounts to be expressed in Australian currency

If an amount of money or the market value of other property:
(a)
is to be taken into account at a particular time under this Part or Part 3‑3; and
(b)
is in a foreign currency;
it is to be converted into the equivalent amount of Australian currency at that time.

103‑25Choices

(1)
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.
(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.
(3)
However, there are 2 exceptions: see subsections 124‑380(5) and 124‑465(5). These relate to *replacement‑asset roll‑over events where there is an interposed company. The company is required to make the choice at an earlier time specified in that subsection.
Note: This section is modified in calculating the attributable income of a CFC: see section 421 of the Income Tax Assessment Act 1936.

Division 104—CGT events

Table of Subdivisions

Guide to Division 104
104‑A Disposals
104‑B Use and enjoyment before title passes
104‑C End of a CGT asset
104‑D Bringing into existence a CGT asset
104‑E Trusts
104‑F Leases
104‑G Shares
104‑H Special capital receipts
104‑I Australian residency ends
104‑J Reversals of roll‑overs
104‑K Other CGT events

Guide to Division 104

104‑1What this Division is about

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.

104‑5Summary of the CGT events

CGT events
Event number and description	Time of event is:	Capital gain is:	Capital loss is:
A1 Disposal of a CGT asset [See section 104‑10]	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
B1 Use and enjoyment before title passes [See section 104‑15]	when use of CGT asset passes	capital proceeds less asset’s cost base	asset’s reduced cost base less capital proceeds
C1 Loss or destruction of a CGT asset [See section 104‑20]	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
C2 Cancellation, surrender and similar endings [See section 104‑25]	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
C3 End of option to acquire shares etc. [See section 104‑30]	when option ends	capital proceeds from granting option less expenditure in granting it	expenditure in granting option less capital proceeds
D1 Creating contractual or other rights [See section 104‑35]	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
D2 Granting an option [See section 104‑40]	when option is granted	capital proceeds from grant less expenditure to grant it	expenditure to grant option less capital proceeds
D3 Granting a right to income from mining [See section 104‑45]	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
E1 Creating a trust over a CGT asset [See section 104‑55]	when trust is created	capital proceeds from creating trust less asset’s cost base	asset’s reduced cost base less capital proceeds
E2 Transferring a CGT asset to a trust [See section 104‑60]	when asset transferred	capital proceeds from transfer less asset’s cost base	asset’s reduced cost base less capital proceeds
E3 Converting a trust to a unit trust [See section 104‑65]	when trust is converted	market value of asset at that time less its cost base	asset’s reduced cost base less that market value
E4 Capital payment for trust interest [See section 104‑70]	when trustee makes payment	non‑assessable part of the payment less cost base of the trust interest	no capital loss
E5 Beneficiary becoming entitled to a trust asset [See section 104‑75]	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
E6 Disposal to beneficiary to end income right [See section 104‑80]	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
E7 Disposal to beneficiary to end capital interest [See section 104‑85]	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
E8 Disposal by beneficiary of capital interest [See section 104‑90]	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 trust’s net assets less capital proceeds
E9 Creating a trust over future property [See section 104‑105]	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)
F1 Granting a lease [See section 104‑110]	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
F2 Granting a long term lease [See section 104‑115]	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
F3 Lessor pays lessee to get lease changed [See section 104‑120]	when lease term is varied or waived	no capital gain	amount of expenditure to get lessee’s agreement
F4 Lessee receives payment for changing lease [See section 104‑125]	when lease term is varied or waived	capital proceeds less cost base of lease	no capital loss
F5 Lessor receives payment for changing lease [See section 104‑130]	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
G1 Capital payment for shares [See section 104‑135]	when company pays non‑assessable amount	payment less cost base of shares	no capital loss
G2 Shifts in share values [See section 104‑140 and Division 140]	when the shift happens	the decrease in the shares’ market value (so far as it has shifted into certain other shares) less the corresponding proportion of the shares’ cost base	no capital loss
G3 Liquidator declares shares worthless [See section 104‑145]	when liquidator makes declaration	no capital gain	shares’ reduced cost base
H1 Forfeiture of a deposit [See section 104‑150]	when deposit is forfeited	deposit less expenditure in connection with prospective sale	expenditure in connection with prospective sale less deposit
H2 Receipt for event relating to a CGT asset [See section 104‑155]	when act, transaction or event occurred	capital proceeds less incidental costs	incidental costs less capital proceeds
I1 Individual or company stops being a resident [See section 104‑160]	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
I2 Trust stops being a resident trust [See section 104‑170]	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
J1 Company stops being member of wholly‑owned group after roll‑over [See section 104‑175]	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
K1 Partial realisation of intellectual property right [See section 104‑205]	when contract is entered into or, if none, when partial realisation happens	capital proceeds from partial realisation less cost base of the item of intellectual property	no capital loss
K2 Bankrupt pays amount in relation to debt [See section 104‑210]	when payment is made	no capital gain	so much of payment as relates to denied part of a net capital loss
K3 Asset passing to tax‑advantaged entity [See section 104‑215]	when individual dies	market value of asset at death less its cost base	reduced cost base of asset less that market value
K4 CGT asset starts being trading stock [See section 104‑220]	when asset starts being trading stock	market value of asset less its cost base	reduced cost base of asset less its market value
K5 Special capital loss from collectable that has fallen in market value [See section 104‑225]	when CGT event A1, C2 or E8 happens to shares in the company, or an interest in the trust, that owns the collectable	no capital gain	market value of the shares or interest (as if the collectable had not fallen in market value) less the capital proceeds from CGT event A1, C2 or E8
K6 Pre‑CGT shares or trust interest [See section 104‑230]	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

[This is the end of the Guide]

Subdivision 104‑A—Disposals

104‑10Disposal of a CGT asset: CGT event A1

(1)
CGT event A1 happens if you *dispose of a *CGT asset.
(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:
(a)
if you stop being the legal owner of the asset but continue to be its beneficial owner; or
(b)
merely because of a change of trustee.
(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).
(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
(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:
(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: 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.
Compulsory acquisition
(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.
(7)
CGT event A1 does not happen if the *disposal of the asset was done to provide or redeem a security.

Subdivision 104‑B—Use and enjoyment before title passes

104‑15Use and enjoyment before title passes: CGT event B1

(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 the end of the agreement.
(2)
The time of the event is when the other entity first obtains the use and enjoyment of the asset.
(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
(4)
A *capital gain or *capital loss you make is disregarded if:
(a)
title in the asset does not pass to the other entity when the agreement ends; or
(b)
you *acquired the asset before 20 September 1985.

Subdivision 104‑C—End of a CGT asset

Table of sections

104‑20 Loss or destruction of a CGT asset: CGT event C1
104‑25 Cancellation, surrender and similar endings: CGT event C2
104‑30 End of option to acquire shares etc.: CGT event C3

104‑20Loss or destruction of a CGT asset: CGT event C1

(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).
(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.
(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
(4)
A *capital gain or *capital loss you make is disregarded if you *acquired the asset before 20 September 1985.

