Commonwealth Consolidated Acts Commonwealth Consolidated ActsThis Part does not exempt from income tax an education entry payment under Part 2.13A of the Social Security Act 1991 .
Contents
Chapter 2--Liability rules of general application i
Part 2-15--Non-assessable income i
Division 58--Capital allowances for depreciating assets previously owned by an exempt entity 1
Guide to Division 58 1
58-1....... What this Division is about ................................................................. 1
Subdivision 58-A--Application 1
58-5....... Application of Division ....................................................................... 2
58-10..... When an asset is acquired in connection with the acquisition of a business 3
Subdivision 58-B--Calculating decline in value of privatised assets under Division 40 4
58-60..... Purpose of rules in this Subdivision ................................................... 5
58-65..... Choice of method to work out cost of privatised asset ........................ 5
58-70..... Application of Division 40 .................................................................. 5
58-75..... Meaning of notional written down value ............................................. 6
58-80..... Meaning of undeducted pre-existing audited book value .................... 8
58-85..... Pre-existing audited book value of depreciating asset ......................... 9
58-90..... Method and effective life for transition entity .................................... 10
Division 59--Particular amounts of non-assessable non-exempt income 11
Guide to Division 59 11
59-1....... What this Division is about ............................................................... 11
59-10..... Compensation under firearms surrender arrangements ..................... 11
59-15..... Mining payments .............................................................................. 12
59-20..... Taxable amounts relating to franchise fees windfall tax .................... 12
59-25..... Taxable amounts relating to Commonwealth places windfall tax ...... 12
59-30..... Amounts you must repay .................................................................. 13
59-35..... Amounts that would be mutual receipts but for prohibition on distributions to members 13
59-40..... Issue of rights ................................................................................... 13
59-45..... Tax bonus for the 2007-08 income year ............................................ 14
59-55..... 2010-11 floods--recovery grants for small businesses and primary producers 14
59-60..... Cyclone Yasi--recovery grants for small businesses and primary producers 15
Part 2-20--Tax offsets 16
Division 61--Generally applicable tax offsets 16
Subdivision 61-G--Private health insurance offset complementary to Part 2-2 of the Private Health Insurance Act 2007 16
Guide to Subdivision 61-G 16
61-200... What this Subdivision is about .......................................................... 16
61-205... Entitlement to the private health insurance tax offset ......................... 17
61-210... Amount of the private health insurance tax offset ............................. 18
61-215... Tax offset after a person 65 years or over ceases to be covered by policy 19
61-220... How to work out the incentive amount ............................................. 20
Subdivision 61-I--First child tax offset (baby bonus) 21
Guide to Subdivision 61-I 21
61-350... What this Subdivision is about .......................................................... 21
Entitlement to a first child tax offset 22
61-355... Who is entitled to a tax offset under this section ............................... 22
61-360... What is a child event? ........................................................................ 23
61-365... First child only .................................................................................. 24
61-370... Another carer with entitlement for another child ............................... 24
61-375... Selection rules ................................................................................... 24
61-380... Special rules for death of first child ................................................... 25
Transferring an entitlement 25
61-385... You may transfer your entitlement to a tax offset .............................. 25
61-390... Transfer is irrevocable ....................................................................... 26
61-395... Transferor is not entitled to tax offset ................................................ 26
61-400... Transferee is entitled to tax offset ...................................................... 26
Claiming a first child tax offset 26
61-405... How to claim a tax offset for a child ................................................. 26
61-410... Claim is irrevocable ........................................................................... 26
Amount of a first child tax offset 27
61-415... Formula for working out amount of tax offset .................................. 27
61-420... Component of formula--entitlement amount .................................... 27
61-425... Component of formula--total of the entitlement days ....................... 28
61-430... What is your base year? .................................................................... 28
Additional tax offset if a child is in your care before you legally adopt the child 29
61-440... Additional tax offset if a child is in your care before you legally adopt the child 29
61-445... When a child is first in your care ....................................................... 30
61-450... What is your base year if a child is in your care before you legally adopt the child? 30
61-455... Old Subdivision applies if you would be worse off .......................... 31
Subdivision 61-IA--Child care tax offset 32
Guide to Subdivision 61-IA 32
61-460... What this Subdivision is about .......................................................... 32
61-465... Object of this Subdivision ................................................................. 33
Entitlement to the child care tax offset 33
61-470... Who is entitled to the tax offset ......................................................... 33
61-475... Meaning of approved child care ....................................................... 34
61-480... Meaning of entitled to child care benefit and entitlement to child care benefit 34
Amount of the child care tax offset 36
61-485... Amount of the child care tax offset ................................................... 36
61-490... Component of formula-- approved child care fees ........................... 37
61-495... Component of formula-- child care offset limit ................................. 38
Transfer of entitlement to unused balance of child care tax offset 38
61-496... Entitlement to transfer ....................................................................... 38
61-497... Form of transfer ................................................................................ 39
Subdivision 61-J--25% entrepreneurs' tax offset 39
Guide to Subdivision 61-J 39
61-500... What this Subdivision is about .......................................................... 39
61-505... 25% entrepreneurs' tax offset: individual or company ...................... 40
61-510... 25% entrepreneurs' tax offset: partner in a partnership ..................... 42
61-515... 25% entrepreneurs' tax offset: trustee of a trust ................................ 44
61-520... 25% entrepreneurs' tax offset: beneficiary of a trust ......................... 45
61-523... 25% entrepreneurs' tax offset--reduction for non-small business income 47
61-525... Meaning of net small business income and small business entity turnover 48
Subdivision 61-K--Mature age worker tax offset 49
Guide to Subdivision 61-K 49
61-550... What this Subdivision is about .......................................................... 49
61-555... Object of this Subdivision ................................................................. 49
61-560... Entitlement to the mature age worker tax offset ................................. 50
61-565... The amount of the tax offset .............................................................. 50
61-570... Definition of net income from working ............................................. 50
Subdivision 61-L--Tax offset for Medicare levy surcharge (lump sum payments in arrears) 51
Guide to Subdivision 61-L 51
61-575... What this Subdivision is about .......................................................... 51
