Tax Flashcards
CGT: a net capital gain that has accrued to a taxpayer in a particular income year is included in the taxpayer’s assessable income of that year.
CGT applies - on or after 20 September 1985
CGT:
A taxpayer disposes of a CGT asset if there is a change of ownership from the taxpayer to another entity.
E.g. one super fund to another (different trustees)
Discounts to capital gains
This is defined as a capital gain that meets all four of the following requirements:
• It is made by an individual, trust or complying superannuation entity:
• It results from a CGT event that happens on or after 21 September 1999:
• It is worked out without indexing the cost base elements:
• It results from a CGT event that happens to a CGT asset that was acquired at least 12 months before the event:
What is the discount percentage: section 115-100?
For individuals and trusts the discount percentage is 50% of the capital gain, worked out without indexation of the cost base.
For complying superannuation entities, it is 1/3 of that capital gain (i.e. 33.33%).
From 8 May 2012, the CGT discount is no longer available to foreign resident or ‘temporary resident’ individuals.
What is the discount percentage: section 115-100?
For individuals and trusts the discount percentage is 50% of the capital gain, worked out without indexation of the cost base.
For complying superannuation entities, it is 1/3 of that capital gain (i.e. 33.33%).
From 8 May 2012, the CGT discount is no longer available to foreign resident or ‘temporary resident’ individuals.
Note: The net capital loss cannot be deducted from assessable income (is carried forward to offset future capital gains).
All super assets are considered post CGT assets.
Assets acquired on or after 11.45 am, 21 September 1999
Division 115 specifies an asset acquired on or after 11.45 am, 21 September 1999, which has been held for 12 months or more by the taxpayer, must use the discount method for calculating the capital gain.
If the asset was acquired between 20 September 1985 and 20 September 1999 the taxpayer can choose to use the indexation or discount method to give the best tax outcome.
Companies are not entitled to a CGT discount.
Capital losses are to be subtracted from the capital gain prior to discounting the capital gain.
CGT Main residence exemption
For this exemption to apply, the dwelling must be the main residence for at least three months from the time it becomes the main residence. This is only a guide and the facts of each case will need to be considered.
Acquisition of main residence from deceased estate
If a taxpayer acquires a main residence as a beneficiary in the estate of a deceased person, the full main residence exemption will remain available to the beneficiary if the property is sold and settlement occurs within 24 months after the date of death, regardless of whether the beneficiary used the inherited house as their own residence or not.
CGT consequences of a taxpayer’s death
The legal personal representative or beneficiary is taken to have acquired the CGT asset on the date that the taxpayer died. All CGT assets will be treated post-CGT assets in the hands of the legal personal representative or beneficiary (regardless of whether they were pre-CGT assets in the hands of deceased taxpayer).
The legal personal representative or beneficiary will have a cost base as follows:
• For pre-CGT assets : the market value of the CGT asset on the day that the taxpayer died.
* For post-CGT assets : is the value of the asset on the day it was acquired by the deceased. * For a dwelling that was the deceased taxpayer’s main residence just before death and was not used to produce assessable income : the market value of the dwelling on the day that the taxpayer died.
For the purpose of the CGT general discount, the legal personal representative and beneficiary are deemed to have acquired the asset at the same time that the deceased taxpayer acquired the asset.
