Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

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

Division 104 - CGT events  

Subdivision 104-K - Other CGT events  

SECTION 104-225   Special collectable losses: CGT event K5  

104-225(1)    
CGT event K5 happens if the requirements in subsections (2), (3) and (4) are satisfied.

104-225(2)    

There is a fall in the *market value of a *collectable of a company or trust.

104-225(3)    
*CGT event A1, C2 or E8 happens to:

(a) *shares you own in the company (or in a company that is a member of the same *wholly-owned group); or

(b) an interest you have in the trust;

and there is no roll-over for that CGT event.

104-225(4)    
As a result of the *capital proceeds from that event being replaced under section 116-80 :

(a) you make a *capital gain that you would not otherwise have made; or

(b) you do not make the *capital loss you would otherwise have made; or

(c) you make a capital loss that is less than you would otherwise have made.

Note:

The capital proceeds from that event are replaced with the market value of the shares or the interest in the trust as if the fall in the market value of collectables and personal use assets had not occurred: see section 116-80 .

104-225(5)    
The time of CGT event K5 is the time of *CGT event A1, C2 or E8.

104-225(6)    

You make a capital loss from a *collectable equal to:

• the *market value of the *shares or the interest in the trust (worked out as at the time of *CGT event A1, C2 or E8 as if the fall in market value of the collectable had not occurred);

less:

• the actual *capital proceeds from CGT event A1, C2 or E8.

 

Example:

You own 50% of the shares in a company. You bought them in 1999 for $60,000. The company owns a painting worth $100,000 and another asset worth $20,000. The painting falls in value to $50,000.

In 1999 you sell your shares for $35,000 (the actual capital proceeds). You would otherwise make a capital loss of $25,000.

However, the actual capital proceeds are replaced with $60,000 (the market value of the shares if the painting had not fallen in value). You do not make a capital loss from selling the shares.

You do make a collectable loss equal to:

$60,000   −   $35,000   =   $25,000

Note:

You can subtract capital losses from collectables only from your capital gains from collectables: see section 108-10 .