New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 (90 of 2002)
Schedule 15 Value shifting
Part 5 Dictionary amendments
Income Tax Assessment Act 1997
19 After Division 975
Insert:
Division 977 - Realisation events, and the gains and losses they realise for income tax purposes
Table of sections
CGT assets
977-5 Realisation event
977-10 Loss realised for income tax purposes
977-15 Gain realised for income tax purposes
Trading stock
977-20 Realisation event
977-25 Disposal of trading stock: loss realised for income tax purposes
977-30 Ending of an income year: loss realised for income tax purposes
977-35 Disposal of trading stock: gain realised for income tax purposes
977-40 Ending of an income year: gain realised for income tax purposes
Revenue assets
977-50 Meaning of revenue asset
977-55 Loss or gain realised for income tax purposes
CGT assets
977-5 Realisation event
For a*CGT asset, a realisation event is a*CGT event (except CGT event E4 and CGT event G1).
977-10 Loss realised for income tax purposes
(1) A loss is realised for income tax purposes by a*realisation event that happens to a*CGT asset if, and only if, an entity makes a*capital loss from the event. That capital loss is the loss realised by the event.
(2) If a provision of this Act reduces the loss that would, apart from that provision, be*realised for income tax purposes by the event, the*capital loss is reduced by the same amount.
977-15 Gain realised for income tax purposes
(1) A gain is realised for income tax purposes by a*realisation event that happens to a*CGT asset if, and only if, an entity makes a*capital gain from the event. That capital gain is the gain that is realised by the event.
(2) If a provision of this Act reduces the gain that would, apart from that provision, be*realised for income tax purposes by the event, the*capital gain is reduced by the same amount.
Trading stock
977-20 Realisation event
For an item of*trading stock, a realisation event is a disposal of the item or the ending of an income year.
977-25 Disposal of trading stock: loss realised for income tax purposes
(1) A loss is realised for income tax purposes by a*realisation event consisting of disposal of an item of*trading stock if, and only if:
(a) the item is disposed of, for less than its*cost, in the same income year in which it became part of the trading stock on hand of the entity disposing of it; or
(b) the item is disposed of in a later income year for less than its*value as trading stock of the entity on hand at the start of the later income year.
(2) The loss that is realised for income tax purposes by the event is the difference between the amount included in the entity's assessable income because of the disposal and:
(a) the amount that the entity can deduct for the item's*cost; or
(b) the item's*value as*trading stock on hand at the start of the later income year;
as appropriate.
(3) If a provision of this Act reduces the loss that would, apart from that provision, be*realised for income tax purposes by the event:
(a) the amount that the entity can deduct for the item's*cost; or
(b) the item's*value as trading stock on hand at the start of the later income year;
as appropriate, is reduced by the same amount.
977-30 Ending of an income year: loss realised for income tax purposes
(1) A loss is realised for income tax purposes by a*realisation event that happens to an item of*trading stock and consists of the ending of an income year if, and only if, the*value of the item, as trading stock of an entity on hand at the end of that income year, is less than:
(a) its*cost, if it became part of the trading stock on hand of the entity during that income year; or
(b) otherwise, its value as trading stock of the entity on hand at the start of that income year.
(2) The loss that is realised for income tax purposes by the event is the difference between the*value of the item, as*trading stock of the entity on hand at the end of that income year and:
(a) the amount that the entity can deduct for the item's*cost; or
(b) the item's*value as trading stock on hand at the start of the income year;
as appropriate.
(3) If a provision of this Act reduces the loss that would, apart from that provision, be*realised for income tax purposes by the event:
(a) the amount that the entity can deduct for the item's*cost; or
(b) the item's*value as*trading stock on hand at the start of the income year;
as appropriate, is reduced by the same amount.
977-35 Disposal of trading stock: gain realised for income tax purposes
(1) A gain is realised for income tax purposes by a*realisation event consisting of disposal of an item of*trading stock if, and only if:
(a) the item is disposed of, for more than its*cost, in the same income year in which it became part of the trading stock on hand of the entity disposing of it; or
(b) the item is disposed of in a later income year for more than its*value as trading stock of the entity on hand at the start of the later income year.
(2) The gain that is realised for income tax purposes by the event is the difference between the amount included in the entity's assessable income because of the disposal and:
(a) the amount that the entity can deduct for the item's*cost; or
(b) the item's*value as trading stock on hand at the start of the later income year;
as appropriate.
(3) If a provision of this Act reduces the gain that would, apart from that provision, be*realised for income tax purposes by the event, the amount that is included in the assessable income of the entity because of the disposal is reduced by the same amount.
977-40 Ending of an income year: gain realised for income tax purposes
(1) A gain is realised for income tax purposes by a*realisation event that happens to an item of*trading stock and consists of the ending of an income year if, and only if, the*value of the item, as trading stock of an entity on hand at the end of that income year, is greater than:
(a) its*cost, if it became part of the trading stock on hand of the entity during that income year; or
(b) otherwise, its value as trading stock of the entity on hand at the start of that income year.
(2) The gain that is realised for income tax purposes by the event is the difference between the*value of the item, as*trading stock of the entity on hand at the end of that income year and:
(a) the amount that the entity can deduct for the item's*cost; or
(b) the item's*value as trading stock on hand at the start of the income year;
as appropriate.
(3) If a provision of this Act reduces the gain that would, apart from that provision, be*realised for income tax purposes by the event:
(a) the amount that the entity can deduct for the item's*cost; or
(b) the item's*value as*trading stock on hand at the start of the income year;
as appropriate, is increased by the same amount.
[The next section is section 977-50.]
Revenue assets
977-50 Meaning of revenue asset
A*CGT asset is a revenue asset if, and only if:
(a) the profit or loss on your disposing of the asset, ceasing to own it, or otherwise realising it, would be taken into account, in calculating your assessable income or*tax loss, otherwise than as a*capital gain or*capital loss; and
(b) the asset is neither*trading stock nor a*depreciating asset.
977-55 Loss or gain realised for income tax purposes
For a*revenue asset:
(a) disposing of, ceasing to own, or otherwise realising, the asset is a realisation event ; and
(b) a loss is realised for income tax purposes by the*realisation event if, and only if, there is a loss on the event; and
(c) a gain is realised for income tax purposes by the realisation event if, and only if, there is a profit on the event; and
(d) the loss or profit on the event is the loss or gain realised for income tax purposes; and
(e) if a provision of this Act reduces the loss or gain that would, apart from that provision, be realised for income tax purposes by the event, the loss or profit to be taken into account in calculating your assessable income or*tax loss is reduced by the same amount.