Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

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

Division 118 - Exemptions  

Subdivision 118-A - General exemptions  

Exempt assets

SECTION 118-12   Assets used to produce exempt income etc.  

118-12(1)    
A *capital gain or *capital loss you make from a *CGT asset that you used solely to produce your *exempt income or *non-assessable non-exempt income is disregarded.

118-12(2)    
However, the exemption does not apply if the asset was used to gain or produce an amount that is *non-assessable non-exempt income because of:

(a) any of these provisions of this Act:

(i) section 59-15 (mining payments);

(ia) section 59-35 (amounts that would be mutual receipts but for prohibition on distributions to members or issue of MCIs);

(ii) subsection 70-90(2) (disposing of trading stock outside the ordinary course of business);

(iii) section 86-30 (income of a personal services entity);

(iv) subsection 86-35(1) (payment by a personal services entity);

(v) subsection 86-35(2) (share of personal services entity ' s net income);

(vi) section 240-40 (treatment of arrangement payments);

(via) section 242-40 (about luxury car lease payments);

(vib) section 768-5 (foreign equity distributions on participation interests);

(vii) section 802-15 (foreign residents - exempting CFI from Australian tax);

(viii) section 840-815 (foreign residents - final withholding tax on managed investment trust income); or

(b) any of these provisions of the Income Tax Assessment Act 1936 :

(i) section 23AH (foreign branch profits of Australian companies);

(ii) section 23AI (amounts paid out of attributed income);

(iii) (Repealed by No 110 of 2014)

(iv) section 23AK (attributed foreign investment fund income);

(v) subsection 23L(1) (fringe benefits);

(vi) subsection 99B(2A) (attributed trust income);

(vii) section 128D (dividends, royalties and interest subject to withholding tax);

(viii) subsection 271-105(3) in Schedule 2F (amounts subject to family trust distribution tax).

(ix) (Repealed by No 79 of 2010 )

Note:

These provisions make amounts non-assessable non-exempt income to prevent them being double taxed rather than to remove them entirely from the taxation system. Therefore, the policy reason for disregarding gains and losses does not apply to assets used to produce those amounts.