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  

Anti-overlap provisions

SECTION 118-20   Reducing capital gains if amount otherwise assessable  

118-20(1)    
A *capital gain you make from a *CGT event is reduced if, because of the event, a provision of this Act (outside of this Part) includes an amount (for any income year) in:

(a)    your assessable income or *exempt income; or

(b)    if you are a partner in a partnership, the assessable income or exempt income of the partnership.

118-20(1A)    
Subsection (1) applies to an amount that, under a provision of this Act (outside of this Part), is included in:

(a)    your assessable income or *exempt income; or

(b)    if you are a partner in a partnership, the assessable income or exempt income of the partnership;

in relation to a *CGT asset as if it were so included because of the *CGT event referred to in that subsection if the amount would also be taken into account in working out the amount of a *capital gain you make.

Note:

An example is an amount assessable under Division 16E of Part III of the Income Tax Assessment Act 1936 , which deals with accruals taxation of certain securities.

118-20(1B)    
The rule in subsection (1) does not apply to:

(a)    an amount that is taken to be a dividend under section 159GZZZP of the Income Tax Assessment Act 1936 (which relates to buy-backs of *shares); or

(b)    

an amount included in assessable income under subsection 207-20(1) , 207-35(1) or 207-35(3) of this Act (which relate to franked distributions).

118-20(2)    
The gain is reduced to zero if it does not exceed:

(a)    the amount included; or

(b)    if you are a partner, your share (the partner ' s share ) of the amount included in the assessable income or *exempt income of the partnership (calculated according to your entitlement to share in the partnership net income or loss).

Example:

Liz bought some land in 1990, as part of a profit-making scheme. In December 1998 she sells it.

Her profit from the sale is $40,000 and is included in her assessable income under section 6-5 (about ordinary income).

Suppose she made a capital gain from the sale of $30,000. It is reduced to zero because it is does not exceed the amount included.

118-20(3)    
The gain is reduced by the amount included, or the amount of the partner ' s share, if the gain exceeds that amount.

Note:

These rules are modified for complying superannuation funds that become non-complying and for foreign superannuation funds that become Australian superannuation funds: see Division 295 .

118-20(4)    

A *capital gain you make from a *CGT event is reduced by the extent that a provision of this Act (except sections 59-40 and 316-255 ) treats:

(a)    

an amount of your *ordinary income or *statutory income from the event as being *non-assessable non-exempt income; or

(b)    

if you are a partner, your share of the ordinary income or *statutory income of the partnership from the event (calculated according to your entitlement to share in the partnership net income or loss) as being non-assessable non-exempt income of the partnership.

118-20(4A)    

A *capital gain the trustee of a *superannuation fund makes from a *CGT event happening in relation to a *CGT asset in an income year is reduced if the asset ' s *market value was taken into account in working out the fund ' s income from previous years under section 295-325 or 295-330 .

118-20(4B)    

The gain is reduced to zero if it does not exceed the amount that would have been the *capital gain from the *CGT event if the *capital proceeds from the event were the asset ' s *market value that was taken into account in working out that net previous income.

If the gain exceeds that amount, it is reduced by that amount.

Exceptions

118-20(5)    
The gain is not reduced if an amount is included in your assessable income, or the assessable income of the partnership, for any income year because of a balancing adjustment.

118-20(6)    

The gain is not reduced if an amount is included in your *non-assessable non-exempt income under section 768-5 (about foreign equity distributions on participation interests) because a company makes a *foreign equity distribution that is:

(a)    

debited against a *share capital account of the company; or

(b) (Omitted by No 63 of 1998)

(c)    debited against an asset revaluation reserve of the company; or

(d)    directly or indirectly attributable to amounts transferred from such an account or reserve of the company.