61-580... Entitlement to a tax offset .................................................................. 52
61-585... The amount of a tax offset ................................................................. 54
61-590... Definition of MLS lump sums ........................................................... 54
Subdivision 61-M--Education expenses tax offset 55
Guide to Subdivision 61-M 55
61-600... What this Subdivision is about .......................................................... 55
Entitlement to education expenses tax offset 56
61-610... Entitlement to education expenses tax offset ..................................... 56
61-620... Eligibility in respect of another individual ......................................... 57
61-630... Schooling requirement ...................................................................... 58
61-640... Education expenses ........................................................................... 60
Amount of education expenses tax offset 62
61-650... Amount of education expenses tax offset .......................................... 62
61-660... Education expenses tax offset limit ................................................... 63
61-670... Shared care ........................................................................................ 64
61-680... Excess education expenses ................................................................ 66
Division 63--Common rules for tax offsets 68
Guide to Division 63 68
63-1....... What this Division is about ............................................................... 68
63-10..... Priority rules ..................................................................................... 68
Division 65--Tax offset carry forward rules 71
Guide to Division 65 71
65-10..... What this Division is about ............................................................... 71
65-30..... Amount carried forward .................................................................... 71
65-35..... How to apply carried forward tax offsets .......................................... 72
65-40..... When a company cannot apply a tax offset ....................................... 72
65-50..... Effect of bankruptcy .......................................................................... 73
65-55..... Deduction for amounts paid for debts incurred before bankruptcy ... 73
Division 67--Refundable tax offset rules 75
Guide to Division 67 75
67-10..... What this Division is about ............................................................... 75
67-20..... Which tax offsets this Division applies to ......................................... 75
67-23..... Refundable tax offsets ....................................................................... 75
67-25..... Refundable tax offsets--franked distributions .................................. 76
67-30..... Refundable tax offsets--R&D .......................................................... 78
Part 2-25--Trading stock 80
Guide to Division 70 80
70-1....... What this Division is about ............................................................... 80
70-5....... The 3 key features of tax accounting for trading stock ...................... 81
Subdivision 70-A--What is trading stock 81
70-10..... Meaning of trading stock .................................................................. 81
Subdivision 70-B--Acquiring trading stock 82
70-15..... In which income year do you deduct an outgoing for trading stock? 82
70-20..... Non-arm's length transactions .......................................................... 83
70-25..... Cost of trading stock is not a capital outgoing ................................... 83
70-30..... Starting to hold as trading stock an item you already own ................ 83
Subdivision 70-C--Accounting for trading stock you hold at the start or end of the income year 86
70-35..... You include the value of your trading stock in working out your assessable income and deductions 87
70-40..... Value of trading stock at start of income year ................................... 87
70-45..... Value of trading stock at end of income year .................................... 87
70-50..... Valuation if trading stock obsolete etc. .............................................. 89
70-55..... Working out the cost of natural increase of live stock ....................... 89
70-60..... Valuation of horse breeding stock ..................................................... 89
70-65..... Working out the horse opening value and the horse reduction amount 90
Subdivision 70-D--Assessable income arising from disposals of trading stock and certain other assets 91
Guide to Subdivision 70-D 91
70-75..... What this Subdivision is about .......................................................... 91
70-80..... Why the rules in this Subdivision are necessary ............................... 92
70-85..... Application of this Subdivision to certain other assets ...................... 92
70-90..... Assessable income on disposal of trading stock outside the ordinary course of business 93
70-95..... Purchase price is taken to be market value ........................................ 93
70-100... Notional disposal when you stop holding an item as trading stock ... 94
70-105... Death of owner ................................................................................. 96
70-110... You stop holding an item as trading stock but still own it ................. 97
70-115... Compensation for lost trading stock .................................................. 98
Subdivision 70-E--Miscellaneous 98
70-120... Deducting capital costs of acquiring trees ......................................... 98
Part 2-40--Rules affecting employees and other taxpayers receiving PAYG withholding payments 101
Division 80--General rules 101
Guide to Division 80 101
80-1....... What this Division is about ............................................................. 101
80-5....... Holding of an office ........................................................................ 101
80-10..... Application to the termination of employment ................................. 102
80-15..... Transfer of property ........................................................................ 102
80-20..... Payments for your benefit or at your direction or request ............... 102
Division 82--Employment termination payments 104
Guide to Division 82 104
82-1....... What this Division is about ............................................................. 104
Subdivision 82-A--Employment termination payments: life benefits 104
Guide to Subdivision 82-A 104
82-5....... What this Subdivision is about ........................................................ 104
82-10..... Taxation of life benefit termination payments .................................. 105
Subdivision 82-B--Employment termination payments: death benefits 106
Guide to Subdivision 82-B 106
82-60..... What this Subdivision is about ........................................................ 106
82-65..... Death benefits for dependants ......................................................... 107
82-70..... Death benefits for non-dependants .................................................. 108
82-75..... Death benefits paid to trustee of deceased estate ............................. 109
Subdivision 82-C--Key concepts 110
Guide to Subdivision 82-C 110
82-125... What this Subdivision is about ........................................................ 110
82-130... What is an employment termination payment ? ................................ 111
82-135... Payments that are not employment termination payments ............... 112
82-140... Tax free component of an employment termination payment .......... 114
82-145... Taxable component of an employment termination payment ........... 114
82-150... What is an invalidity segment of an employment termination payment? 114
82-155... What is a pre-July 83 segment of an employment termination payment? 115
82-160... What is the ETP cap amount ? ......................................................... 116
Division 83--Other payments on termination of employment 117
Guide to Division 83 117
83-1....... What this Division is about ............................................................. 117
Subdivision 83-A--Unused annual leave payments 117
Guide to Subdivision 83-A 117
83-5....... What this Subdivision is about ........................................................ 117
83-10..... Unused annual leave payment is assessable .................................... 118
83-15..... Entitlement to tax offset ................................................................... 119