104‑25Cancellation, surrender and similar endings: CGT event C2

(1)
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.
(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.
(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.
(4)
A lease is taken to have expired even if it is extended or renewed.
Exceptions
(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:
(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:
·
your lease expires and you did not use it mainly to produce assessable income: see section 118‑40; or
·
you exercise rights to acquire shares or units: see section 130‑40; or
·
you acquire shares or units by converting a convertible note: see section 130‑60; or
·
you exercise an option: see section 134‑1.
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 of Schedule 2C to the Income Tax Assessment Act 1936.

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.

104‑30End of option to acquire shares etc.: CGT event C3

(1)
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)
the entity releases or abandons it.
(2)
The time of the event is when the option ends.
(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.
(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
(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.

Subdivision 104‑D—Bringing into existence a CGT asset

Table of sections

104‑35 Creating contractual or other rights: CGT event D1
104‑40 Granting an option: CGT event D2
104‑45 Granting a right to income from mining: CGT event D3

104‑35Creating contractual or other rights: CGT event D1

(1)
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.
(2)
The time of the event is when you enter into the contract or create the other right.
(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:
(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
(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 *shares to you; or
(d)
the trustee of a unit trust issues units in the trust to you.
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 a gain or loss from CGT event D1 is disregarded.

104‑40Granting an option: CGT event D2

(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).
(2)
The time of the event is when you grant, renew or extend the option.
(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.
(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
(5)
A *capital gain or *capital loss you make from the grant, renewal or extension of the option is disregarded if the other entity exercises the option.
Note: Section 134‑1 sets out the consequences of an option being exercised.
(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.
(7)
Nor does it apply to an option relating to a *personal use asset or a *collectable.

104‑45Granting a right to income from mining: CGT event D3

(1)
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.
(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.
(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.
(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.

Subdivision 104‑E—Trusts

Table of sections

104‑55 Creating a trust over a CGT asset: CGT event E1
104‑60 Transferring a CGT asset to a trust: CGT event E2
104‑65 Converting a trust to a unit trust: CGT event E3
104‑70 Capital payment for trust interest: CGT event E4
104‑75 Beneficiary becoming entitled to a trust asset: CGT event E5
104‑80 Disposal to beneficiary to end income right: CGT event E6
104‑85 Disposal to beneficiary to end capital interest: CGT event E7
104‑90 Disposal by beneficiary of capital interest: CGT event E8
104‑95 Making a capital gain
104‑100 Making a capital loss
104‑105 Creating a trust over future property: CGT event E9

104‑55Creating a trust over a CGT asset: CGT event E1

(1)
CGT event E1 happens if you create a trust over a *CGT asset by declaration or settlement.
(2)
The time of the event is when the trust over the asset is created.
(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
(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
(5)
CGT event E1 does not happen if:
(a)
you are the sole beneficiary of the trust and:
(i)
you are absolutely entitled to the asset as against the trustee (disregarding any legal disability); and
(ii)
the trust is not a unit trust; or
(b)
the trust is created by transferring the asset from another trust, and the beneficiaries and terms of both trusts are the same.
(6)
A *capital gain or *capital loss you make is disregarded if you *acquired the asset before 20 September 1985.

104‑60Transferring a CGT asset to a trust: CGT event E2

(1)
CGT event E2 happens if you transfer a *CGT asset to an existing trust.
(2)
The time of the event is when the asset is transferred.
(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.
(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
(5)
CGT event E2 does not happen if:
(a)
you are the sole beneficiary of the trust and:
(i)
you are absolutely entitled to the asset as against the trustee (disregarding any legal disability); and
(ii)
the trust is not a unit trust; or
(b)
the trust is created by transferring the asset from another trust, and the beneficiaries and terms of both trusts are the same.
Note: There is also an exception for employee share trusts: see section 130‑90.
(6)
A *capital gain or *capital loss you make is disregarded if you *acquired the asset before 20 September 1985.

104‑65Converting a trust to a unit trust: CGT event E3

(1)
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).
(2)
The time of the event is when the trust is converted.
(3)
The trustee of the original trust 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 trustee makes a capital loss if that market value is less than the asset’s *reduced cost base.
Exception
(4)
A *capital gain or *capital loss the trustee makes is disregarded if it *acquired the asset before 20 September 1985.

104‑70Capital payment for trust interest: CGT event E4

(1)
CGT event E4 happens if:
(a)
the trustee of a trust makes a payment to you in respect of a unit or an 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.
The payment can include giving property: see section 103‑5.
(2)
In working out the non‑assessable part, disregard any part of the payment that is:
(a)
*excluded exempt income; or
(b)
*exempt income subject to withholding tax; or
(c)
paid from an amount that has been assessed to the trustee.
(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 CGT event.
(4)
You make a capital gain if the sum of the amounts of the non‑assessable parts (adjusted by subsection (7)) 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.
(5)
If you make a *capital gain, the *cost base and *reduced cost base of the unit or interest are reduced to nil.
(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 subsection (7) adjustment).
Example: Mandy owns units in a unit trust that she bought on 1 July 1999 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.
(7)
The amount of the non‑assessable part is adjusted to exclude any part of it that is attributable to:
(a)
deductions under Division 43 (about capital works); or
(b)
an amount that is not included in the assessable income of an entity because of:
(i)
section 124ZM or 124ZN (which exempt income arising from *shares in a *PDF) of the Income Tax Assessment Act 1936; or
(ii)
section 159GZZZZE (which exempts certain payments related to infrastructure borrowings) of that Act; or
(c)
proceeds from a *CGT event that happens in relation to *shares in a company that was a *PDF when that event happened.
Note 1: Deductions under Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works) are also relevant: see section 104‑72 of the Income Tax (Transitional Provisions) Act 1997.
Note 2: In working out the cost base of the unit or interest, the non‑assessable part does not exclude any part attributable to a deduction under Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works) if the payment was made before 18 December 1986: see section 104‑70 of the Income Tax (Transitional Provisions) Act 1997.
Exception
(8)
A *capital gain you make is disregarded if you *acquired the *CGT asset that is the unit or interest before 20 September 1985.

104‑75Beneficiary becoming entitled to a trust asset: CGT event E5

(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.
(2)
The time of the event is when the beneficiary becomes absolutely entitled to the asset.
Trustee makes a capital gain or loss
(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
(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 130‑90.
Beneficiary makes a capital gain or loss
(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
(6)
A *capital gain or *capital loss the beneficiary makes is disregarded if the beneficiary:
(a)
*acquired the *CGT asset that is the interest (except by way of an assignment from another entity) for no expenditure; or
(b)
acquired it before 20 September 1985.
Expenditure can include giving property: see section 103‑5.

104‑80Disposal to beneficiary to end income right: CGT event E6

(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.
(2)
The time of the event is when the disposal occurs.
Trustee makes a capital gain or loss
(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
(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
(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
(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.

104‑85Disposal to beneficiary to end capital interest: CGT event E7

(1)
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.
(2)
The time of the event is when the disposal occurs.
Trustee makes a capital gain or loss
(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
(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
(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
(6)
A *capital gain or *capital loss the beneficiary makes is disregarded if the beneficiary:
(a)
*acquired the *CGT asset that is the interest (except by way of an assignment from another entity) for no expenditure; or
(b)
acquired it before 20 September 1985.
Expenditure can include giving property: see section 103‑5.

104‑90Disposal by beneficiary of capital interest: CGT event E8

(1)
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.
(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.

