Step 2 How to complete the CGT summary worksheet for 2011 tax returns

You use the CGT summary worksheet to calculate your entity’s net capital gain for the 2010–11 income year or net capital losses carried forward to later income years. It also provides the information you need to complete the capital gains item on your entity’s tax return and, if required, the CGT schedule.

You should include on this worksheet any capital gain your entity is entitled to as a distribution from a trust.

The CGT summary worksheet is designed for entities that make capital gains or capital losses during the income year. However, you may also find it useful if you are an individual (including a partner in a partnership) who has more complex CGT affairs.

The CGT summary worksheet differentiates between capital gains from active assets and non-active assets. Generally, an active asset is a business asset the entity owns, for example, goodwill of a business.

A share and an interest in a trust can also be active assets if certain conditions are met.

There are four small business CGT concessions that may apply to capital gains from active assets:

• The small business 15-year exemption: this exemption, subject to certain conditions being satisfied, means a capital gain is totally disregarded if you or your small business entity has continuously owned the CGT asset for at least 15 years, and
  • you are 55 years old or over and retiring, or
  • you are permanently incapacitated.
   
• The small business 50% active asset reduction: this concession provides a 50% reduction of a capital gain for an active asset.
  
• The small business retirement exemption: this allows you to disregard capital gains for active assets (up to a lifetime limit of $500,000) if the conditions are satisfied. If you are eligible for this exemption and are under 55 years old just before you choose it, you must pay the amount into a superannuation (or similar) fund.
  
• The small business rollover: this enables you to defer all or part of a capital gain if you acquire a replacement asset or make an improvement to an existing asset and satisfy other conditions.

To find out if your business is eligible for the small business CGT concessions, see the publication Capital gains tax (CGT) concessions for small business – overview.

The parts in this step relate to the parts of the CGT summary worksheet. Work through each relevant part to complete your worksheet.

Part A Total current year capital gains

In part A you write your entity’s total current year capital gains.

Part A1 Current year capital gains from CGT assets and CGT events or a distribution from a trust that includes a capital gain (other than capital gains from collectables)

At A to H and M to U on this worksheet, write the current year capital gains (other than from collectables) transferred from the capital gain or capital loss worksheets.

Trust capital gains

You must also include at G to I and S to U on the worksheet any distribution from a trust of a net capital gain from a CGT event (other than one involving a collectable) that your entity is entitled to.

You must use the same method as the method used by the trustee to calculate your entity’s capital gain from the trust. For example, if the trustee used the discount method to calculate a capital gain, you must use the discount method. In some cases, your entity must gross up the amount of the trust’s capital gain. If this applies, you include the grossed-up amount at H, S, T and U, as explained below.

If the trustee used the discount method to calculate a capital gain, you need to gross it up by multiplying the distribution amount by two. Include the result at H. Grossing up ensures that any capital losses your entity has made are deducted from your entity’s grossed-up capital gain before the CGT discount is applied.

If the trust’s capital gain was reduced by the small business 50% active asset reduction, again it needs to be grossed-up by multiplying the distribution amount by two. Include the result at S or U.

If the trust’s capital gain was reduced by the CGT discount and by the small business 50% active asset reduction, multiply the distribution amount by four and include the result at T.

Amount of capital gain

Write the full amounts of all capital gains in part A1.

Do not apply:

• capital losses (which are applied at part D of the worksheet)
• the CGT discount (which is applied at part F of the worksheet)
• the small business CGT concessions (which are applied at part G of the worksheet).

Transfer the amounts at A1 to A6 to the corresponding A1 to A6 in part A3 of the CGT summary worksheet.

Part A2 Capital gains and capital losses from collectables

Did your entity make a capital gain or a capital loss from a collectable during the income year? Or did the entity receive a distribution from a trust during the income year that includes a net capital gain from a collectable?

Yes

Read on.

No

Go to part A3.

Transfer any capital gains from collectables from the capital gain or capital loss worksheets to C1, C2 or C3 on your CGT summary worksheet. Transfer any capital losses from collectables to C4 on your CGT summary worksheet.