Subdivision 83-B--Unused long service leave payments 119
Guide to Subdivision 83-B 119
83-65..... What this Subdivision is about ........................................................ 119
83-70..... Application--long service leave ...................................................... 120
83-75..... Meaning of unused long service leave payment .............................. 120
83-80..... Taxation of unused long service leave payments ............................. 121
83-85..... Entitlement to tax offset ................................................................... 121
83-90 ..... Meaning of pre-16/8/78 period , pre-18/8/93 period , post-17/8/93 period and long service leave employment period ........................................................................................................ 122
Employment wholly full-time or wholly part-time 123
83-95..... How to work out amount of payment attributable to each period .... 123
83-100... How to work out unused days of long service leave for each period 124
83-105... How to work out long service leave accrued in each period ............ 125
Employment partly full-time and partly part-time 126
83-110... Leave accrued in pre-16/8/78, pre-18/8/93 and post-17/8/93 periods--employment full-time and part-time 126
Long service leave taken at less than full pay 126
83-115... Working out used days of long service leave if leave taken at less than full pay 126
Subdivision 83-C--Genuine redundancy payments and early retirement scheme payments 127
Guide to Subdivision 83-C 127
83-165... What this Subdivision is about ........................................................ 127
83-170... Tax-free treatment of genuine redundancy payments and early retirement scheme payments 128
83-175... What is a genuine redundancy payment ? ........................................ 129
83-180... What is an early retirement scheme payment ? ................................ 130
Subdivision 83-D--Foreign termination payments 131
Guide to Subdivision 83-D 131
83-230... What this Subdivision is about ........................................................ 131
83-235... Termination payments tax free--foreign resident period ................. 132
83-240... Termination payments tax free--Australian resident period ............ 132
Subdivision 83-E--Other payments 133
Guide to Subdivision 83-E 133
83-290... What this Subdivision is about ........................................................ 133
83-295... Termination payments made more than 12 months after termination etc. 134
Division 83A--Employee share schemes 135
Guide to Division 83A 135
83A-1.... What this Division is about ............................................................. 135
Subdivision 83A-A--Objects of Division and key concepts 135
83A-5.... Objects of Division ......................................................................... 136
83A-10.. Meaning of ESS interest and employee share scheme ..................... 136
Subdivision 83A-B--Immediate inclusion of discount in assessable income 137
Guide to Subdivision 83A-B 137
83A-15.. What this Subdivision is about ........................................................ 137
83A-20.. Application of Subdivision ............................................................. 138
83A-25.. Discount to be included in assessable income ................................. 138
83A-30.. Amount for which discounted ESS interest acquired ...................... 138
83A-35.. Reduction of amounts included in assessable income ..................... 139
Subdivision 83A-C--Deferred inclusion of gain in assessable income 142
Guide to Subdivision 83A-C 142
83A-100 What this Subdivision is about ........................................................ 142
83A-105 Application of Subdivision ............................................................. 143
83A-110 Amount to be included in assessable income .................................. 145
83A-115 ESS deferred taxing point--shares ................................................. 146
83A-120 ESS deferred taxing point--rights to acquire shares ....................... 147
83A-125 Tax treatment of ESS interests held after ESS deferred taxing points 148
Takeovers and restructures 149
83A-130 Takeovers and restructures .............................................................. 149
Subdivision 83A-D--Deduction for employer 151
Guide to Subdivision 83A-D 151
83A-200 What this Subdivision is about ........................................................ 151
83A-205 Deduction for employer .................................................................. 152
83A-210 Timing of general deductions .......................................................... 153
Subdivision 83A-E--Miscellaneous 153
83A-305 Acquisition by associates ................................................................ 153
83A-310 Forfeiture etc. of ESS interest ......................................................... 154
83A-315 Market value of ESS interest ........................................................... 155
83A-320 Interests in a trust ............................................................................ 155
83A-325 Application of Division to relationships similar to employment ...... 156
83A-330 Application of Division to ceasing employment .............................. 156
83A-335 Application of Division to stapled securities ................................... 157
83A-340 Application of Division to indeterminate rights ............................... 157
Part 2-42--Personal services income 159
84-1....... What this Part is about .................................................................... 159
84-5....... Meaning of personal services income ............................................. 159
84-10..... This Part does not imply that individuals are employees ................. 160
Division 85--Deductions relating to personal services income 161
Guide to Division 85 161
85-1....... What this Division is about ............................................................. 161
85-5....... Object of this Division .................................................................... 161
85-10..... Deductions for non-employees relating to personal services income 162
85-15..... Deductions for rent, mortgage interest, rates and land tax ............... 163
85-20..... Deductions for payments to associates etc. ..................................... 163
85-25..... Deductions for superannuation for associates ................................. 163
85-30..... Exception: personal services businesses ......................................... 164
85-35..... Exception: employees, office holders and religious practitioners .... 164
85-40..... Application of Subdivision 900-B to individuals who are not employees 165
Division 86--Alienation of personal services income 166
Guide to Division 86 166
86-1....... What this Division is about ............................................................. 166
86-5....... A simple description of what this Division does ............................. 166
86-10..... Object of this Division .................................................................... 168
86-15..... Effect of obtaining personal services income through a personal services entity 168
86-20..... Offsetting the personal services entity's deductions against personal services income 169
86-25 ..... Apportionment of entity maintenance deductions among several individuals 171
86-27..... Deduction for net personal services income loss ............................. 173
86-30..... Assessable income etc. of the personal services entity .................... 173
86-35..... Later payments of, or entitlements to, personal services income to be disregarded for income tax purposes 173
86-40..... Salary payments shortly after an income year ................................. 174
Subdivision 86-B--Entitlement to deductions 175
86-60..... General rule for deduction entitlements of personal services entities 175
86-65..... Entity maintenance deductions ........................................................ 176
86-70..... Car expenses ................................................................................... 176
86-75..... Superannuation ............................................................................... 177
86-80..... Salary or wages promptly paid ........................................................ 178
86-85..... Deduction entitlements of personal services entities for amounts included in an individual's assessable income 178
