CGT

Question 1

Intro

Answer 1

Applies to Capital Gains Tax assets acquired after 19 September 1985

• Net capital gains are included in assessable income ITAA97 s100-10
• Capital losses are only deductible against capital gainsITAA97 s.100-50

•Net capital losses are not deductible but are carried forward to offset against future capital gains
Principles Ch 11.10 - 20

Question 2

A simple example – non share trader

Answer 2

Purchase shares in April 2017 paying $12,000 plus $500 brokerageSell the shares in March 2018 receiving $14,000 less $400 brokerageThe disposal of the shares is a capital gains tax event.

Capital proceeds $14,000 ITAA97s104-5
Less
Purchase price $12,000
Brokerage (500 + 400) $900
Cost base $12,900
Capital gain $1,100

The total of all the capital gains less capital losses in the year is the Net Capital Gain or Net Capital Loss s100-10

Question 3

CGT assets

Answer 3

Examples of CGT assets include:
Shares in a company
Options
Debts owing to you
Right to enforce a contractual obligation

Excludes: depreciable assets that are used wholly for income producing purposes

Principles Ch 11.170

Question 4

CGT events:

Answer 4

•A capital gain/loss arises when a CGT event happens s.102-20•Table of CGT events s.104-5

Question 5

CGT event: A1 - Disposal of a CGT asset

Answer 5

•Timing – where disposal under contract, when the contract is entered into
where no contract, when change of ownership occurs s.104-5-A1
•A CGT event includes the sale or gifting of an asset

Question 6

CGT event: B1- Use and enjoyment before title passes

Answer 6

•Taxpayer enters agreement where the right to use and enjoyment passes from the taxpayer to another entity and ownership will/may pass at a later date
s.104 -5-B1

• Example: John agrees to rent property to Joan for 2 years. During that time Joan can purchase the property. Event B1 has occurred when she commenced to rent the property

Principles Ch 11.60

Question 7

CGT event: C1- Loss or destruction of the asset

Answer 7

Timing of event – if compensation received (e.g. insurance), when the compensation is received

• if no compensation, when loss/destruction occurred s.104-5 C1

Principles Ch 11.70

Question 8

CGT event: D1- Creating a contractual right happens when taxpayer enters into a restrictive covenant with someone

Answer 8

•Timing – when the contract is entered into
s.104-5 – D1
•Cost base usually low – may be only legal fees

•Example – agreeing not to compete with someone for a period of time, or agreeing to play sport only with a particular club and no other club