104‑95Making a capital gain

You are the only beneficiary
(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.

(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:
You make a capital gain of:
(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:
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:
You make a capital gain of:
There is more than one beneficiary
(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:
Example: To vary the example in 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:
You make a capital gain of:
(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:
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:
You make a capital gain of:
Exception
(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.

104‑100Making a capital loss

You are the only beneficiary
(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.

(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.

(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:

There is more than one beneficiary

(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:
(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:

Exception

(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.

104‑105Creating a trust over future property: CGT event E9

(1)
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.
(2)
The time of the event is when you made the agreement.
(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.
(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.

Subdivision 104‑F—Leases

Table of sections

104‑110 Granting a lease: CGT event F1
104‑115 Granting a long‑term lease: CGT event F2
104‑120 Lessor pays lessee to get lease changed: CGT event F3
104‑125 Lessee receives payment for changing lease: CGT event F4
104‑130 Lessor receives payment for changing lease: CGT event F5

104‑110Granting a lease: CGT event F1

(1)
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.
(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.
(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.
(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
(5)
The lessor can choose to apply section 104‑115 to certain long term leases. If it does so, this section does not apply.

104‑115Granting a long‑term lease: CGT event F2

(1)
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; 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.
(2)
The time of the event is when the lessor grants the lease, or at the start of the renewal or extension, as appropriate.
(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
(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.

104‑120Lessor pays lessee to get lease changed: CGT event F3

(1)
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.)
(2)
The time of the event is when the term is varied or waived.
Exception
(3)
However, this event does not apply to expenditure for a lease to which the lessor has chosen to apply section 104‑115.

104‑125Lessee receives payment for changing lease: CGT event F4

(1)
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.
(2)
The time of the event is when the term is varied or waived.
(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.
(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
(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.

104‑130Lessor receives payment for changing lease: CGT event F5

(1)
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.
(2)
The time of the event is when the term is varied or waived.
(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.
(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
(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.

Subdivision 104‑G—Shares

Table of sections

104‑135 Capital payment for shares: CGT event G1
104‑140 Shifts in share values: CGT event G2
104‑145 Liquidator declares shares worthless: CGT event G3

104‑135Capital payment for shares: CGT event G1

(1)
CGT event G1 happens if:
(a)
a company makes a payment to you for 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.
The payment can include giving property: see section 103‑5.
(2)
The time of the event is when the company makes the payment.
(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: You cannot make a capital loss.
(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.
Exceptions
(5)
A *capital gain you make is disregarded if you *acquired the *CGT asset that is the *share before 20 September 1985.
(6)
You disregard a payment by a liquidator for the purposes of this section if the company is dissolved within 18 months of the payment. The payment will be part of your *capital proceeds for *CGT event C2 happening when the share ends.

104‑140Shifts in share values: CGT event G2

(1)
CGT event G2 happens if:
(a)
a *share value shift occurs under a *scheme involving a company and an entity (or the entity’s *associate); and
(b)
the entity is a *controller (for CGT purposes) of the company at any time from when the scheme is entered into to when it has been implemented; and
(c)
there is a *material decrease in the market value of a share in the company that is owned by the entity or the entity’s associate.
Note 1: Other matters relevant to this event are set out in Division 140.
Note 2: Division 140 is also relevant to interests in shares and rights or options to acquire shares: see section 140‑30.
(2)
The time of the event is when the *share value shift happens.
(3)
An entity makes a capital gain in the circumstances set out in sections 140‑55 and 140‑90.
Note 1: The entity cannot make a capital loss.
Note 2: The entity will not make a capital gain unless:
·
for value shifted into shares acquired before 20 September 1985—value is shifted into shares owned by the entity or an associate or, in certain circumstances, owned by an associate of an associate; or
·
for value shifted into shares acquired on or after 20 September 1985—value is shifted into shares owned by an associate of the entity or, in certain circumstances, owned by an associate of an associate.

104‑145Liquidator declares shares worthless: CGT event G3

(1)
CGT event G3 happens if you own a *share in a company and its liquidator declares in writing that he or she has reasonable grounds to believe (as at the time of the declaration) there is no likelihood that the shareholders in the company, or shareholders of the relevant class of shares, will receive any further distribution in the course of winding up the company.
(2)
The time of the event is when the liquidator makes the declaration.
(3)
You can choose to make a capital loss equal to the *reduced cost base of your *share (as at the time of the declaration).
(4)
If you make the choice, the *cost base and *reduced cost base of the *share are reduced to nil just after the liquidator makes the declaration.
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 share.
Exception
(5)
You cannot choose to make a *capital loss if you *acquired the *CGT asset that is the *share before 20 September 1985.

Subdivision 104‑H—Special capital receipts

Table of sections

104‑150 Forfeiture of deposit: CGT event H1
104‑155 Receipt for event relating to a CGT asset: CGT event H2

104‑150Forfeiture of deposit: CGT event H1

(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.
(2)
The time of the event is when the deposit is forfeited.
(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.
(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:

104‑155Receipt for event relating to a CGT asset: CGT event H2

(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.
(2)
The time of the event is when the act, transaction or event occurs.
(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.
(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
(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 *shares to you; or
(d)
the trustee of a unit trust issues units in the trust to you.

Subdivision 104‑I—Australian residency ends

Table of sections

104‑160 Individual or company stops being resident: CGT event I1
104‑165 Exception for individual who stops being resident
104‑170 Trust stops being a resident trust: CGT event I2

104‑160Individual or company stops being resident: CGT event I1

(1)
CGT event I1 happens if you stop being an *Australian resident.
(2)
The time of the event is when you stop being one.
(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 having the *necessary connection with Australia.
(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.
Exception
(5)
A *capital gain or *capital loss you make is disregarded if you *acquired the asset before 20 September 1985.
Note 1: An individual may be able disregard the gain or loss if he or she was a short term resident: see section 104‑165.
Note 2: An individual can choose to disregard a capital gain or loss he or she makes until another CGT event happens in relation to the asset or he or she becomes a resident again: see section 104‑165.

104‑165Exception for individual who stops being resident

Short term residents
(1)
A *capital gain or *capital loss from a *CGT asset covered by *CGT event I1 is disregarded if you are an individual and you were an *Australian resident for less than 5 years during the 10 years before you stopped being one and:
(a)
you owned the asset before last becoming one; or
(b)
you *acquired the asset (after last becoming one) because of someone’s death.
Choosing to disregard making a gain or loss
(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.
(3)
If you do so choose, each of those assets is taken to have the *necessary connection with Australia until the earlier of:
(a)
a *CGT event happening in relation to the asset;
(b)
you again becoming an *Australian resident.

104‑170Trust stops being a resident trust: CGT event I2

(1)
CGT event I2 happens if a trust stops being a *resident trust for CGT purposes.
(2)
The time of the event is when the trust stops being one.
(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 having the *necessary connection with Australia).

Subdivision 400‑B of the Income Tax Assessment Act 1997 applies to assessments for the 1998‑99 income year and later income years.
[The next section is section 400‑100.]

400‑100Application of Subdivision 400‑C of the Income Tax Assessment Act 1997

Subdivision 400‑C of the Income Tax Assessment Act 1997 applies to the use of property in the 1998‑99 income year and later income years.

