Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-1 - CAPITAL GAINS AND LOSSES: GENERAL TOPICS  

Division 115 - Discount capital gains and trusts ' net capital gains  

Subdivision 115-A - Discount capital gains  

What is a discount capital gain?

SECTION 115-20   Discount capital gain must not have indexed cost base  

115-20(1)    

To be a *discount capital gain, the *capital gain must have been worked out:

(a) using a *cost base that has been calculated without reference to indexation at any time; or

(b) for a capital gain that arose under *CGT event K7 - using the *cost of the *depreciating asset concerned.

Note:

A listed investment company must also calculate capital gains without reference to indexation in order to allow its shareholders to access the concessions in Subdivision 115-D .

115-20(2)    

For the purposes of working out whether the *capital gain is a *discount capital gain and the amount of that gain, the *cost base taken into account in working out the capital gain may be recalculated without reference to indexation if the cost base had an element including indexation because of another provision of this Act. This subsection has effect despite that other provision.

Note:

This lets a capital gain of an entity (the gain entity ) on a CGT asset be a discount capital gain even if:

(a) another provision of this Act (such as a provision for a same-asset roll-over or Division 128 ) set the gain entity ' s cost base for the asset by reference to the cost base for the asset when it was owned by another entity (the earlier owner ), and the earlier owner ' s cost base for the asset included indexation; or

(b) another provision of this Act (such as a provision for a replacement-asset roll-over) set the cost base of the asset by reference to the cost base of the original asset involved in the roll-over, and the original asset ' s cost base included indexation.

Example:

In 1995 Elizabeth acquired land from her ex-husband under an order made by a court under the Family Law Act 1975 . Former section 160ZZM of the Income Tax Assessment Act 1936 treated her as having paid $56,000 for the land, equal to her ex-husband ' s indexed cost base for it. His cost base for the land then was $40,000.

In 2000, she sold the land for capital proceeds of $150,000.

Her discount capital gain on the land is $110,000 (equal to the capital proceeds less the cost base for the land without indexation).

115-20(3)    

This section does not apply to a *capital gain worked out under subsection 104-255(3) (about carried interests).