Guide to capital gains tax 2016

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Part C - Instructions for companies, trusts and funds (entities)

Are you an individual?

If you are completing a tax return on behalf of an individual (rather than an entity) and you do not wish to use the worksheets, read part B .

If you need help completing the:

• Capital gain or capital loss worksheet (PDF, 127KB), read step   1 of this part (ignoring the word 'entity')
• CGT summary worksheet 2016 (PDF, 166KB), read steps 2 and 3 in this part.

Is your entity a company, trust or fund?

Read this part.

Do you expect your entity's total capital gains or total capital losses for the 2015-16 income year to be $10,000 or less?

An Attribution Managed Investment Trust (AMIT) with multiple classes must apply the $10,000 total capital gain or loss threshold to each class separately.

Yes	Work through steps 1 to 3.
No	Work through steps 1 to 4. Step 4 will show you how to complete the CGT schedule.

 

Introduction

The instructions in this part are designed to help companies, trusts and funds (your entity) to calculate a capital gain or capital loss and to complete the capital gains items on the relevant tax return:

• Company tax return 2016 item 7
• Trust tax return 2016 item 21
• Fund income tax return 2016 item 10
• Self managed superannuation fund annual return 2016 item   11 .

Funds include superannuation funds, approved deposit funds and pooled superannuation trusts.

A self-managed superannuation fund is a fund with fewer than five members that meets the requirements of section 17A of the Superannuation Industry (Supervision) Act 1993 .

The labels to complete at these items on your entity's tax return are:

• G Did you have a capital gains tax event during the year?
• M Have you applied an exemption or rollover?
• A Net capital gain

You will also need to complete V Net capital losses carried forward to later income years at Losses information on your entity's tax return.

The relevant item number on each tax return is:

• Company tax return 2016 item 13
• Trust tax return 2016 item 27
• Fund income tax return 2016 item 13
• Self managed superannuation fund annual return 2016 item   14 .

You may need to complete a Consolidated groups losses schedule 2016 or a Losses schedule 2016 . See the applicable schedule instructions for full details of who must complete the schedule.

Entity

The term 'entity' is used to describe a company (including a head company of a consolidated group), a trust and a fund in this part of the guide.

Worksheets

The worksheets provided in this guide are the:

• Capital gain or capital loss worksheet (PDF, 127KB) (to calculate the capital gain or capital loss from each CGT event)
• CGT summary worksheet 2016 (PDF, 166KB) for 2015 tax returns (to calculate the net capital gain for the 2015-16 income year or net capital losses carried forward to later income years and to complete the CGT labels on the 2016 tax return).

You can print out the worksheets and complete them as you work through this part.

The worksheets are optional and your entity may prefer to use a different worksheet or a computer-based alternative. We have used these worksheets throughout this part of the guide as examples to help you complete the capital gains item on your entity's tax return, and a CGT schedule if this is required.

CGT schedule

Your entity must complete this schedule for the 2015-16 income year if the:

• total current year capital gains are greater than $10,000, or
• total current year capital losses are greater than $10,000.

If your entity is required to complete a CGT schedule, you must attach it to your entity's 2016 tax return.

In the worksheets and CGT schedule at the back of this guide, 'current year capital gain' (CYCG), 'current year capital losses' (CYCL) and 'prior year net capital losses' (PYNCL) refer to 'current income year' and 'prior income year'.

Consolidated groups

If a group consolidates during the income year, the head company must lodge a CGT schedule if the total capital gains or total capital losses that it makes (as head company of the consolidated group and while not a member of a consolidated group) are greater than $10,000.

An entity that has joined a consolidated group or groups during the year of income as a subsidiary member must lodge a CGT schedule covering any periods of non-membership if the entity satisfies the requirements for lodgment of that schedule.

For detailed information on the operation of consolidation, see Consolidation .

Attribution Managed Investment Trusts (AMIT)

If an AMIT chooses multi-class treatment, complete a separate CGT schedule for each class with a total capital gain or loss greater than $10,000.

AMITs that do not choose multi-class treatment must lodge a CGT schedule if the entity has a total capital gain or loss greater the $10,000.

Steps you need to take

The completion of the CGT labels on your entity's 2016 tax return involves a three-step process (for entities with capital gains or capital losses under the $10,000 threshold) or a four-step process (for entities with capital gains or capital losses over the $10,000 threshold):

• Step 1 Calculate the capital gain or capital loss for each CGT event that happens during the 2015-16 income year using the Capital gain or capital loss worksheet .
• Step 2 Calculate the net capital gain for the 2015-16 income year or net capital losses carried forward to later income years using the CGT summary worksheet .
• Step 3 Complete the capital gains item on your entity's tax return.
• Step 4 If required, complete a CGT schedule.