86-87..... Personal services entity cannot deduct net personal services income loss 179
86-90..... Application of Divisions 28 and 900 to personal services entities .. 179
Division 87--Personal services businesses 180
Guide to Division 87 180
87-1....... What this Division is about ............................................................. 180
87-5....... Diagram showing the operation of this Division ............................. 181
87-10..... Object of this Division .................................................................... 183
87-15..... What is a personal services business? ............................................. 183
87-18..... The results test for a personal services business ............................. 185
87-20..... The unrelated clients test for a personal services business .............. 186
87-25..... The employment test for a personal services business .................... 187
87-30..... The business premises test for a personal services business ........... 187
87-35..... Personal services income from Australian government agencies .... 188
87-40..... Application of this Division to certain agents .................................. 189
Subdivision 87-B--Personal services business determinations 191
87-60..... Personal services business determinations for individuals .............. 191
87-65..... Personal services business determinations for personal services entities 194
87-70..... Applying etc. for personal services business determinations .......... 196
87-75..... When personal services business determinations have effect .......... 197
87-80..... Revoking personal services business determinations ...................... 198
87-85..... Review of decisions ........................................................................ 198
Chapter 3--Specialist liability rules 199
Part 3-1--Capital gains and losses: general topics 199
Division 100--A Guide to capital gains and losses 199
100-1..... What this Division is about ............................................................. 199
100-5..... Effect of this Division ..................................................................... 200
100-10... Fundamentals of CGT ..................................................................... 200
100-15... Overview of Steps 1 and 2 .............................................................. 201
Step 1--Have you made a capital gain or a capital loss? 202
100-20... What events attract CGT? ................................................................ 202
100-25... What are CGT assets? ..................................................................... 203
100-30... Does an exception or exemption apply? .......................................... 203
100-33... Can there be a roll-over? ................................................................. 204
Step 2--Work out the amount of the capital gain or loss 205
100-35... What is a capital gain or loss? ......................................................... 205
100-40... What factors come into calculating a capital gain or loss? ............... 205
100-45... How to calculate the capital gain or loss for most CGT events ....... 206
Step 3--Work out your net capital gain or loss for the income year 206
100-50... How to work out your net capital gain or loss ................................ 206
100-55... How do you comply with CGT? ..................................................... 207
Keeping records for CGT purposes 207
100-60... Why keep records? .......................................................................... 207
100-65... What records? ................................................................................. 207
100-70... How long you need to keep records ................................................ 208
Division 102--Assessable income includes net capital gain 209
Guide to Division 102 209
102-1..... What this Division is about ............................................................. 209
102-3..... Concessions in working out your net capital gain ........................... 209
102-5..... Assessable income includes net capital gain .................................... 210
102-10... How to work out your net capital loss ............................................ 212
102-15... How to apply net capital losses ....................................................... 213
102-20... Ways you can make a capital gain or a capital loss .......................... 213
102-22... Amounts of capital gains and losses ............................................... 214
102-23... CGT event still happens even if gain or loss disregarded ................ 214
102-25... Order of application of CGT events ................................................ 214
102-30... Exceptions and modifications .......................................................... 215
Division 103--General rules 218
Guide to Division 103 218
103-1..... What this Division is about ............................................................. 218
103-5..... Giving property as part of a transaction .......................................... 218
103-10... Entitlement to receive money or property ........................................ 218
103-15... Requirement to pay money or give property ................................... 219
103-25... Choices ........................................................................................... 219
103-30... Reduction of cost base etc. by net input tax credits ......................... 220
Guide to Division 104 221
104-1..... What this Division is about ............................................................. 221
104-5..... Summary of the CGT events ........................................................... 222
Subdivision 104-A--Disposals 232
104-10... Disposal of a CGT asset: CGT event A1 ........................................ 232
Subdivision 104-B--Use and enjoyment before title passes 234
104-15... Use and enjoyment before title passes: CGT event B1 .................... 234
Subdivision 104-C--End of a CGT asset 235
104-20... Loss or destruction of a CGT asset: CGT event C1 ........................ 235
104-25... Cancellation, surrender and similar endings: CGT event C2 ........... 236
104-30... End of option to acquire shares etc.: CGT event C3 ........................ 237
Subdivision 104-D--Bringing into existence a CGT asset 238
104-35... Creating contractual or other rights: CGT event D1 ........................ 238
104-40... Granting an option: CGT event D2 ................................................. 240
104-45... Granting a right to income from mining: CGT event D3 ................. 241
104-47... Conservation covenants: CGT event D4 ......................................... 241
104-55... Creating a trust over a CGT asset: CGT event E1 ........................... 243
104-60... Transferring a CGT asset to a trust: CGT event E2 ......................... 244
104-65... Converting a trust to a unit trust: CGT event E3 ............................. 245
104-70... Capital payment for trust interest: CGT event E4 ............................ 245
104-71... Adjustment of non-assessable part .................................................. 247
104-72... Reducing your capital gain under CGT event E4 if you are a trustee 251
104-75... Beneficiary becoming entitled to a trust asset: CGT event E5 ......... 251
104-80... Disposal to beneficiary to end income right: CGT event E6 ............ 252
104-85... Disposal to beneficiary to end capital interest: CGT event E7 ......... 253
104-90... Disposal by beneficiary of capital interest: CGT event E8 .............. 254
104-95... Making a capital gain ...................................................................... 255
104-100. Making a capital loss ....................................................................... 258
104-105. Creating a trust over future property: CGT event E9 ....................... 259
104-110. Granting a lease: CGT event F1 ...................................................... 260
104-115. Granting a long-term lease: CGT event F2 ...................................... 261
104-120. Lessor pays lessee to get lease changed: CGT event F3 .................. 262
104-125. Lessee receives payment for changing lease: CGT event F4 ........... 262
104-130. Lessor receives payment for changing lease: CGT event F5 ........... 263
104-135. Capital payment for shares: CGT event G1 ..................................... 264
104-145. Liquidator or administrator declares shares or financial instruments worthless: CGT event G3 266
Subdivision 104-H--Special capital receipts 267
