Explanatory Memorandum
(Circulated by the authority of the Treasurer, the Hon Wayne Swan MP)Chapter 3 Tax benefits and capital gains tax
Outline of chapter
3.1 Schedule 3 to this Bill amends the Income Tax Assessment Act 1997 (ITAA 1997) to provide a general exemption from capital gains tax (CGT) for capital gains or capital losses arising from a right or entitlement to a tax offset, deduction or similar benefit.
Context of amendments
3.2 Subsection 118-37(1) of the ITAA 1997 disregards the capital gain or capital loss you make from a CGT event as a result of a number of specified events or programs.
3.3 This measure covers capital gains or capital losses you make from a CGT event as a result of receiving a tax offset, deduction or other similar benefit.
Summary of new law
3.4 Subsection 118-37(1) of the ITAA 1997 disregards the capital gain or capital loss you make from a CGT event as a result of a number of specified events or programs.
3.5 The amendment disregards capital gains or capital losses you make from a CGT event as a result of receiving a tax offset, deduction or other similar benefit.
Detailed explanation of new law
3.6 A highly technical interpretation of the income tax law may result in a capital gain or capital loss arising to taxpayers who have a right to receive an urban water tax offset on the satisfaction of the right.
3.7 This measure puts beyond doubt that a capital gain or capital loss would not arise for taxpayers in such circumstances, or in other circumstances where a tax offset, deduction or other taxation benefit arises under a scheme.
3.8 The opportunity is taken to extend this treatment to taxpayers who have the right to receive other types of tax offsets, deductions or other taxation benefits. For example, this treatment would be extended to the right to receive a reduction in land tax available under an Australian law, or under the law of a foreign country or part of a foreign country. [ Schedule 3, item 1, paragraph 118-37(1 )( h )]
Application and transitional provisions
3.9 This measure applies to relevant CGT events happening in the 2009-10 income year and later income years. [ Schedule 3, item 2 ]