Part B – Instructions for individuals completing their tax return

Explains how to complete question 18 in your individual supplementary tax return.

Who should read this part?

The information in Part B will help you complete question 18 of the Tax return for individuals (supplementary section) 2023 if:

• you are an individual or completing a tax return on behalf of an individual, and
• a CGT event happened in 2022–23 or a distribution from a trust (including a managed fund) that included a net capital gain was received.

If you are competing a tax return for a company, trust or fund, go to Part C.

If you have sold only a few shares or units, or have a managed fund distribution, you may find it easier to use the Personal investors guide to capital gains tax 2023.

Individuals, including individual partners in a partnership, who lodge using a paper tax return, are not required to complete a CGT schedule.

The labels to complete on the Tax return for individuals (supplementary section) 2023 are:

• G Did you have a capital gains tax event during the year?
• M Have you applied an exemption, rollover or additional discount during the year?
• A Net capital gain
• H Total current year capital gains
• V Net capital losses carried forward to later income years
• X Credit for foreign resident capital gains withholding amounts.

Worksheets

If you need help completing the:

• Capital gain or capital loss worksheet 2023, go to step 1 of Part C (ignore the word ‘entity’)
• CGT summary worksheet for 2023 tax returns, go to steps 2 and 3 of Part C.

How to work out your capital gain or capital loss in part A explains how to calculate a capital gain or capital loss for each CGT event or asset using completed examples and the Capital gain or capital loss worksheet 2023. For most individuals, this worksheet is all you will need to work out what needs to be included at question 18 in your supplementary tax return. Make copies of the worksheet if you need more than one. If you need help completing the Capital gain or capital loss worksheet, see step 1 in Part C (ignore the word ‘entity’).

If you have a number of the Capital gain or capital loss worksheets because several CGT events happened, you may wish to use the CGT summary worksheet for 2023 tax returns to help you calculate your net capital gain or net capital loss. Read steps 2 and 3 in Part C (ignoring the word ‘entity’) to find out how to complete the summary worksheet. Then complete question 18 in your supplementary tax return.

Step 1 Types of CGT assets and CGT events

Certain capital gains and capital losses (that is, those from collectables and personal use assets) are treated differently when calculating your net capital gain or net capital loss. For explanations of these assets, see Does capital gains tax apply to you? in part A. Disregard capital losses from personal use assets and do not take them into account when working out your net capital gain. You can only use capital losses from collectables to reduce capital gains from collectables.

You need to separate the records of your CGT events into the following 3 categories:

• those relating to collectables (for example, jewellery)
• those relating to personal use assets (for example, a boat you use for recreation)
• other CGT assets or CGT events, including distributions of capital gains from managed funds.

Step 2 Exemptions, rollovers and the additional affordable housing discount

There are exemptions and rollovers that may allow you to reduce, defer or disregard your capital gain or capital loss. There is also an additional discount on capital gains for resident individuals who invest in affordable housing.

If you applied an exemption or rollover to disregard, defer a capital gain or capital loss or you qualified for and applied the additional affordable housing discount to reduce a capital gain, write X in the Yes box at question 18 Capital gains – label M in your supplementary tax return. Write X in the No box if you did not.

Write in the code box at label M the code from the following list that represents the CGT exemption, rollover or additional discount that produced the largest amount of capital gain or capital loss deferred or disregarded.

CGT exemption and rollover codes:

• A Small business active asset reduction
• B Small business retirement exemption
• C Small business rollover
• D Small business 15–year exemption
• E Foreign resident CGT exemption
• F Scrip for scrip rollover
• I Main residence exemption
• J Capital gains disregarded as a result of the sale of a pre-CGT asset
• K Disposal or creation of assets in a wholly-owned company
• L Replacement asset rollovers
• M Exchange of shares or units
• N Exchange of rights or options
• O Exchange of shares in one company for shares in another company
• P Exchange of units in a unit trust for shares in a company
• R Demerger rollover
• S Same asset rollovers
• T Small business restructure rollover
• U Early stage investor
• V Venture capital investment
• W Affordable housing discount
• X Other exemptions and rollovers

Step 3 Calculating your current year capital gain or capital loss for each CGT asset or CGT event

Calculate whether you have made a capital gain or capital loss for each CGT event that has happened during 2022–23. The Capital gain or capital loss worksheet 2023 can help you work this out. Do not include capital gains that are disregarded, deferred or reduced, or capital losses that are disregarded; see Exemptions and rollovers.