104-150. Forfeiture of deposit: CGT event H1 .............................................. 267
104-155. Receipt for event relating to a CGT asset: CGT event H2 ............... 268
Subdivision 104-I--Australian residency ends 269
104-160. Individual or company stops being an Australian resident: CGT event I1 269
104-165. Exception for individuals ................................................................ 270
104-170. Trust stops being a resident trust: CGT event I2 ............................. 271
Subdivision 104-J--CGT events relating to roll-overs 272
104-175. Company ceasing to be member of wholly-owned group after roll-over: CGT event J1 272
104-180. Sub-group break-up ........................................................................ 274
104-182. Consolidated group break-up .......................................................... 275
104-185. Change in relation to replacement asset or improved asset after a roll-over under Subdivision 152-E: CGT event J2 ........................................................................................................ 276
104-190. Modifying or extending the replacement asset period ..................... 278
104-195. Trust failing to cease to exist after roll-over under Subdivision 124-N: CGT event J4 278
104-197. Failure to acquire replacement asset and to incur fourth element expenditure after a roll-over under Subdivision 152-E: CGT event J5 .................................................................................. 280
104-198. Cost of acquisition of replacement asset or amount of fourth element expenditure, or both, not sufficient to cover disregarded capital gain: CGT event J6 ........................................... 281
Subdivision 104-K--Other CGT events 282
104-210. Bankrupt pays amount in relation to debt: CGT event K2 ............... 283
104-215. Asset passing to tax-advantaged entity: CGT event K3 ................... 283
104-220. CGT asset starts being trading stock: CGT event K4 ...................... 284
104-225. Special collectable losses: CGT event K5 ........................................ 285
104-230. Pre-CGT shares or trust interest: CGT event K6 ............................. 286
104-235. Balancing adjustment events for depreciating assets and certain assets used for R&D: CGT event K7 289
104-240. Working out capital gain or loss for CGT event K7: general case ... 291
104-245. Working out capital gain or loss for CGT event K7: pooled assets . 292
104-250. Direct value shifts: CGT event K8 .................................................. 293
104-255. Carried interests: CGT event K9 ..................................................... 294
104-260. Certain short-term forex realisation gains: CGT event K10 ............. 295
104-265. Certain short-term forex realisation losses: CGT event K11 ........... 296
104-270. Foreign hybrids: CGT event K12 .................................................... 296
Subdivision 104-L--Consolidated groups and MEC groups 296
104-500. Loss of pre-CGT status of membership interests in entity becoming subsidiary member: CGT event L1 297
104-505. Where pre-formation intra-group roll-over reduction results in negative allocable cost amount: CGT event L2 299
104-510. Where tax cost setting amounts for retained cost base assets exceeds joining allocable cost amount: CGT event L3 ........................................................................................................ 299
104-515. Where no reset cost base assets and excess of net allocable cost amount on joining: CGT event L4 300
104-520. Where amount remaining after step 4 of leaving allocable cost amount is negative: CGT event L5 300
104-525. Error in calculation of tax cost setting amount for joining entity's assets: CGT event L6 301
104-535. Where reduction in tax cost setting amounts for reset cost base assets cannot be allocated: CGT event L8 303
Division 106--Entity making the gain or loss 304
Guide to Division 106 304
106-1..... What this Division is about ............................................................. 304
Subdivision 106-A--Partnerships 304
106-5..... Partnerships .................................................................................... 304
Subdivision 106-B--Bankruptcy and liquidation 306
106-30... Effect of bankruptcy ........................................................................ 307
106-35... Effect of liquidation ......................................................................... 307
Subdivision 106-C--Absolutely entitled beneficiaries 307
106-50... Absolutely entitled beneficiaries ...................................................... 307
Subdivision 106-D--Security holders 308
106-60... Acts by security holders .................................................................. 308
Guide to Division 108 309
108-1..... What this Division is about ............................................................. 309
Subdivision 108-A--What a CGT asset is 309
108-5..... CGT assets ...................................................................................... 309
108-7..... Interest in CGT assets as joint tenants ............................................. 310
Subdivision 108-B--Collectables 310
108-10... Losses from collectables to be offset only against gains from collectables 310
108-15... Sets of collectables .......................................................................... 311
108-17... Cost base of a collectable ................................................................ 312
Subdivision 108-C--Personal use assets 312
108-20... Losses from personal use assets must be disregarded ..................... 313
108-25... Sets of personal use assets .............................................................. 313
108-30... Cost base of a personal use asset .................................................... 314
Subdivision 108-D--Separate CGT assets 314
Guide to Subdivision 108-D 314
108-50... What this Subdivision is about ........................................................ 314
108-55... When is a building a separate asset from land? ............................... 315
108-60... Depreciating asset that is part of a building is a separate asset ........ 315
108-65... Land adjacent to land acquired before 20 September 1985 .............. 315
108-70... When is a capital improvement a separate asset? ............................. 316
108-75... Capital improvements to CGT assets for which a roll-over may be available 318
108-80... Deciding if capital improvements are related to each other .............. 320
108-85... Meaning of improvement threshold ................................................ 320
Division 109--Acquisition of CGT assets 321
Guide to Division 109 321
109-1..... What this Division is about ............................................................. 321
Subdivision 109-A--Operative rules 321
109-5..... General acquisition rules ................................................................. 322
109-10... When you acquire a CGT asset without a CGT event .................... 324
109-15... Exceptions ....................................................................................... 325
Subdivision 109-B--Signposts to other acquisition rules 325
109-50... Effect of this Subdivision ................................................................ 325
109-55... Other acquisition rules .................................................................... 325
109-60... Acquisition rules outside this Part and Part 3-3 .............................. 332
Division 110--Cost base and reduced cost base 335
Guide to Division 110 335
110-1..... What this Division is about ............................................................. 335
110-5..... Modifications to general rules ......................................................... 335
110-10... Rules about cost base not relevant for some CGT events ................ 335
Subdivision 110-A--Cost base 337
110-25... General rules about cost base .......................................................... 338
110-35... Incidental costs ................................................................................ 340
110-36... Indexation ....................................................................................... 341
What does not form part of the cost base 342
110-37... Expenditure forming part of cost base or element ........................... 342
110-38... Exclusions ....................................................................................... 343
110-40... Assets acquired before 7.30 pm on 13 May 1997 ........................... 344