If your entity was entitled to a distribution of a net capital gain from a trust resulting from a collectable, write this amount at C5 to C7. You must use the same method as the trustee to calculate your entity’s capital gain from the trust. For example, if the trustee used the discount method to calculate a capital gain, you need to do the same and write the grossed up amount at C6.

If the trustee used the discount method to calculate a capital gain, gross it up by multiplying the distribution amount by two. Grossing up ensures that any capital losses your entity has made are deducted from your grossed-up capital gain before the CGT discount is applied.

Write the totals of all of your entity’s capital gains from collectables at C8 to C10.

Step A2.1 Apply any current year capital losses from collectables

If your entity has any current year capital losses from collectables, deduct these from any current year capital gains from collectables. This reduces your CGT obligation. If your entity has current year capital losses from collectables that can be deducted they must be deducted here. You cannot choose to defer to a later year any amount that can be deducted this year.

Does your entity have any current year capital gains from collectables?

No

Transfer the amount at C4 to H in part I and then go to part A3

Yes

Does your entity have a CYCL from a collectable?

No

Transfer the amounts at C8, C9 and C10 to 1E, 1F and 1G and then go to step A2.2.

Yes

Read on.

Deduct any current year capital losses from collectables (written at C4) from your current year capital gains from collectables (written at C8 to C10).

You can do this in the order that gives the best result, which would usually be to apply the losses against capital gains calculated using the:

• 'other' method
• indexation method
• discount method.

Write the amounts to be deducted from capital gains from your collectables at 1A to 1C, depending on the choice made about how to deduct the losses. Write the total losses from collectables deducted from gains from collectables (1A to 1C) at 1D.

Write the resulting capital gains from collectables at 1E to 1G.

If your entity has net capital losses from collectables (C4 minus 1D), you can carry this forward to reduce the capital gains from collectables in later income years. There is no time limit on how long you can carry forward this loss. Transfer the amount of excess capital losses from collectables to H UNCL from collectables in part I.

Step A2.2 Apply any prior year net capital losses from collectables

Prior year net capital losses (PYNCL) are the unapplied net capital losses carried forward from earlier years.

If your entity has prior year net capital losses that can be deducted, deduct them here. You cannot choose to defer to a later year any amount that can be deducted this year.

Does your entity have any remaining current year capital gains from collectables?

No

If your entity has PYNCL, complete 2A, 2B and 2C, and transfer the amount at 2C to H in part I. Go to part A3.

Yes

Does your entity have a PYNCL from a collectable?

No

Transfer the amounts at 1E, 1F and 1G in step A2.1 to J, K and L in part A3 and continue from part A3.

Yes

Read on.

At 2C, write the available prior year net capital losses from collectables after you have made any necessary adjustments for commercial debts forgiven written at 2B. For more information on commercial debts forgiven, see your entity’s tax return instructions.

Again, you can deduct PYNCL from collectables from any remaining capital gains from collectables in the manner that produces the best result. You must, however, deduct them in the order in which they were made, for example, you should deduct a 1995–96 income year capital loss before a 1998–99 income year capital loss.

At 2D to 2F, write the amounts of prior year net capital losses from collectables in the order you have chosen.

At 2G, write the total amount of prior year net capital losses from collectables that you have deducted from the current year capital gains from collectables (2D to 2F).

At J, K and L in step A2.2, write the capital gains from collectables after you have applied the current year capital losses and prior year net capital losses from collectables.

You can carry forward any unapplied net capital losses from collectables (2C minus 2G) but in later income years you can only use them to reduce any capital gains from collectables (not from other CGT assets). There is no time limit on how long you can carry forward these losses.

When you have completed step A2.2, transfer:

• the amounts at J, K and L to the corresponding labels in part A3, and
• the amount of unapplied prior year net capital losses from collectables (referred to above) to H UNCL from collectables in part I (together with any net capital losses from collectables at step A2.1).

Part A3 Total current year capital gains

In part A3, add A1 and J, A2 and K, and A3 and L, to give A7, A8 and A9 respectively.

Copy A4, A5 and A6 down to A10, A11 and A12 respectively.

At Total CYCG in part A3, write the total of your entity’s capital gains at A7 to A12.