Include the relevant capital gains at this step if you are a small business owner and qualify for one or more of the following small business CGT concessions:

• 50% active asset reduction
• small business rollover relief, or
• small business retirement exemption.

Do not include capital gains to which the small business 15-year exemption applies as these are only included in question 8 of the CGT schedule.

You apply the concessions to the amount of any relevant capital gains remaining after step 8.

In calculating your capital gain, you will use one of the following 3 methods for each asset:

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

For a full explanation of these methods and how to use them to calculate your capital gain or capital loss for each CGT event, see How to work out your capital gain or capital loss in part A.

For a CGT event that happens after 11:45 am AEST on 21 September 1999 to a CGT asset that you acquired at or before that time, you can choose to use either the indexation or the discount method to calculate your capital gain if you have owned the asset for at least 12 months. If you bought and sold your asset within 12 months, you must use the 'other' method to calculate your capital gain.

If you use the discount method, do not apply the discount percentage until you have applied current year capital losses and unapplied net capital losses from earlier years.

You also need to work out the amount of any capital gains that you are taken to have made as part of a distribution from a trust. You must use the same method the trustee used in calculating the amount of the capital gain. For more information, see Trust distributions.

Concessions that may apply

There are special rules if a trust’s net capital gain was reduced by the CGT discount or by applying the small business 50% active asset reduction, or both. The trust should advise you if it has claimed either (or both) of these concessions as you will need to adjust the amount of the net capital gain to be included in your total capital gains. As the beneficiary of the capital gain distribution, you do this by grossing up the net capital gain by the amount that relates to the discount applied, for example, if the trust's net capital gain was reduced by the CGT discount (50%), you adjust the amount of the net capital gain by multiplying it by 2. You include this grossed up amount in your total capital gains.

For more information, see Trust distributions.

Step 4 Total current year capital gains

If you do not have any capital gains from collectables, add up all your capital gains from step 3 and write this amount at question 18 – label H Total current year capital gains in your supplementary tax return.

If you have a capital gain from collectables, deduct any capital losses from collectables (including unapplied net capital losses from earlier years from collectables). Do not deduct capital losses from other capital gains at this stage.

Any capital gain remaining is added to all your other capital gains from step 3. Write the total amount at question 18 – label H in your supplementary tax return.

If you received (or are entitled to receive) a distribution from a trust that includes a net capital gain, you also need to include this amount here in your total capital gains. Ensure that you gross up the net capital gain amount by the amount that relates to the CGT discount applied by the trust. Do not include this amount as a distribution from the trust at question 13 Partnerships and trusts in your supplementary tax return.

If your capital gains from collectables were reduced to zero when you applied your losses from collectables, and you still have capital losses from collectables remaining, then make a note of this amount.

This capital loss can be carried forward to future years, see step 11, and will be recorded at question 18 – label V Net capital losses carried forward to later income years in your supplementary tax return.

Step 5 Capital losses

If you have no current year capital losses or unapplied net capital losses from earlier years, go to step 8. Otherwise, read on.

From your Capital gain or capital loss worksheet, add up all your capital losses for 2022–23 and make a note of this amount. Remember that you do not include capital losses:

• from personal use assets
• from collectables
• that are disregarded (for example, those from assets acquired before 20 September 1985), see Exemptions.

If you have a current year capital loss, go to step 6.

If you have only unapplied net capital losses from earlier years and no current year capital losses, go to step 7.

Step 6 Applying current year capital losses

You must apply your current year capital losses from step 5 against (that is, deducted from) any capital gains you made during the year to determine your net capital gain or net capital loss.

 

When applying your current year capital losses, you can choose the method that gives you the best result to reduce your current year capital gains. While you will need to consider your own situation, for most people the order that usually gives the greatest benefit and the smallest net capital gain is to apply the capital losses against capital gains calculated using the:

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

Apply your current year capital losses against your current year capital gains and make a note of any capital gains remaining. If you have current year capital losses that can be applied to 2022–23 they must be applied here. You cannot choose to defer to a later year any amount that can be applied this year.

If your total capital losses for the year are more than your total capital gains, you will need to keep a record of the difference. This amount (your net capital loss) is carried over and used to reduce your future capital gains. There is no time limit on how long you can carry forward your net capital loss. If you have reduced your capital gains to zero, do not put anything at label A Net capital gain.

