Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

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

Division 116 - Capital proceeds  

SECTION 116-10   Modifications to general rules  

116-10(1)    

There are 6 modifications to the general rules that may be relevant. The table in section 116-25 lists which ones may be relevant to each CGT event listed in the table.

Explanation of modifications

116-10(2)    
The first is a market value substitution rule. It is relevant if:

• you receive no capital proceeds from a CGT event; or

• some or all of the capital proceeds cannot be valued; or

• you did not deal at arm ' s length with another entity in connection with the event.

116-10(3)    
The second is an apportionment rule. It is relevant if a payment you receive in connection with a transaction relates in part only to a CGT event.

Example:

You sell 3 CGT assets for a total of $100,000. The $100,000 needs to be apportioned between the 3 assets.

116-10(4)    
The third is a non-receipt rule. It is relevant if you do not receive, or are not likely to receive, some or all of the capital proceeds from a CGT event.

116-10(5)    
The fourth is a repaid rule. It is relevant if you are required to repay some or all of the capital proceeds from a CGT event.

116-10(6)    
The fifth is relevant only if another entity assumes a liability in connection with a CGT event.

116-10(7)    

The sixth relates to misappropriation by an employee or agent. It is relevant if your employee or agent misappropriates all or part of the capital proceeds from a CGT event.

Note 1:

Also, these provisions of the Income Tax Assessment Act 1936 modify capital proceeds:

(a) section 23B (undistributed FIF attribution income on disposal of an interest in a FIF);

(b) sections 159GZZZF and 159GZZZG (cancellation of shares in a holding company);

(c) sections 159GZZZQ and 159GZZZS (buy-backs of shares);

(d) sections 401 , 422 , 423 and 461 (CFCs).

Note 2:

Section 230-505 of this Act (Division 230 financial arrangement as consideration for provision or acquisition of a thing) also modifies capital proceeds.