 

Step 1 How to complete the capital gain or capital loss worksheet for each CGT event

The Capital gain or capital loss worksheet calculates a capital gain or capital loss for each separate CGT event. Do not attach completed worksheets to your entity's 2016 tax return. These are your working papers and should be kept with your entity's tax records.

There are a few things to remember when you are using the worksheet.

Firstly, you show the type of CGT asset or CGT event that resulted in the capital gain or capital loss.

Organise each of these under one of the following nine categories:

• shares in companies listed on an Australian securities exchange
• other shares
• units in unit trusts listed on an Australian securities exchange
• other units
• real estate situated in Australia
• other real estate
• amount of capital gain from a trust (including a managed fund)
• collectables
• other CGT assets and any other CGT events.

Secondly, there are special rules that apply when working out a capital gain or capital loss for a depreciating asset. A capital gain or capital loss will only arise to the extent that a depreciating asset is used for a non-taxable purpose (for example, used privately). You calculate the capital gain or capital loss according to concepts used in the uniform capital allowance provisions. Those provisions also treat as income or allow as a deduction any gain or loss from a depreciating asset to the extent that it was used for a taxable purpose.

Thirdly, if a capital gain was made, you calculate it using the:

• indexation method (see note   2 of the worksheet) for capital gains made on CGT assets acquired before 11.45am (by legal time in the ACT) on 21   September 1999 and owned for at least 12   months
• discount method (see note   3 of the worksheet) for assets owned for at least 12   months and for which you are not using the indexation method, or
• 'other' method (if neither the indexation method nor the discount method applies).

These three methods of calculating a capital gain are explained in full in part   A How to work out your capital gain or capital loss and are also listed in Definitions .

When choosing between the indexation and discount methods, the amounts at (a) and (b) at the bottom of the worksheet do not yet reflect any capital losses or CGT discount you may be able to apply. This affects your choice of the amount to transfer to the CGT summary worksheet, which you can use to calculate your net capital gain or net capital loss.

Organise your worksheets so they are grouped by the type of CGT asset or event and transfer the capital gain or capital loss calculated for each group of worksheets to the CGT summary worksheet . Transfer a capital gain according to the method you used to calculate it and the type of asset that gave rise to it.

 

Step 2 How to complete the CGT summary worksheet for 2016 tax returns

You use the CGT summary worksheet to calculate your entity's net capital gain for the 2015-16 income year or net capital losses carried forward to later income years. It also provides the information you need to complete the capital gains item on your entity's tax return and, if required, the CGT schedule.

You should include on this worksheet any capital gain your entity is entitled to as a distribution from a trust.

The CGT summary worksheet is designed for entities that make capital gains or capital losses during the income year. However, you may also find it useful if you are an individual (including a partner in a partnership) who has more complex CGT affairs.

The CGT summary worksheet differentiates between capital gains from active assets and non-active assets. Generally, an active asset is a business asset the entity owns, for example, goodwill of a business. A share and an interest in a trust can also be active assets if certain conditions are met. You will only need to differentiate your capital gains between active and non-active assets if you are going to apply the small business concessions.

There are four small business CGT concessions that may apply to capital gains from active assets.

• The small business 15-year exemption subject to certain conditions being satisfied, means a capital gain is totally disregarded if you or your small business entity has continuously owned the CGT asset for at least 15   years, and
  • you are 55 years old or over and retiring, or
  • you are permanently incapacitated.
• The small business 50% active asset reduction provides a 50% reduction of a capital gain for an active asset.
• The small business retirement exemption allows you to disregard capital gains for active assets (up to a lifetime limit of $500,000) if the conditions are satisfied. If you are eligible for this exemption and are under 55   years old just before you choose it, you must pay the amount into a superannuation (or similar) fund.
• The small business rollover enables you to defer all or part of a capital gain if you acquire a replacement asset or make an improvement to an existing asset and satisfy other conditions.

To find out if your business is eligible for the small business CGT concessions, see Capital gains tax (CGT) concessions for small business - overview .

Active assets

At Active assets in the CGT summary worksheet (and the CGT schedule), you should only include a capital gain from an active asset that qualifies for one or more of the following three small business CGT concessions:

• small business 50% active asset reduction
• small business retirement exemption
• small business rollover.

If the asset does not qualify for one or more of these three concessions, include the capital gain at Non-active assets .