110-43... Partnership interests acquired before 7.30 pm on 13 May 1997 ..... 344
110-45... Assets acquired after 7.30 pm on 13 May 1997 ............................. 345
110-50... Partnership interests acquired after 7.30 pm on 13 May 1997 ........ 347
110-53... Exceptions to application of sections 110- 45 and 110-50 ............... 349
110-54... Debt deductions disallowed by thin capitalisation rules .................. 349
Subdivision 110-B--Reduced cost base 349
110-55... General rules about reduced cost base ............................................ 350
110-60... Reduced cost base for partnership assets ........................................ 353
Division 112--Modifications to cost base and reduced cost base 355
Guide to Division 112 355
112-1..... What this Division is about ............................................................. 355
112-5..... Discussion of modifications ............................................................ 355
Subdivision 112-A--General modifications 356
112-15... General rule for replacement modifications ..................................... 356
112-20... Market value substitution rule ......................................................... 356
112-25... Split, changed or merged assets ...................................................... 358
112-30... Apportionment rules ....................................................................... 359
112-35... Assumption of liability rule ............................................................. 361
112-37... Put options ...................................................................................... 361
Subdivision 112-B--Finding tables for special rules 361
112-40... Effect of this Subdivision ................................................................ 362
112-45... CGT events ..................................................................................... 362
112-48... Gifts acquired by associates ............................................................ 363
112-50... Main residence ................................................................................ 363
112-53... Scrip for scrip roll-over ................................................................... 364
112-53AAStatutory licences .......................................................................... 364
112-53A MDO roll-over ................................................................................ 365
112-53B Exchange of stapled ownership interests for units in a unit trust ..... 365
112-53C Water entitlement roll-overs ............................................................ 365
112-54... Demergers ....................................................................................... 366
112-54A Transfer of assets between certain trusts ......................................... 366
112-55... Effect of you dying ......................................................................... 367
112-60... Bonus shares or units ...................................................................... 367
112-65... Rights .............................................................................................. 367
112-70... Convertible interests ........................................................................ 368
112-77... Exchangeable interests .................................................................... 368
112-80... Leases ............................................................................................. 369
112-85... Options ........................................................................................... 369
112-87... Residency ........................................................................................ 370
112-90... An asset stops being a pre-CGT asset ............................................. 370
112-92... Demutualisation of certain entities ................................................... 370
112-95... Transfer of tax losses and net capital losses within wholly-owned groups of companies 371
112-97... Modifications outside this Part and Part 3-3 ................................... 372
Subdivision 112-C--Replacement-asset roll-overs 379
112-100. Effect of this Subdivision ................................................................ 379
112-105. What is a replacement-asset roll-over? ............................................ 379
112-110. How is the cost base of the replacement asset modified? ................ 380
112-115. Table of replacement-asset roll-overs .............................................. 380
Subdivision 112-D--Same-asset roll-overs 381
112-135. Effect of this Subdivision ................................................................ 382
112-140. What is a same-asset roll-over? ....................................................... 382
112-145. How is the cost base of the asset modified? .................................... 382
112-150. Table of same-asset roll-overs ......................................................... 382
Division 114--Indexation of cost base 384
114-1..... Indexing elements of cost base ........................................................ 384
114-5..... When indexation relevant ................................................................ 385
114-10... Requirement for 12 months ownership ........................................... 386
114-15... Cost base modifications .................................................................. 388
114-20... When expenditure is incurred for roll-overs .................................... 389
Division 115--Discount capital gains and trusts' net capital gains 391
Guide to Division 115 391
115-1..... What this Division is about ............................................................. 391
Subdivision 115-A--Discount capital gains 392
What is a discount capital gain? 392
115-5..... What is a discount capital gain ? ...................................................... 392
115-10... Who can make a discount capital gain? ........................................... 392
115-15... Discount capital gain must be made after 21 September 1999 ......... 393
115-20... Discount capital gain must not have indexed cost base ................... 393
115-25... Discount capital gain must be on asset acquired at least 12 months before 394
115-30... Special rules about time of acquisition ............................................ 395
115-32... Special rule about time of acquisition for certain replacement-asset roll-overs 399
115-34... Further special rule about time of acquisition for certain replacement-asset roll-overs 399
What are not discount capital gains? 401
115-40... Capital gain resulting from agreement made within a year of acquisition 401
115-45... Capital gain from equity in an entity with newly acquired assets .... 401
115-50... Discount capital gain from equity in certain entities ........................ 403
115-55... Capital gains involving money received from demutualisation of friendly society health or life insurer 405
Subdivision 115-B--Discount percentage 406
115-100. What is the discount percentage for a discount capital gain ............ 406
Subdivision 115-C--Rules about trusts with net capital gains 406
Guide to Subdivision 115-C 406
115-200. What this Division is about ............................................................. 406
115-210. When this Subdivision applies ........................................................ 407
115-215. Assessing presently entitled beneficiaries ....................................... 408
115-220. Assessing trustees under section 98 of the Income Tax Assessment Act 1936 409
115-222. Assessing trustees under section 99 or 99A of the Income Tax Assessment Act 1936 410
115-225. Attributable gain .............................................................................. 411
115-227. Share of a capital gain ..................................................................... 412
115-228. Specifically entitled to an amount of a capital gain ........................... 412
115-230. Choice for resident trustee to be specifically entitled to capital gain 413
Subdivision 115-D--Tax relief for shareholders in listed investment companies 415
Guide to Subdivision 115-D 415
115-275. What this Subdivision is about ........................................................ 415
115-280. Deduction for certain dividends ...................................................... 415
115-285. Meaning of LIC capital gain ........................................................... 418
115-290. Meaning of listed investment company ........................................... 419