Part 2Consequential amendment of the Income Tax Assessment Act 1997

Section 12‑5 (table item headed “environment”)

Repeal the item, substitute:

environment
environmental impact assessment ..........................................	Subdivision 400‑A
environmental protection activities.........................................	Subdivision 400‑B

Subsection 20‑30(1) (at the end of the table)

Add:

1.17	Subdivision 400‑A	expenditure on environmental impact assessment
1.18	Subdivision 400‑B	expenditure on environmental protection activities

4
Section 40‑30 (table items dealing with environmental impact studies and environment protection)
Repeal the items, substitute:

Environmental impact assessment	Expenditure on assessing the environmental impact of an income‑producing project	Any entity with an income‑producing project	Generally 10 years, but may be less, depending on the estimated life of the project	This is not applicable	Subdivision 400‑A
Environmental protection activities	Expenditure incurred in dealing with pollution or waste	Any entity incurring expenditure to deal with pollution or waste from its income‑producing activity or from or on the site of that activity	Immediate 100% write off	This is not applicable	Subdivision 400‑B

5
Section 41‑5 (after table item dealing with electricity connections)
Insert:

Environmental impact assessment	Does not apply	Applies as modified by subsection 400‑20(3)	Does not apply
Environmental protection activities	Does not apply	Applies as modified by subsection 400‑65(4)	Does not apply

Subsection 42‑55(1)

Repeal the subsection.

Subsection 42‑55(2)

Repeal the subsection.

Paragraph 43‑20(5)(a)

Repeal the paragraph, substitute:
(a)
they are constructed as a result of carrying out an activity described in paragraph 400‑60(1)(a) or (b) (in the definition of environmental protection activities); and

Subsection 43‑20(5) (note)

Omit “eligible environment”, substitute “environmental”.

Subsection 43‑50(4)

Repeal the subsection.

Subsection 43‑50(5)

Repeal the subsection.

Part 3Consequential amendment of the Income Tax Assessment Act 1936

Before subsection 82BB(1)

Insert:
(1A)
This section does not allow a deduction for the 1998‑99 year of income or a later year of income.
Note: Subdivision 400‑A of the Income Tax Assessment Act 1997 allows deductions for the 1998‑99 year of income and later years of income for allowable environmental impact expenditure.

Subsection 82BG(1)

After “1991”, insert “and before the taxpayer’s 1998‑99 year of income”.

At the end of subsection 82BG(1)

Add:
Note: Subdivision 400‑C of the Income Tax Assessment Act 1997 treats property used for eligible environmental impact activities in the 1998‑99 year of income or a later year of income as if it were used for the purpose of producing assessable income.

Before subsection 82BK(1)

Insert:
(1A)
This section does not allow a deduction for the 1998‑99 year of income or a later year of income.
Note: Subdivision 400‑B of the Income Tax Assessment Act 1997 allows deductions for the 1998‑99 year of income and later years of income for allowable environment protection expenditure.

Subsection 82BR(1)

After “1992”, insert “and before the taxpayer’s 1998‑99 year of income”.

At the end of subsection 82BR(1)

Add:
Note: Subdivision 400‑C of the Income Tax Assessment Act 1997 treats property used for eligible environment protection activities in the 1998‑99 year of income or a later year of income as if it were used for the purpose of producing assessable income.
18
Subsection 245‑140(1) of Schedule 2C (table item dealing with expenditure on study to evaluate the environmental impact of an income producing project)
Repeal the item, substitute:

Expenditure on environmental impact assessment

item 1, 2 or 3 of the table in subsection 400‑15(3) of the Income Tax Assessment Act 1997

19
Subsection 57‑85(3) of Schedule 2D (table items 3 and 4)
Repeal the items, substitute:

3	Environmental impact assessment	Subdivision 400‑A	Subdivision C of Division 3 of Part III
4	Environmental protection	Subdivision 400‑B	Subdivision CA of Division 3 of Part III

Schedule 8Above‑average special professional income (new Division 405)Part 1Amendment of the Income Tax (Transitional Provisions) Act 1997

At the end of the Act

Add:
[The next Division is Division 405.]

Division 405—Above‑average special professional income of authors, inventors, performing artists, production associates and sportspersons

Table of sections

405‑1 Application of Division 405 of the Income Tax Assessment Act 1997

405‑1Application of Division 405 of the Income Tax Assessment Act 1997

(1)
Division 405 of the Income Tax Assessment Act 1997 applies for the purposes of assessments for the 1998‑99 income year and later income years.
(2)
It applies for the purposes of your assessment as if:
(a)
for each income year earlier than the 1998‑99 income year you had a taxable professional income equal to your eligible taxable income (if any) under Division 16A of Part III of the Income Tax Assessment Act 1936 for that earlier income year; and
(b)
you had been an Australian resident for each income year before the 1998‑99 income year for which you were a qualifying resident taxpayer under Division 16A of Part III of the Income Tax Assessment Act 1936.

Part 2Consequential amendment of the Income Tax Assessment Act 1936

Before section 158B

Insert:

158BADivision 16A does not apply to 1998‑99 or later year of income

This Division does not apply for the purposes of an assessment for the 1998‑99 year of income or a later year of income.
3
Subsection 159ZR(1) (paragraph (b) of the definition of normal taxable income)
Repeal the paragraph, substitute:
(b)
the taxable income were reduced by:
(i)
any abnormal income amount taken to be included in the taxable income under section 158L; or
(ii)
any above‑average special professional income included in the taxable income under section 405‑15 of the Income Tax Assessment Act 1997; and

Paragraph 221YBA(2)(b)

Repeal the paragraph, substitute:
(b)
the above‑average special professional income included in the taxpayer’s taxable income under section 405‑15 of the Income Tax Assessment Act 1997.
5
Subsection 221YCAA(2) (paragraph (f) of the definition of adjusted preceding year’s tax)
Repeal the paragraph, substitute:
(f)
the taxpayer’s taxable professional income for the preceding year of income had been increased by the provisional tax uplift factor for the current year of income, for the purposes of Division 405 of the Income Tax Assessment Act 1997 (which deals with above‑average special professional income) except working out the taxpayer’s average taxable professional income for the current year of income; and

Subparagraph 221YCAA(3)(b)(iv)

Repeal the subparagraph, substitute:
(iv)
for the purposes of Division 405 of the Income Tax Assessment Act 1997 (which deals with above‑average special professional income), the taxpayer’s taxable professional income for the preceding year of income were any amount determined by the Commissioner.

Paragraph 221YDA(1)(dab)

Repeal the paragraph, substitute:
(dab)
the taxpayer’s taxable professional income and average taxable professional income for the year of income for the purposes of Division 405 of the Income Tax Assessment Act 1997 (which deals with above‑average special professional income); and

Subparagraph 221YDA(2)(a)(iii)

Repeal the subparagraph, substitute:
(iii)
the taxpayer’s taxable professional income and average taxable professional income for the year of income for the purposes of Division 405 of the Income Tax Assessment Act 1997 (which deals with above‑average special professional income) were those amounts as shown in the statement; and

Application of amendments made by items 4 to 8

The amendments made by items 4 to 8 apply for the purposes of working out amounts of provisional tax payable for the 1999‑2000 year of income and later years of income.