Part B Current year capital losses from CGT assets and CGT events, other than capital losses from collectables

In part B, write any current year capital losses your entity has made from:

• shares and units (in unit trusts) at A
• forestry managed investment scheme interest at T
• real estate at B
• hedging financial arrangements at U, and
• other CGT assets and any other CGT events at C.

Write the total at D.

You can transfer these from your capital gain or capital loss worksheets.

If your entity does not have any current year capital losses (other than from collectables), go to part D.

Do not include any capital loss made from personal use assets at C Other CGT assets and any other CGT events. You disregard capital losses from personal use assets and cannot apply them to reduce capital gains.

Do not write capital losses made from collectables in part B, you should have shown them in part A2.

Part D Apply capital losses against current year capital gains

In part D, write your entity’s current year capital gains (CYCG) reduced by:

• current year capital losses, other than from collectables (step D1)
• prior year net capital losses, other than from collectables (step D2), and
• capital losses transferred in (for companies only, step D3).

Step D1 Apply current year capital losses against total current year capital gains written at rows A7 to A12 above

If your entity has current year capital losses (other than capital losses from collectables) that can be deducted, you must deduct them here. You cannot choose to defer to a later income year any amount that can be deducted this income year.

Have you written current year capital gains for your entity at A7 to A12 in part D?

No

Transfer D in part B to I in part I of the worksheet, then go to step D2.

Yes

Does your entity have CYCLs or PYNCLs, other than from a collectable, or capital losses transferred in?

No

Transfer the amounts at A7 to A12 in part D to A to F in part E and continue from part F.

Yes

If your entity has CYCL, read on. If your entity has only PYNCL, transfer the amounts at A7 to A12 in part D to 3G to 3L in step D1 and then go to step D2. If your entity has only capital losses transferred in, go to step D3.

You can choose the order in which you deduct your entity’s current year capital losses (at D in part B) from the current year capital gains (at A7 to A12).

Generally, if your entity is entitled to the small business CGT concessions, it is better to reduce the non-active asset capital gains first. Within the non-active and active categories you usually get the greatest benefit by reducing:

• capital gains calculated using the 'other' method, then
• capital gains calculated using the indexation method, then
• capital gains calculated using the discount method.

At 3A to 3F, write the amounts of current year capital losses deducted in the order you have chosen with the total at H. At 3G to 3L, write the capital gains after applying (deducting) the current year capital losses.

You can carry forward net capital losses other than from collectables (D in part B minus H) to reduce capital gains in later income years.

When you have completed step D1, transfer the amount of net capital losses (D minus H) to I UNCL from other CGT assets in part I.

Step D2 Apply any prior year net capital losses, other than those from collectables, against current year capital gains remaining after step D1

Prior year net capital losses are the unapplied net capital losses carried forward from earlier income years.

If your entity has prior year net capital losses (other than from collectables) that can be deducted, they must be deducted here.

You cannot choose to defer to a later income year any amount that can be deducted this income year.

Does your entity have any current year capital gain remaining?

No

If your entity has PYNCL, complete 4A, 4B and 4C and transfer the amount at 4C to I in part I. Go to part E.

Yes

Does your entity have any PYNCL, other than collectables?

No

If your entity is a company with capital losses transferred in, go to step D3. Otherwise, transfer 3G to 3L in step D1 to A to F in part E and continue from part F.

Yes

Read on.

Reduce the prior year net capital losses at 4A by any adjustment for commercial debts forgiven at 4B. For more information on commercial debts forgiven, see your entity’s tax return instructions.

Again, you can deduct prior year net capital losses from any remaining capital gains in the way that produces the best result. See discussion for step D1. However, you must deduct them in the order in which they were made, for example, you must deduct a 1995–96 income year capital loss before a 1998–99 income year capital loss.

At 4D to 4I, write the amounts of prior year net capital losses you have chosen to be deducted and the total at L. At 4J to 4O, write the capital gains after you have applied the prior year net capital losses.

You can carry forward any unapplied prior year net capital losses (4C minus L) to reduce the capital gains in later income years. There is no time limit on how long you can carry forward these losses.