Limit on value of assets

Where the turnover of your entity and related entities exceeds $2   million, the small business CGT concessions are only available if the net value of the assets of your entity and related entities just before the CGT event do not exceed $6   million. For more information, see Comparison of changes to small business CGT concessions since 2006 .

If your entity is not entitled to the small business concessions, include the capital gain at Non-active assets .

Life insurance companies

Life insurance companies, including friendly societies that conduct life insurance business, need to complete two CGT summary worksheets, one for each class of income they derived (superannuation class and ordinary class income). You can only apply capital losses from one class of income against capital gains from that class of income. Combine the details from both summary worksheets onto one CGT schedule, if it is required.

The following parts in this step relate to the parts of the CGT summary worksheet which in turn match the items of the CGT schedule. Work through each relevant part to complete your entity's CGT summary worksheet.

If you have total capital losses from collectables (including current year and prior year losses) greater than your current year capital gains from collectables you need to complete part 9 of the summary worksheet. Otherwise you only need to complete parts 1 to 6.

Part 1 Total current year capital gains and losses

Each group of worksheets you organised at Step 1 corresponds with a column and row in table   1 according to the method you used to calculate your capital gain or loss and the type of CGT asset or event that gave rise to it. To complete table   1 write your entity's current year capital gains and capital losses for each group of worksheets in the corresponding column and row.

What to include and exclude

You generally do not include any capital gain to which an exemption (for example, the small business 15-year exemption) or exception applies.

However, you must include in the Active assets columns capital gains for which your entity may be exempt because it is entitled to one or more of the following:

• small business 50% active asset reduction
• small business retirement exemption
• small business rollover.

If a capital gain does not qualify for one or more of these three concessions, include it at Non-active assets .

Do not include any capital loss made from personal use assets at Other CGT assets and any other CGT events . You disregard capital losses from personal use assets and cannot apply them to reduce capital gains.

Trust capital gains

Include in row 7 of table 1 amounts of capital gains your entity received from a trust (including a managed fund) other than a capital gain involving a collectable.

You must use the same method as the method used by the trustee to calculate your entity's amount of capital gain from the trust. For example, if the trustee used the discount method to calculate a capital gain, you must use the discount method. In some cases, your entity must gross up the amount of the trust's capital gain. If this applies, you include the grossed-up amount at row 7 as explained below.

If the trustee used the discount method to calculate a capital gain, you need to gross it up by multiplying the distribution amount by two. Include the result at the appropriate box in row 7 under Non-active asset Capital gains - discount method. Grossing up ensures that any capital losses your entity has made are deducted from your entity's grossed-up capital gain before the CGT discount is applied.

If the trust's capital gain was reduced by the small business 50% active asset reduction, again it needs to be grossed-up by multiplying the distribution amount by two. Include the result in row 7 at Active assets under the Capital gains - indexation method or Capital gains - 'other' method.

If the trust's capital gain was reduced by the CGT discount and by the small business 50% active asset reduction, multiply the distribution amount by four and include the result in row 7 at Active assets under the Capital gains - discount method.

Did your entity receive an amount from a trust during the income year that includes a net capital gain from a collectable?

If your entity was entitled to an amount of capital gain from a trust resulting from a collectable, include the amount in row 8 of table 1 . Do not include these amounts in row 7. You must use the same method as the trustee to calculate your entity's capital gain from the trust. For example, if the trustee used the discount method to calculate a capital gain, you need to do the same and write the grossed up amount under the Capital gains - discount method column in row 8 of table 1 .

If the trustee used the discount method to calculate a capital gain, gross it up by multiplying the distribution amount by two. Grossing up ensures that any capital losses your entity has made are deducted from your grossed-up capital gain before the CGT discount is applied.

Amount of capital gain and loss

Sum each row of table 1 to obtain the amounts at 1A to 1I and sum each column to obtain the amounts at A to F and 1J and 2A .

Do not apply:

• capital losses (which are applied at part   2 of the worksheet)
• the CGT discount (which is applied at part   4 of the worksheet)
• the small business CGT concessions (which are applied at part 5 of the worksheet).

Transcribe the amounts at A to 1J to the corresponding A to 1J to table 2 in part 2 of the CGT summary worksheet .

Part 2 Applying capital losses against current year capital gains

Part 2A Applying current year capital losses

In this part, you are calculating the amount of current year capital losses you can apply to reduce your entity's current year capital gains.

A company is entitled to deduct net capital losses from current year capital gains as long as it has either:

• substantially maintained the same ownership and control, or
• carried on the same business.

For more information, see Continuity of ownership, control, and same business tests in How to claim a tax loss .