Part 3Consequential amendment of the Income Tax Rates Act 1986

10
Subsection 3(1) (definition of abnormal income amount)
Omit “the abnormal income amount (if any) included in the taxable income of the taxpayer of the year of income as specified in section 158L of the Assessment Act”, substitute “any above‑average special professional income included in the taxpayer’s taxable income for the year of income under section 405‑15 of the Income Tax Assessment Act 1997”.

Schedule 9Consequential amendments relating to indexationPart 1Amendment of the Income Tax (Transitional Provisions) Act 1997

Section 42‑70

Repeal the section, substitute:

42‑70Adjustment: acquiring a car at a discount

Paragraph 42‑70(1)(c) of the Income Tax Assessment Act 1997 has effect as if, in addition to referring to the car depreciation limit, it also referred to the motor vehicle depreciation limit under section 57AF of the Income Tax Assessment Act 1936.

Part 2Consequential amendment of the Income Tax Assessment Act 1997

Subsection 28‑45(2) (note)

Omit “Subdivision 42‑K”, substitute “Section 42‑80”.

Paragraph 42‑70(1)(c)

Omit “calculated under section 42‑345”.

At the end of section 42‑80

Add:
(3)
The car depreciation limit for the 1997‑98 financial year is $55,134.
(4)
The car depreciation limit is indexed annually.
Note: Subdivision 960‑M shows you how to index amounts.
(5)
The Commissioner must publish before the beginning of each *financial year the *car depreciation limit for that year.

Subdivision 42‑K

Repeal the Subdivision.
6
Subsection 995‑1(1) (definition of car depreciation limit)
Omit “section 42‑345”, substitute “section 42‑80”.

Part 3Consequential amendment of the Income Tax Assessment Act 1936

After subsection 57AF(5)

Insert:
(5A)
Despite subsection (5), the indexation factor for the 1997‑98 financial year is 1.

Part 4Application

Application

The amendments made by this Schedule apply to assessments for the 1997‑98 income year and later income years.

Schedule 10Amendment of Chapter 6 (the Dictionary) of the Income Tax Assessment Act 1997

Subsection 960‑220(1)

Omit “*listed public”.

At the end of subsection 960‑220(1)

Add:
Note: A special rule applies in working out whether an asset has stopped being a pre‑CGT asset: see section 149‑10.

At the end of subsection 960‑220(2)

Add:
Note: A special rule applies in working out whether an asset has stopped being a pre‑CGT asset: see section 149‑10.

Subsection 960‑225(1)

Omit “*listed public”.

Section 960‑230

Omit “*listed public”.

Subsection 960‑235(1)

Omit “*listed public”.

Section 960‑240

Omit “*listed public”.

Subsection 960‑245(1)

Omit “*listed public”.

Subsection 960‑245(2) (link note)

Repeal the link note.

At the end of Division 960

Add:

Subdivision 960‑M—Indexation

Guide to Subdivision 960‑M

960‑260What this Subdivision is about

There are a number of provisions in this Act that require amounts to be indexed. This Subdivision shows you:
·
how to index those amounts; and
·
how to calculate the indexation factor.

Table of sections

Operative provisions
960‑270 Indexing amounts
960‑275 Indexation factor
960‑280 Index number
[This is the end of the Guide.]

960‑265The provisions for which indexation is relevant

This table sets out the provisions for which indexation is relevant.

Provisions for which indexation is relevant
Item	Topic of provision:	See:
1	Car depreciation limit	Subdivision 42‑K
2	Capital gains—cost base	Parts 3‑1 and 3‑3
3	Capital gains—Improvements as separate assets	Subdivision 108‑D
4	Capital gains—Goodwill	Subdivision 118‑C

Note: There are provisions of the Income Tax Assessment Act 1936 dealing with indexation that have not yet been rewritten.

Operative provisions

960‑270Indexing amounts

(1)
Some provisions of this Act require amounts to be indexed. You index an amount by multiplying it by its *indexation factor.
(2)
You do not index the amount if its *indexation factor is 1 or less.

960‑275Indexation factor

(1)
For indexation of amounts on an annual basis, the indexation factor is:
Example: The business exemption threshold is an amount that is indexed on an annual basis: see section 118‑260.
(2)
For indexation of the *cost base of a *CGT asset (except the first element of the cost base of an asset covered by subsection (3)), the indexation factor for expenditure in an element of the cost base is:
Note 1: This rule applies even if you do not actually pay some of the expenditure until a later time (for example, under a contract to purchase an asset by instalments).
Note 2: There are rules affecting when the expenditure was incurred: see sections 114‑15 and 114‑20.
(3)
For indexation of the first element of the *cost base of a *CGT asset that is:
(a)
a *share in a company that was issued or allotted by the company; or
(b)
a unit in a unit trust that was issued by the trustee of the unit trust;
the indexation factor for an amount in the first element of the *cost base of the asset that was paid at a time after it was issued or allotted is:
The payment can include giving property: see section 103‑5.
Example: A company issues shares to you. You acquire the shares in circumstances that did not involve a CGT event. If the shares are partly‑paid and the company later makes a call on the shares, you use the index number for the quarter in which you paid that later payment.
Note: This subsection does not apply to shares or units you acquired before 16 August 1989: see section 960‑275 of the Income Tax (Transitional Provisions) Act 1997.
(4)
However, you cannot index expenditure in the third element of the *cost base of a CGT asset (non‑capital costs of ownership).
(5)
You work out the *indexation factor to 3 decimal places (rounding up if the fourth decimal place is 5 or more).
Example: If the factor is 1.102795, it would be rounded up to 1.103.

960‑280Index number

(1)
In most cases, the index number for a quarter is the All Groups Consumer Price Index number (being the weighted average of the 8 capital cities) first published by the Australian Statistician for the quarter.
(2)
For calculating the *car depreciation limit under Subdivision 42‑K, the index number for a quarter is the index number for the motor vehicle purchase sub‑group of the Consumer Price Index, being the weighted average of the 8 capital cities, first published by the Australian Statistician for the quarter.
(3)
If the Australian Statistician changes the reference base for an *index number, only index numbers published in terms of the new base are to be used after the change.
[The next Division is Division 975.]

Subsection 995‑1(1)

Insert:
above‑average special professional income has the meaning given by section 405‑15.

Subsection 995‑1(1)

Insert:
acquire:
(a)
a *CGT asset: you acquire a CGT asset at the time worked out under Division 109; and
Note: A CGT asset acquired before 20 September 1985 may be treated as having been acquired on or after that day: see Division 149.
(b)
an item of *intellectual property: an entity does not acquire an item of intellectual property merely because a licence relating to a patent, design or copyright is surrendered to the entity.

Subsection 995‑1(1)

Insert:
amount arising from a *partial realisation of an item of *intellectual property has the meaning given by section 373‑45.

Subsection 995‑1(1)

Insert:
annuity instrument means an instrument that secures the grant of an annuity (whether dependent on the life of an individual or not).

