Guide to capital gains tax 2009

This version is no longer current. Please follow this link to view the current version.

• This document has changed over time. View its history.

Introduction

This guide will help you work out whether any of the assets you own (or may own in the future), and any events that happen, are subject to CGT. Where they are, it tells you how to work out your capital gain or capital loss. It also covers what records you need to keep.

New terms We may use some terms that are new to you. These words are explained in Definitions . Generally they are also explained in more detail in the section where they first appear. While we have sometimes used the word 'bought' rather than 'acquired', you may have acquired an asset subject to CGT (a CGT asset) without paying for it (for example, as a gift or through an inheritance). Similarly, we refer to 'selling' such an asset when you may have disposed of it in some other way (for example, by giving it away or transferring it to someone else). Whether by sale or by any other means, all of these disposals are CGT events.

Your tax return

Whether you are an individual or an entity (company, trust or fund), if you have a capital gain or capital loss for 2008-09, this guide will help you to complete the capital gains item on your tax return.

Worksheets

You may wish to use the two CGT worksheets provided at the back of this guide to help you keep track of your records and make sure you pay no more CGT than necessary.

There is:

• a Capital gain or capital loss worksheet (PDF, 96KB) for working out your capital gain or capital loss for each CGT event
• a CGT summary worksheet for 2008-09 tax returns (PDF, 210KB) (CGT summary worksheet) to help you summarise your capital gains and capital losses and produce the final net amount you need to include on your tax return.

You can print out these forms and complete them as you work through the guide.

CGT schedule

If you are a company, trust or fund with total capital gains or capital losses of more than $10,000 this income year, you must complete a Capital gains tax (CGT) schedule 2009 (CGT schedule). Partnerships and individual paper tax preparers are not required to lodge a schedule.

The CGT schedule is explained in detail in part   C and a copy is provided at the back of this guide.

What's new?

Changes and proposed changes to the law

Demutualisation of private health insurers

Changes to the law provide relief from CGT for policy holders of health insurers who receive shares (or rights) when their insurer demutualises. These changes apply from 1   July 2007.

For more information, see Demutualisation of private health insurers .

Marriage breakdown rollover

Changes to the Family Law Act mean that de facto couples now have access to the financial settlement regime under the Family Law Act 1975 .

As a result the capital gains tax provisions have been changed to extend CGT rollover on the transfer of an asset on marriage breakdown to transfers of assets under an agreement made between parties to a de facto relationship under the Family Law Act 1975 .

The CGT rollover has also been extended to include the transfer of an asset reflecting the personal interest of a party to a de facto relationship in a small superannuation fund from that fund to another complying fund in accordance with a court order under the Family Law Act 1975 or an agreement made between the parties to the de facto relationship under the Family Law Act 1975 .

These changes apply from 1   March 2009. For further information see Marriage breakdown .

Changes to the law will also extend CGT rollover on the transfer of assets on marriage breakdown to cover transfer between spouses, whether a marriage, or a same-sex or opposite-sex de facto relationship. This change will apply from the 2009-10 income year.

Modification of the scrip-for-scrip provisions for corporate restructures

A Bill introduced into Parliament modifies the scrip-for-scrip CGT rollover provisions to ensure that, for corporate restructures, the acquiring entity's cost base of shares in the target entity reflects the tax costs of the target entity's net assets.

The amendments apply to arrangements entered into after 7.30pm (by legal time in the ACT) on 13   May 2008.

Announced by the government

These changes were announced by the government during the year but they had not become law when this guide was finalised.

Capital gains tax relief for compulsory acquisitions of part of a main residence

On 19   March 2009, the government announced it will seek an amendment to the law so that the CGT main residence exemption can apply in certain circumstances to the compulsory acquisitions of and certain other involuntary events in relation to part of a taxpayer's main residence.

The amendments will ensure taxpayers do not pay CGT on compulsory acquisitions of part of their main residence and they are not better or worse off as a result of a compulsory acquisition.

The changes will apply to CGT events that happen after the date of royal assent. Taxpayers can also apply the changes from the 2004-05 income year to the date of royal assent.

Capital gains tax - recognition of termination and exit fees in a capital gain or capital loss calculation

The government announced on 27 February 2009 its intention to allow termination and exit fees to be recognised when calculating a capital gain or capital loss on an asset by including these costs in the asset's cost base. The intention is for this change to apply to CGT events that happen on and after 1   July 2008 for all CGT assets.

Capital gains tax relief for transformation of water rights

The government announced on 27   February 2009 that it will provide CGT rollover relief for irrigators who transform their entitlement to water under an irrigation right held against an irrigation infrastructure operator into an individual water entitlement.

This rollover will assist the transformation arrangements allowed under the new water market rules by deferring the CGT consequences of the transformation for irrigators until they subsequently deal with their individually held water entitlement. The intention is for this change to apply to CGT events that happen on and after 1   July 2008.

Demutualisation of friendly societies

On 24 October 2008, the Assistant Treasurer announced changes to the tax law to provide relief from CGT for policy holders of friendly societies, including joint health and life insurers, which demutualise to for-profit entities.

The announcement proposed that the changes to the law would take effect from 1   July 2008.

Extension of small business concessions

The government announced in the 2008 Budget that it would increase access to the small business CGT concessions for businesses with turnover of less than $2   million via the small business entity test concession. This would apply to:

• taxpayers owning a CGT asset used in a business by a related entity
• an individual partner who owns a CGT asset (not an interest in an asset of the partnership) used in the partnership business.

For more information, refer to Capital gains tax (CGT) concessions for small business - overview .

2009 budget announcements

Shares, rights and options acquired after 7.30pm (AEST) on 12   May 2009 In the 2009 Federal Budget the government announced changes to the income tax concessions previously available to participants in employee share schemes. The changes will apply to shares and rights acquired under an employee share scheme after 7.30pm (AEST) on 12   May 2009. The measure will remove the ability of taxpayers to elect to either have the discount on qualifying shares and rights acquired under an employee share scheme taxed upfront or in the future. This will mean that discounts provided on all shares or rights acquired under an employee share scheme will be assessed in the income year the shares or rights are acquired. The measure will also limit access to the existing tax exemption of up to $1,000 of the total discounts received to employees with an adjusted taxable income of less than $60,000. At the time this guide was finalised, legislation had not been enacted to give effect to the new measure. Go to our website at www.ato.gov.au for instructions on how to complete your tax return and information about the progress of the Bill.

ATO references:
NO NAT 4151