115-295. Maintaining records ........................................................................ 420
Division 116--Capital proceeds 421
Guide to Division 116 421
116-1..... What this Division is about ............................................................. 421
116-5..... General rules ................................................................................... 422
116-10... Modifications to general rules ......................................................... 422
116-20... General rules about capital proceeds .............................................. 423
Modifications to general rules 425
116-25... Table of modifications to the general rules ...................................... 425
116-30... Market value substitution rule: modification 1 ................................ 427
116-35... Companies and trusts that are not widely held ................................ 429
116-40... Apportionment rule: modification 2 ................................................ 430
116-45... Non-receipt rule: modification 3 ...................................................... 431
116-50... Repaid rule: modification 4 ............................................................. 432
116-55... Assumption of liability rule: modification 5 .................................... 432
116-60... Misappropriation rule: modification 6 ............................................. 432
116-65... Disposal etc. of a CGT asset the subject of an option ..................... 433
116-70... Option requiring both acquisition and disposal etc. ......................... 434
116-75... Special rule for CGT event happening to a lease ............................. 434
116-80... Special rule if CGT asset is shares or an interest in a trust .............. 434
116-85... Section 47A of 1936 Act applying to rolled-over asset ................... 435
116-95... Company changes residence from an unlisted country .................... 436
116-100. Gifts of property ............................................................................. 437
116-105. Conservation covenants .................................................................. 438
116-110. Roll-overs for merging superannuation funds ................................. 438
Guide to Division 118 439
118-1..... What this Division is about ............................................................. 439
Subdivision 118-A--General exemptions 440
118-5..... Cars, motor cycles and valour decorations ...................................... 441
118-10... Collectables and personal use assets ............................................... 441
118-12... Assets used to produce exempt income etc. .................................... 442
118-13... Shares in a PDF .............................................................................. 444
118-20... Reducing capital gains if amount otherwise assessable ................... 444
118-21... Carried interests .............................................................................. 446
118-22... Superannuation lump sums and employment termination payments 447
118-24... Depreciating assets .......................................................................... 447
118-25... Trading stock .................................................................................. 447
118-27... Division 230 financial arrangements and financial arrangements to which Subdivision 250-E applies 448
118-30... Film copyright ................................................................................. 449
118-35... R&D ............................................................................................... 449
Exempt or loss-denying transactions 449
118-37... Compensation, damages etc. ........................................................... 449
118-40... Expiry of a lease .............................................................................. 453
118-42... Transfer of stratum units ................................................................. 453
118-45... Sale of rights to mine ...................................................................... 453
118-55... Foreign currency hedging gains and losses ..................................... 453
118-60... Certain gifts ..................................................................................... 454
118-65... Later distributions of personal services income ............................... 454
118-70... Transactions by exempt entities ....................................................... 455
118-75... Marriage or relationship breakdown settlements ............................. 455
Boat capital gains 455
118-80... Reduction of boat capital gain ......................................................... 455
118-85... Special disability trusts .................................................................... 456
Subdivision 118-B--Main residence 456
Guide to Subdivision 118-B 456
118-100. What this Subdivision is about ........................................................ 456
118-105. Map of this Subdivision .................................................................. 459
118-110. Basic case ........................................................................................ 459
118-115. Meaning of dwelling ....................................................................... 460
118-120. Extension to adjacent land etc. ......................................................... 461
118-125. Meaning of ownership period ......................................................... 461
118-130. Meaning of ownership interest in land or a dwelling ...................... 462
Rules that may extend the exemption 462
118-135. Moving into a dwelling ................................................................... 462
118-140. Changing main residences ............................................................... 463
118-145. Absences ......................................................................................... 463
118-147. Absence from dwelling replacing main residence that was compulsorily acquired, destroyed etc. 464
118-150. If you build, repair or renovate a dwelling ...................................... 466
118-155. Where individual referred to in section 118-150 dies ...................... 467
118-160. Destruction of dwelling and sale of land ......................................... 467
Rules that may limit the exemption 468
118-165. Separate CGT event for adjacent land or other structures ................ 468
118-170. Spouse having different main residence .......................................... 468
118-175. Dependent child having different main residence ............................ 469
Roll-overs under Subdivision 126-A 469
118-178. Previous roll-over under Subdivision 126-A .................................. 469
118-180. Acquisition of dwelling from company or trust on marriage or relationship breakdown--roll-over provision applying ........................................................................................................ 470
Partial exemption rules 471
118-185. Partial exemption where dwelling was your main residence during part only of ownership period 471
118-190. Use of dwelling for producing assessable income .......................... 472
118-192. Special rule for first use to produce income .................................... 473
Dwellings acquired from deceased estates 474
118-195. Dwelling acquired from a deceased estate ....................................... 474
118-197. Special rule for surviving joint tenant .............................................. 476
118-200. Partial exemption for deceased estate dwellings .............................. 476
118-205. Adjustment if dwelling inherited from deceased individual ............. 477
118-210. Trustee acquiring dwelling under will ............................................. 478
118-215. What the following provisions are about ......................................... 480
118-218. Exemption available to trustee--main case ...................................... 480
118-220. Exemption available to trustee--after the principal beneficiary's death 481
118-222. Exemption available to other beneficiary who acquires the CGT asset after the principal beneficiary's death 481
118-225. Amount of exemption available after the principal beneficiary's death--general 482
118-227. Amount of exemption available after the principal beneficiary's death--cost base and reduced cost base 483
118-230. Application of CGT events E5 and E7 in relation to main residence exemption and special disability trusts 484