Subsection 995‑1(1)

Insert:
apportionable deductions are:
(a)
amounts deducted or deductible under section 25‑75 (which provides a deduction for rates and land tax); or
(b)
amounts deducted or deductible under section 30‑15 because of item 1 or 2 in the table in that section, except amounts deducted or deductible for gifts of trading stock in cases where:
(i)
the gifts are covered by section 70‑90 (which has the effect that the giver’s assessable income includes the market value of the gift); and
(ii)
no election has been made, or is made, under Subdivision 385‑E (which allows the giver to choose to spread the market value of a gift of *live stock over the giver’s assessable income for 5 income years or to reduce the amount included in the giver’s assessable income by the cost of replacement live stock).

Subsection 995‑1(1)

Insert:
arm’s length: in determining whether parties deal at arm’s length, consider any connection between them and any other relevant circumstance.

Subsection 995‑1(1)

Insert:
artistic support has the meaning given by subsection 405‑25(5).

Subsection 995‑1(1)

Insert:
assessable non‑primary production income has the meaning given by subsection 392‑85(2).

Subsection 995‑1(1)

Insert:
assessable primary production income has the meaning given by subsection 392‑80(2).

Subsection 995‑1(1)

Insert:
assessable professional income has the meaning given by subsection 405‑20(1).

Subsection 995‑1(1)

Insert:
associate‑inclusive control interest in a company has the meaning given by section 140‑22.

Subsection 995‑1(1)

Insert:
attributable income has the meaning given by Division 7 of Part X of the Income Tax Assessment Act 1936.

Subsection 995‑1(1)

Insert:
average income has the meaning given in subsection 392‑45(1).

Subsection 995‑1(1)

Insert:
average taxable professional income has the meaning given by subsections 405‑50(1) and (2).

Subsection 995‑1(1)

Insert:
averaging adjustment has the meaning given in section 392‑75.

Subsection 995‑1(1)

Insert:
averaging component has the meaning given in subsection 392‑90(1).

27
Subsection 995‑1(1) (definition of balancing adjustment event)
Repeal the definition, substitute:
balancing adjustment event: for the purposes of a particular *capital allowance, balancing adjustment event has the meaning given by the provision shown in this table:

Meaning of balancing adjustment event
Item	For this capital allowance:	See:
1	Depreciation	subsection 42‑30(3)
2	Intellectual property	subsection 373‑60(2)

Subsection 995‑1(1)

Insert:
basic assessable income has the meaning given by subsection 392‑45(2).

Subsection 995‑1(1)

Insert:
basic rates has the meaning given by subsection 392‑35(4).

Subsection 995‑1(1)

Insert:
basic taxable income has the meaning given by section 392‑15.

Subsection 995‑1(1)

Insert:
business exemption threshold has the meaning given by section 118‑260.

Subsection 995‑1(1)

Insert:
capital gain: for each *CGT event a capital gain is worked out in the way described in that event.
Note 1: There are some CGT events for which there is no capital gain.
Note 2: For income years before 1998‑99, capital gain has the meaning given by section 102‑20 of the Income Tax (Transitional Provisions) Act 1997.

Subsection 995‑1(1)

Insert:
capital loss: for each *CGT event a capital loss is worked out in the way described in that event.
Note 1: There are some CGT events for which there is no capital loss.
Note 2: For income years before 1998‑99, capital loss has the meaning given by section 102‑20 of the Income Tax (Transitional Provisions) Act 1997.

Subsection 995‑1(1)

Insert:
capital proceeds has the meaning given by Division 116.

Subsection 995‑1(1)

Insert:
capital unitholding of less than 1% in a unit trust has the meaning given by section 149‑135.

Subsection 995‑1(1)

Insert:
cessation time has the meaning given by sections 139CA and 139CB of the Income Tax Assessment Act 1936.

Subsection 995‑1(1)

Insert:
CFC has the meaning given by Part X of the Income Tax Assessment Act 1936.

Subsection 995‑1(1)

Insert:
CFT has the meaning given by section 342 of the Income Tax Assessment Act 1936.

Subsection 995‑1(1)

Insert:
CGT asset has the meaning given by section 108‑5.

Subsection 995‑1(1)

Insert:
CGT event means any of the CGT events described in Division 104. A CGT event described by number (for example: CGT event A1) refers to the relevant event in that Division.

Subsection 995‑1(1)

Insert:
collectable has the meaning given by section 108‑10.

Subsection 995‑1(1)

Insert:
commencing day of a *CFC has the meaning given by section 406 of the Income Tax Assessment Act 1936.

Subsection 995‑1(1)

Insert:
commencing day asset of a *CFC has the meaning given by section 406 of the Income Tax Assessment Act 1936.

Subsection 995‑1(1)

Insert:
company law has the meaning given by section 124‑520.

Subsection 995‑1(1)

Insert:
commercial horticulture has the meaning given by subsection 387‑170(4).

Subsection 995‑1(1)

Insert:
comparison rate has the meaning given by section 392‑55.
47
Subsection 995‑1(1) (definition of continuing shareholders)
Repeal the definition, substitute:
continuing shareholders has the meaning given by sections 175‑10, 175‑20, 175‑25, 175‑45, 175‑60, 175‑65 and 175‑85.

Subsection 995‑1(1)

Insert:
controller (for CGT purposes): an entity is a controller (for CGT purposes) of a company in the circumstances mentioned in section 140‑20.

Subsection 995‑1(1)

Insert:
convertible note:
(a)
a convertible note of a company has the meaning given by section 82L of the Income Tax Assessment Act 1936; and
(b)
a convertible note of a trust or unit trust means a note that has the same or a similar effect in relation to the trust or unit trust.

Subsection 995‑1(1)

Insert:
cost base of a *CGT asset has the meaning given by Subdivision 110‑A.

Subsection 995‑1(1)

Insert:
Crown lease has the meaning given by section 124‑580.

Subsection 995‑1(1)

Insert:
debenture of a company or unit trust includes debenture stock, bonds, notes and any other securities of the company or trust, whether or not constituting a charge on its assets.

Subsection 995‑1(1)

Insert:
decreased value shares has the meaning given by section 140‑15.

Subsection 995‑1(1)

Insert:
disallow:
(a)
a *net capital loss—has the meaning given by section 175‑40; or
(b)
a *capital loss—has the meaning given by section 175‑55.

Subsection 995‑1(1)

Insert:
discount: *shares in a company or units in a unit trust are issued at a discount if the amount of the payment the company or trustee receives for the issue is less than the market value of the shares or units at the time of issue. (The payment can include a transfer of property: see section 103‑5).

Subsection 995‑1(1)

Insert:
dispose of a *CGT asset has the meaning given by section 104‑10.

Subsection 995‑1(1)

Insert:
distributable profits of a company has the meaning given by section 317 of the Income Tax Assessment Act 1936.

Subsection 995‑1(1)

Insert:
dwelling has the meaning given by section 118‑115.

59
Subsection 995‑1(1) (definition of effective life)
Repeal the definition, substitute:
effective life:
(a)
of *plant—has the meaning given by Subdivision 42‑C; and
(b)
of an item of *intellectual property—has the meaning given by section 373‑35; and
(c)
of a *horticultural plant—has the meaning given by section 387‑175.

Subsection 995‑1(1)

Insert:
eligible termination payment has the meaning given by Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936.

Subsection 995‑1(1)

Insert:
employee share scheme: a *share or right is acquired under an employee share scheme if it is acquired (within the meaning of section 139G of the Income Tax Assessment Act 1936) in the way described in section 139C of that Act.