Step 7 Applying net capital losses from earlier years

If you do not have any unapplied net capital losses from earlier years, go to step 8. Otherwise, read on.

You can further reduce your current year capital gains by your unapplied net capital losses from earlier years.

You must apply unapplied net capital losses from earlier years against capital gains in the order you made them. For example, use net capital losses from 1998–99 before you use any net capital losses from 1999–2000. You can then apply these capital losses against your capital gains in the manner that gives you the best result. Again, for most people the order that usually gives the greatest benefit and the smallest net capital gain is to apply the capital losses against capital gains calculated using the:

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

Reduce your remaining current year capital gains by any unapplied net capital losses from earlier years and make a note of any capital gains remaining. If you have unapplied net capital losses from earlier years that can be applied to 2022–23, they must be applied here. You cannot choose to defer to a later income year any amount that can be applied to 2022–23.

You need to keep a record of any unapplied net capital losses from earlier years. You can continue to carry forward these amounts and use them to reduce your future capital gains. There is no time limit on how long you can carry forward your net capital losses. You record these at label V Net capital losses carried forward to later income years, see step 11. If you have reduced your capital gains to zero, do not put anything at label A Net capital gain.

Step 8 Applying the CGT discount

You can now reduce any remaining current year capital gains calculated using the discount method by the discount percentage (50% for individuals plus any additional affordable housing capital gain discount for eligible investors).

You cannot apply the discount to capital gains calculated using the indexation method or the 'other' method.

Step 9 Applying the small business CGT concessions

If you are a small business owner, you may qualify for one or more of the following small business CGT concessions:

• 50% active asset reduction
• small business rollover relief
• small business retirement exemption.

You can apply these concessions now to the amount of any relevant capital gains remaining after step 8. You may apply the concessions to capital gains calculated using any of the 3 methods. The small business 15-year exemption is not applied at this step as the capital gain to which this exemption applies is excluded under step 3.

Businesses with an aggregated turnover of less than $2 million can now access the small business CGT concessions via the small business entity test for the CGT purposes. This will also apply to:

• taxpayers that do not carry on a business but own a CGT asset used in a business by a related entity
• an individual partner who owns a CGT asset used in the partnership business.

For more information, see Small business CGT concessions.

Step 10 Working out your net capital gain

The amount of your remaining capital gains becomes your net capital gain, which you write at question 18 – label A Net capital gain in your supplementary tax return.

It represents the amount you have written at label H Total current year capital gains reduced in accordance with:

• Step 6 Applying current year capital losses
• Step 7 Applying net capital losses from earlier years
• Step 8 Applying the CGT discount (including any additional affordable housing capital gain discount)
• Step 9 Applying the small business CGT concessions.

If you have capital losses that have reduced your capital gains to zero, do not put anything at label A Net capital gain. If you have any capital losses remaining after reducing your capital gains, you can carry these forward to future income years, see step 11. Again, do not include losses from:

• assets you acquired before 20 September 1985
• personal use assets
• other losses that are disregarded.

Step 11 Capital losses carried forward to later income years

Your net capital losses amount to be carried forward is the total of any:

• unapplied current year net capital loss from step 6
• unapplied net capital losses from earlier years from step 7
• capital losses from collectables to be applied in future income years from step 4.

You will need to keep a separate record of unapplied net capital losses from collectables because you can only use these to reduce capital gains from collectables in later income years. There is no time limit on how long you can carry forward the net capital losses.

Write this amount (if any) at question 18 – label V in your supplementary tax return. Remember to deduct these losses from any capital gains in future income years.

Foreign resident capital gains withholding payments

Foreign resident capital gains withholding applies to certain transactions entered into on or after 1 July 2016. If an amount has been withheld from you and paid to the ATO we will advise you of the receipt of the withholding amount. You can claim a credit for the withholding amount at question 18 – label X in your supplementary tax return.

Look-through earnout rights and amendment to your earlier year income tax assessment

If you received or provided a financial benefit under a look-through earnout right created on or after 24 April 2015 you may need to seek an amendment to your income tax assessment for the year in which the relevant CGT occurred. You may be able to request such amendment via the CGT Schedule (if you satisfy the relevant conditions) when you lodge your current year income tax return. Detailed instructions are provided in Item 7 Earnouts arrangements under Part C.

Continue to: Part C – Instructions for companies, trusts and funds (entities)