Compulsory acquisitions of adjacent land only 484
118-240. What the following provisions are about ......................................... 484
118-245. CGT events happening only to adjacent land .................................. 485
118-250. Compulsory acquisitions of adjacent land ....................................... 486
118-255. Maximum exempt area .................................................................... 488
118-260. Partial exemption rules .................................................................... 489
118-265. Extension to adjacent structures ...................................................... 489
Subdivision 118-D--Insurance and superannuation 489
118-300. Insurance policies ............................................................................ 489
118-305. Superannuation ............................................................................... 491
118-310. RSA's ............................................................................................. 492
118-313. Superannuation agreements under the Family Law Act .................. 492
118-315. Segregated exempt assets of life insurance companies .................... 492
118-320. Segregated current pension assets of a complying superannuation entity 492
Subdivision 118-E--Units in pooled superannuation trusts 492
118-350. Units in pooled superannuation trusts ............................................. 492
Subdivision 118-F--Venture capital investment 493
Guide to Subdivision 118-F 493
118-400. What this Subdivision is about ........................................................ 493
118-405. Exemption for certain foreign venture capital investments through venture capital limited partnerships 494
118-407. Exemption for certain venture capital investments through early stage venture capital limited partnerships 496
118-410. Exemption for certain foreign venture capital investments through Australian venture capital funds of funds 499
118-415. Exemption for certain venture capital investments by foreign residents 501
118-420. Meaning of eligible venture capital partner etc. .............................. 502
118-425. Meaning of eligible venture capital investment --investments in companies 505
118-427. Meaning of eligible venture capital investment --investments in unit trusts 512
118-428. Additional investment requirements for ESVCLPs ......................... 518
118-430. Meaning of at risk ........................................................................... 519
118-435. Special rule relating to investment in foreign resident holding companies 520
118-440. Meaning of permitted entity value ................................................... 521
118-445. Meaning of committed capital ......................................................... 523
Subdivision 118-G--Venture capital: investment by superannuation funds for foreign residents 524
Guide to Subdivision 118-G 524
118-500. What this Subdivision is about ........................................................ 524
118-505. Exemption for certain foreign venture capital .................................. 524
118-510. Meaning of resident investment vehicle ........................................... 525
118-515. Meaning of venture capital entity .................................................... 525
118-520. Meaning of superannuation fund for foreign residents .................. 526
118-525. Meaning of venture capital equity ................................................... 527
Subdivision 118-H--Demutualisation of Tower Corporation 528
118-550. Demutualisation of Tower Corporation ........................................... 528
Division 121--Record keeping 530
Guide to Division 121 530
121-10... What this Division is about ............................................................. 530
121-20... What records you must keep ........................................................... 530
121-25... How long you must retain the records ............................................ 532
121-30... Exceptions ....................................................................................... 533
121-35... Asset register entries ....................................................................... 533
Part 3-3--Capital gains and losses: special topics 535
Division 122--Roll-over for the disposal of assets to, or the creation of assets in, a wholly-owned company 535
Guide to Division 122 535
122-1..... What this Division is about ............................................................. 535
Subdivision 122-A--Disposal or creation of assets by an individual or trustee to a wholly-owned company 536
Guide to Subdivision 122-A 536
122-5..... What this Subdivision is about ........................................................ 536
When is a roll-over available 537
122-15... Disposal or creation of assets--wholly-owned company ............... 537
122-20... What you receive for the trigger event ............................................. 537
122-25... Other requirements to be satisfied ................................................... 538
122-35... What if the company undertakes to discharge a liability (disposal case) 540
122-37... Rules for working out what a liability in respect of an asset is ........ 541
Replacement-asset roll-over if you dispose of a CGT asset 542
122-40... Disposal of a CGT asset ................................................................. 542
Replacement-asset roll-over if you dispose of all the assets of a business 543
122-45... Disposal of all the assets of a business ........................................... 543
122-50... All assets acquired on or after 20 September 1985 ......................... 543
122-55... All assets acquired before 20 September 1985 ................................ 544
122-60... Assets acquired before and after 20 September 1985 ...................... 545
Replacement-asset roll-over for a creation case 546
122-65... Creation of asset .............................................................................. 546
Same-asset roll-over consequences for the company (disposal case) 547
122-70... Consequences for the company (disposal case) .............................. 547
Same-asset roll-over consequences for the company (creation case) 548
122-75... Consequences for the company (creation case) ............................... 548
Subdivision 122-B--Disposal or creation of assets by partners to a wholly-owned company 548
Guide to Subdivision 122-B 548
122-120. What this Subdivision is about ........................................................ 548
When is a roll-over available 549
122-125. Disposal or creation of assets--wholly-owned company ............... 549
122-130. What the partners receive for the trigger event ................................ 550
122-135. Other requirements to be satisfied ................................................... 551
122-140. What if the company undertakes to discharge a liability (disposal case) 553
122-145. Rules for working out what a liability in respect of an interest in an asset is 554
Replacement-asset roll-over if partners dispose of a CGT asset 555
122-150. Capital gain or loss disregarded ...................................................... 555
122-155. Disposal of post-CGT or pre-CGT interests ................................... 555
122-160. Disposal of both post-CGT and pre-CGT interests ......................... 556
Replacement-asset roll-over if the partners dispose of all the assets of a business 556
122-170. Capital gain or loss disregarded ...................................................... 556
122-175. Other consequences ........................................................................ 557
122-180. All interests acquired on or after 20 September 1985 ...................... 557
122-185. All interests acquired before 20 September 1985 ............................ 557
122-190. Interests acquired before and after 20 September 1985 ................... 558
Replacement-asset roll-over for a creation case 559
122-195. Creation of asset .............................................................................. 559
Same-asset roll-over consequences for the company (disposal case) 560
122-200. Consequences for the company (disposal case) .............................. 560
Same-asset roll-over consequences for the company (creation case) 562
122-205. Consequences for the company (creation case) ............................... 562
Table of Subdivisions
Guide to Division 58
58-A Application
58-B Calculating decline in value of privatised assets under Division 40
Guide to Division 58