Subsection 995‑1(1)

Insert:
environmental protection activities has the meaning given by subsection 400‑60(1).
63
Subsection 995‑1(1) (definition of excluded loss)
Repeal the definition, substitute:
excluded loss has the meaning given by sections 175‑5 and 175‑40.

Subsection 995‑1(1)

Insert:
exempt entity means:
(a)
an entity whose *ordinary income and *statutory income is exempt from income tax because of Division 50; or
(b)
an entity whose *ordinary income and *statutory income is exempt from income tax because of any *Commonwealth law other than this Act.

Subsection 995‑1(1)

Insert:
expenditure on an item of *intellectual property has the meaning given by section 373‑30.

Subsection 995‑1(1)

Insert:
firearms surrender arrangements means:
(a)
a *Commonwealth law, a *State law or a *Territory law; or
(b)
administrative arrangements of a State or Territory;
implementing the agreement arising from the meeting of the Police Ministers held on 10 May 1996 concerning the surrender of prohibited firearms.

Subsection 995‑1(1)

Insert:
first continuity period has the meaning given by section 165‑120.

Subsection 995‑1(1)

Insert:
foreign government agency means:
(a)
the government of a foreign country or of part of a foreign country; or
(b)
an authority of the government of a foreign country; or
(c)
an authority of the government of part of a foreign country.

Subsection 995‑1(1)

Insert:
general company tax rate has the meaning given by section 160APA of the Income Tax Assessment Act 1936.

Subsection 995‑1(1)

Insert:
general insurance policy means a policy of insurance that is not a *life insurance policy or an *annuity instrument.

Subsection 995‑1(1)

Insert:
gross averaging amount has the meaning given by section 392‑70.

Subsection 995‑1(1)

Insert:
horticultural plant has the meaning given by subsection 387‑170(1).

Subsection 995‑1(1)

Insert:
horticulture has the meaning given by subsection 387‑170(3).

Subsection 995‑1(1)

Insert:
horticulture business has the meaning given by subsection 387‑170(2).

Subsection 995‑1(1)

Insert:
improvement threshold has the meaning given by section 108‑85.

Subsection 995‑1(1)

Insert:
incidental costs to acquire a *CGT asset, or that relate to a *CGT event, has the meaning given by section 110‑35.

Subsection 995‑1(1)

Insert:
income unitholding of less than 1% in a unit trust has the meaning given by section 149‑135.

Subsection 995‑1(1)

Insert:
increased value shares has the meaning given by section 140‑15.

Subsection 995‑1(1)

Insert:
indexation factor has the meaning given by section 960‑275.

Subsection 995‑1(1)

Insert:
index number has the meaning given by section 960‑280.
81
Subsection 995‑1(1) (at the end of the definition of indirectly)
Add:
An *ultimate owner indirectly has a beneficial interest in a *CGT asset of an entity, or in *ordinary income that may be *derived from a *CGT asset of an entity, as described in section 149‑15.
82
Subsection 995‑1(1) (definition of injected amount)
Repeal the definition, substitute:
injected amount has the meaning given by sections 175‑10, 175‑20 and 175‑85.

Subsection 995‑1(1)

Insert:
intellectual property has the meaning given by section 373‑15.

Subsection 995‑1(1)

Insert:
life insurance company means a company registered under the Life Insurance Act 1995.

Subsection 995‑1(1)

Insert:
life insurance entity means:
(a)
a *life insurance company; or
(b)
an *SGIO.

Subsection 995‑1(1)

Insert:
life insurance policy means a policy of insurance on the life of an individual.

Subsection 995‑1(1)

Insert:
listed country has the meaning given by section 320 of the Income Tax Assessment Act 1936.

Subsection 995‑1(1)

Insert:
majority underlying interests in a *CGT asset has the meaning given by section 149‑15.

Subsection 995‑1(1)

Insert:
material decrease: there is a material decrease in the market value of a *decreased value share in the way described in section 140‑25.

Subsection 995‑1(1)

Insert:
material increase: there is a material increase in the value of an *increased value share in the way described in section 140‑65.

Subsection 995‑1(1)

Insert:
minimum continuity period has the meaning given by section 165‑126.

Subsection 995‑1(1)

Insert:
mining entitlement has the meaning given by subsection 124‑710(2).

Subsection 995‑1(1)

Insert:
necessary connection with Australia: a *CGT asset has the necessary connection with Australia in the way described in section 136‑25.

Subsection 995‑1(1)

Insert:
net asset amount has the meaning given by section 104‑95.

Subsection 995‑1(1)

Insert:
net capital gain has the meaning given by sections 102‑5 and 165‑111.
Note: For income years before 1998‑99, net capital gain has the meaning given by section 102‑20 of the Income Tax (Transitional Provisions) Act 1997.

Subsection 995‑1(1)

Insert:
net capital loss has the meaning given by sections 102‑10 and 165‑114.

Subsection 995‑1(1)

Insert:
net value means:
(a)
for an entity—the amount by which the sum of the market values of the assets of the entity exceeds the sum of its liabilities; or
(b)
for a *business—the amount by which the sum of the market values of the assets of the business (including goodwill) exceeds the sum of its liabilities.

Subsection 995‑1(1)

Insert:
non‑primary production deductions has the meaning given by subsection 392‑85(3).

Subsection 995‑1(1)

Insert:
non‑primary production shade‑out amount has the meaning given by subsections 392‑90(2) and (3).

100

Subsection 995‑1(1)

Insert:
notional net capital gain has the meaning given by section 165‑108.

101

Subsection 995‑1(1)

Insert:
notional net capital loss has the meaning given by section 165‑108.

102

Subsection 995‑1(1)

Insert:
ownership interest in land or a *dwelling has the meaning given by section 118‑130.

103

Subsection 995‑1(1)

Insert:
ownership period of a *dwelling has the meaning given by section 118‑125.
104
Subsection 995‑1(1) (definition of ownership test period)
Repeal the definition, substitute:
ownership test period has the meaning given by sections 165‑12, 165‑37 and 165‑123.

105

Subsection 995‑1(1)

Insert:
partial realisation of an item of *intellectual property has the meaning given by section 373‑45.

106

Subsection 995‑1(1)

Insert:
passes: a *CGT asset passes to a beneficiary in an individual’s estate in the way described in section 128‑20.

107

Subsection 995‑1(1)

Insert:
performing artist has the meaning given by subsections 405‑25(2) and (3).

108

Subsection 995‑1(1)

Insert:
permanent establishment has the meaning given by subsection 6(1) of the Income Tax Assessment Act 1936.

109

Subsection 995‑1(1)

Insert:
personal use asset has the meaning given by section 108‑20.

110

Subsection 995‑1(1)

Insert:
pooled superannuation trust means a pooled superannuation trust within the meaning of section 48 of the Superannuation Industry (Supervision) Act 1993.

111

Subsection 995‑1(1)

Insert:
primary production deductions has the meaning given by subsection 392‑80(3).

112

Subsection 995‑1(1)

Insert:
precluded asset has the meaning given by subsection 122‑25(2).

113

Subsection 995‑1(1)

Insert:
pre‑CGT asset has the meaning given by section 149‑10.

114

Subsection 995‑1(1)

Insert:
production associate has the meaning given by subsection 405‑25(4).

