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Capital Gains Tax |
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CGT Events
There are 54 CGT Events listed in ITAA 1997. These include Event A1 Disposal of a CGT Asset Event B1 The purchaser obtains the use and enjoyment of the CGT Asset before title passes. Events C1 to C3 CGT Assets lost, destroyed, cancelled or finalised. Events D1 to D3 Creating of rights, granting options Events E1 to E9 Creating a trust over a CGT Asset, transferring a CGT Asset to a trust, converting to a unit trust, capital payments, beneficiaries becoming entitled, creating a trust over future property. Categories of assets Assets fall into three categories for CGT purposes: Collectables
Personal-use assets e.g. clothing, electrical appliances, sporting equipment, furniture are CGT exempt where acquired for less than $10,000 Separate CGT assets land, buildings and structures, strata title units, and capital improvements on land – s.108-50 5 elements of the cost base
uses the Consumer Price Index (CPI) is calculated as follows: CPI for quarter when event happened CPI for quarter when expenditure incurred The Indexation Factor must be rounded to 3 decimal places |
Capital Gains Tax |
Capital Gains Tax (CGT) applies to CGT assets that have been acquired and disposed of after 19 September 1985 Assets acquired before the 20 September 1985 are outside the CGT provisions A taxpayer’s assessable income includes any net capital gain CGT Assets A CGT asset includes any form of property or a legal or equitable right that is not property, and includes: e.g. shares, currency, goodwill, land, buildings or legal or equitable right that is not property – s.108-5 e.g. debts owed Specific exemptions
To determine whether there has been a taxable capital gain or capital loss, you need to determine:
A capital loss must be offset against a capital gain as follows:
Capital proceeds from disposal less Cost base of asset equals Capital gain The cost base of an asset CGT is made up of five elements, including the capital costs of acquisition and disposal Methods of calculation
This method applies a discount percentage by which to reduce the capital gain as follows:
Other method This method is used only where a CGT asset is acquired and disposed of within 12 months Using this method, a capital gain is calculated simply by subtracting the cost base of the CGT asset from the capital proceeds from disposal |