When you have completed step D2, transfer the amount of unapplied prior year net capital losses (4C minus L) to I UNCL from other CGT assets in part I (together with any net capital losses at step D1).

Otherwise, transfer the remaining capital gain amounts at 4J to 4O to A to F in part E.

Step D3 Companies only – apply any capital losses transferred in

Only follow this step if your entity is a group company with capital losses transferred in.

A group company may transfer the whole or a part of a capital loss to another company where:

• both companies are members of the same wholly owned group
  
• one of the companies is
  • an Australian branch of a foreign bank, or
  • an Australian permanent establishment of a foreign financial entity if the capital loss is for an income year commencing on or after 26 June 2005
   
• the other company is
  • the head company of a consolidated group or multiple entry consolidated (MEC) group, or
  • not a member of a consolidatable group, and
   
• further conditions in Subdivision 170-A of the Income Tax Assessment Act 1997 are satisfied.

You need to apply the capital losses transferred in to your entity in the order they were received. Your entity must have enough capital gains to absorb the capital losses transferred in.

When you have completed step D3, transfer the amount of CYCG remaining after applying CYCL, PYNCL (4J to 4O in step D2) and capital losses transferred in to A to F in part E.

Part E Current year capital gains after applying capital losses

In part E, write your entity’s current year capital gains reduced by current year capital losses, prior year net capital losses and capital losses transferred in.

Part F CGT discount on capital gains

In part F, apply the CGT discount.

Does your entity have a capital gain at Capital gains – discount method (B or E) in part E?

Yes

Read on.

No

Go to part G.

Next, calculate the CGT discount that applies to the capital gains at B and E in part E. The CGT discount percentage is:

• 33 1/3% for complying superannuation entities, or
• 50% for individuals and trusts.

Write the amount of the CGT discount at J and K in part F.

Write the amount of your remaining capital gains at 6A to 6F in part F.

Part G Small business CGT concessions

In part G, apply the small business CGT concessions your entity is claiming. For more information about the small business CGT concessions, see the publication Capital gains tax (CGT) concessions for small business – overview.

Is your entity eligible for the small business CGT concessions?

Yes

Read on.

No

Go to part H

Write:

• the amount of your entity’s small business 50% active asset reduction (SBAAR) at L to N
• the amount of your entity’s small business retirement exemption (SBRE) at O to Q, and
• the amount of your entity’s small business rollover (SBRO) at R to T.

Write the total amount of the small business CGT concessions your entity is claiming at 7A to 7D of part G.

Part H Net capital gain calculation

In part H, write the amount of your entity’s net capital gain.

Your entity’s net capital gain is the amount remaining after applying any current year capital losses, net capital losses from prior income years, capital losses transferred in, the CGT discount and any applicable CGT small business concessions.

Include a net capital gain as assessable income on your entity’s tax return at the relevant item. See step 3.

Part I Unapplied net capital losses carried forward to later income years

In part I, write any unapplied net capital losses (UNCL) your entity is carrying forward. These losses will be available to reduce any capital gains in later income years.

Does your entity have any unapplied net capital losses?

Yes

Read on.

No

You have completed the worksheet.

At H and I, write details of any capital losses that are unapplied (that is, that have not been used).

At H, write the unapplied capital losses from collectables only. This is the sum of:

• any current year capital losses from collectables that you have not used to reduce capital gains from collectables this income year (that is, deduct 1D in step A2.1 from C4 in part A2), and
• any prior year net capital losses from collectables that you have not used to reduce capital gains from collectables this income year (that is, deduct 2G from 2C in step A2.2).

At I, write all of the other capital losses, that is, the sum of:

• the current year capital losses that you have not used to reduce capital gains (that is, deduct H in step D1 from D in part B), and
• the prior year net capital losses that you have not used to reduce capital gains (that is, deduct L in step D2 from 4C in step D2).

At V, write the total of the amounts at H and I.

The amounts at H and I are the unapplied net capital losses available to be carried forward and used to reduce your capital gains in later income years.

You can only use unapplied net capital losses from collectables to reduce capital gains from collectables in later income years.