115

Subsection 995‑1(1)

Insert:
professional year 1 has the meaning given by subsection 405‑50(3).

116

Subsection 995‑1(1)

Insert:
professional year 2 has the meaning given by subsection 405‑50(4).

117

Subsection 995‑1(1)

Insert:
professional year 3 has the meaning given by subsection 405‑50(4).

118

Subsection 995‑1(1)

Insert:
professional year 4 has the meaning given by subsection 405‑50(4).

119

Subsection 995‑1(1)

Insert:
prospecting entitlement has the meaning given by subsection 124‑710(1).

120

Subsection 995‑1(1)

Insert:
publicly traded unit trust has the meaning given by section 149‑50.
121
Subsection 995‑1(1) (at the end of note 1 to the definition of purpose of producing assessable income)
Add:
·
section 400‑100 (about using property for environmental impact assessment of your project or for environmental protection activities).

122

Subsection 995‑1(1)

Insert:
qualifying right has the meaning given by section 139CD of the Income Tax Assessment Act 1936.

123

Subsection 995‑1(1)

Insert:
qualifying share has the meaning given by section 139CD of the Income Tax Assessment Act 1936.

124

Subsection 995‑1(1)

Insert:
reduced cost base of a *CGT asset has the meaning given by Subdivision 110‑B.

125

Subsection 995‑1(1)

Insert:
reduced net asset amount has the meaning given by section 104‑100.

126

Subsection 995‑1(1)

Insert:
registered organisation has the meaning given by subsection 116E(1) of the Income Tax Assessment Act 1936.

127

Subsection 995‑1(1)

Insert:
related business has the meaning given by subsections 118‑250(3) and (4).

128

Subsection 995‑1(1)

Insert:
replacement‑asset roll‑over: 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 where your ownership of one CGT asset ends and you *acquire another one. The replacement‑asset roll‑overs are listed in section 112‑115.

129

Subsection 995‑1(1)

Insert:
resident trust for CGT purposes: a trust is a resident trust for CGT purposes for an income year if, at any time during the income year:
(a)
for a trust that is not a unit trust, the trustee is an Australian resident or the central management and control of the trust is in Australia; or
(b)
for a unit trust, one of the requirements in column 2 and one of the requirements in column 3 of this table are satisfied.

Requirements for unit trust
Item	One of these requirements is satisfied	And also one of these
1	Any property of the trust is situated in Australia	The central management and control of the trust is in Australia
2	The trust carries on a *business in Australia	Australian residents held more than 50% of the beneficial interests in the income or property of the trust

130

Subsection 995‑1(1)

Insert:
RSA has the meaning given by the Retirement Savings Accounts Act 1997.

131
Subsection 995‑1(1) (definition of same business test period)
Repeal the definition, substitute:
same business test period has the meaning given by sections 165‑13, 165‑15, 165‑35, 165‑40, 165‑45, 165‑126, 165‑129, 165‑132, 166‑5, 166‑20 and 166‑40.

132

Subsection 995‑1(1)

Insert:
second continuity period has the meaning given by section 165‑110.

133

Subsection 995‑1(1)

Insert:
same‑asset roll‑over: a same asset roll‑over allows you to disregard a *capital gain or *capital loss you make from:
(a)
*disposing of a *CGT asset to another entity; or
(b)
entering into an agreement with another entity that constitutes CGT event B1; or
(c)
creating a CGT asset in another entity.
The same‑asset roll‑overs are listed in section 112‑150.

134

Subsection 995‑1(1)

Insert:
SGIO has the meaning given by subsection 6(1) of the Income Tax Assessment Act 1936 .

135

Subsection 995‑1(1)

Insert:
share value shift has the meaning given by section 140‑15.

136

Subsection 995‑1(1)

Insert:
shift proceeds has the meaning given by sections 140‑55 and 140‑90.

137

Subsection 995‑1(1)

Insert:
special professional has the meaning given by subsection 405‑25(1).

138

Subsection 995‑1(1)

Insert:
sporting competition has the meaning given by subsection 405‑25(7).

139

Subsection 995‑1(1)

Insert:
sportsperson has the meaning given by subsection 405‑25(6).

140

Subsection 995‑1(1)

Insert:
starting day has the meaning given by section 149‑60.

141

Subsection 995‑1(1)

Insert:
statutory licence has the meaning given by section 124‑140.

142

Subsection 995‑1(1)

Insert:
stratum unit has the meaning given by section 124‑190.

143

Subsection 995‑1(1)

Insert:
subsidiary: the expression 100% subsidiary has the meaning given by section 975‑505.

144

Subsection 995‑1(1)

Insert:
taxable non‑primary production income has the meaning given by subsection 392‑85(1).

145

Subsection 995‑1(1)

Insert:
taxable primary production income has the meaning given by subsection 392‑80(1).

146

Subsection 995‑1(1)

Insert:
taxable professional income has the meaning given by subsection 405‑45(1).

147

Subsection 995‑1(1)

Insert:
tax advantaged business of a *registered organisation has the meaning given by subsection 116GC(2) of the Income Tax Assessment Act 1936.

148

Subsection 995‑1(1)

Insert:
tax advantaged insurance fund of a *life insurance entity has the meaning given by subsection 111B(2) of the Income Tax Assessment Act 1936.
149
Subsection 995‑1(1) (after table item 1A in the definition of termination value)
Insert:

1B

Intellectual property

section 373‑70

150

Subsection 995‑1(1)

Insert:
test day has the meaning given by section 149‑55.
151
Subsection 995‑1(1) (definition of test period)
Repeal the definition, substitute:
test period has the meaning given by sections 166‑5, 166‑20 and 166‑40.

152

Subsection 995‑1(1) (definition of test time)

Repeal the definition, substitute:
test time has the meaning given by sections 165‑13, 165‑15, 165‑35, 165‑40, 165‑45, 165‑126, 165‑129, 165‑132, 166‑5, 166‑20 and 166‑40.

153

Subsection 995‑1(1)

Insert:
total share value increase of a *share value shift has the meaning given by section 140‑25.

154

Subsection 995‑1(1)

Insert:
traditional security has the meaning given by section 26BB of the Income Tax Assessment Act 1936.

155

Subsection 995‑1(1)

Insert:
ultimate owner has the meaning given by section 149‑15.

156

Subsection 995‑1(1)

Insert:
unlisted country has the meaning given by section 320 of the Income Tax Assessment Act 1936.
157
Subsection 995‑1(1) (definition of unrecouped expenditure)
Repeal the definition, substitute:
unrecouped expenditure: for the purposes of a particular *capital allowance, unrecouped expenditure has the meaning given by the provision shown in this table:

Meaning of unrecouped expenditure
Item	For this capital allowance:	See:
1	Intellectual property	section 373‑25
2	Mining and quarrying: development and operation of a mine or quarry	section 330‑105

158
Subsection 995‑1(1) (after table item 1A in the definition of written down value)
Insert:

1B

Intellectual property

section 373‑75

159

Subsection 995‑1(1)

Insert:
your earning activity has the meaning given by subsection 400‑60(3).

[Minister’s second reading speech made in –

House of Representatives on 27 November 1997

Senate on 13 May 1998]

(225/97)