If your entity has current year capital losses that can be deducted, you must deduct them here. You cannot choose to defer to a later income year any amount that can be deducted this income year.

You can choose the order in which you apply your entity's current year capital losses.

Generally, if your entity is entitled to the small business CGT concessions, it is better to reduce the non-active asset capital gains first. Within the non-active and active categories you usually get the greatest benefit by reducing:

• capital gains calculated using the 'other' method, then
• capital gains calculated using the indexation method, then
• capital gains calculated using the discount method.

Write your entity's current year capital losses applied in the order you have chosen (calculated using your current year capital losses at 2A in table 1 ) in row 2 of table 2. If you do not have any current year capital losses, record zeros in all labels in row 2.

Collectables

If you have capital losses from collectables you can only apply those to your capital gains from collectables. If your current year capital losses from collectables ( 1Q of table 1 ) are greater than your current year capital gains from collectables ( 1H of table 1 ) you need to reduce them to the amount of the gain when calculating the amounts in row 2. Any unapplied losses from collectables are carried forward to later income years. Make a note of this amount at Q of table 9 .

Transcribe the total amount of unapplied current year capital losses to K in table 5 .

Calculate the amounts at G to M in table 2 and transcribe to row 1 of table 3 .

Part 2B Applying prior year net capital losses

In this part, you are calculating the amount of prior year net capital losses you can apply to reduce your entity's current year capital gains remaining after you applied current year capital losses.

Prior year net capital losses are the unapplied net capital losses carried forward from earlier income years.

If your entity has prior year net capital losses that can be applied, they must be deducted here. You cannot choose to defer to a later income year any amount that can be applied this income year.

Does your entity have any prior year net capital losses?

Yes

Complete the corresponding boxes in table 3A. Reduce the prior year net capital losses by any adjustment for commercial debts forgiven . For more information on commercial debts forgiven, see your entity's tax return instructions. The amount at Z1 is the amount of prior year net capital losses that is available to be applied against current year capital gains remaining after applying current year capital losses.

No

Record a zero in Z1 of table 3A.

 

Again, you can deduct prior year net capital losses from any remaining capital gains in the way that produces the best result. However, you must deduct them in the order in which they were made, for example, you must deduct a 1995-96 income year capital loss before a 1998-99 income year capital loss.

Collectables

If you have capital losses from collectables you can only apply those to your capital gains from collectables. If your prior year capital losses from collectables are greater than your current year capital gains from collectables remaining after applying current year capital losses from collectables, you need to reduce them to the amount of the gain when calculating the amounts in row 2. Any unapplied prior year net capital losses from collectables are carried forward to later income years. Make a note of this amount at R of table 9 .

Write your entity's prior year net capital losses applied in the order you have chosen (calculated using your Prior year net capital losses after adjustment from Z1 in table 3A ) in row 2 of table 3 .

Transcribe any unapplied prior year net capital losses to L of table 5 .

Calculate the amounts at N to T and transcribe to row 1 of table 4 .

Part 2C Applying net capital losses transferred in

Transfer of net capital losses is only applicable to group companies with net capital losses transferred in. All other entities record zeros in row 2 of table 4 .

A group company may transfer the whole or a part of a net capital loss to another company where:

• both companies are members of the same wholly owned group
• one of the companies is
  • an Australian branch of a foreign bank, or
  • an Australian permanent establishment of a foreign financial entity if the capital loss is for an income year commencing on or after 26   June 2005
• the other company is
  • the head company of a consolidated group or multiple entry consolidated (MEC) group, or
  • not a member of a consolidatable group, and
• further conditions in Subdivision 170-B of the Income Tax Assessment Act 1997 are satisfied.

You need to apply the net capital losses transferred in to your entity in the order they were received. Your entity must have enough capital gains to absorb the net capital losses transferred in.

Write the amount of net capital losses transferred in your entity chooses to apply against capital gains in row 2 of table 4 .

Calculate the amounts at U to A of table 4 and transcribe to row 1 of table 6 .

Part 3 Calculating unapplied net capital losses carried forward

In this part you are calculating the total of any unapplied capital losses from step 2. These unapplied capital losses will be available to reduce any capital gains in later income years.

Write the sum of K and L at 3B of table 5 .

Part 4 CGT discount on capital gains

In this part you are calculating the amount of discount you can apply to reduce your capital gains after applying all losses.

CGT discount

Companies are not eligible for the CGT discount unless they are life insurance companies or friendly societies that carry on life insurance business. These companies may be entitled to the CGT discount for their complying superannuation business.

Calculate the CGT discount in row 2 of table 6 that applies to the capital gains at V and Y . The CGT discount percentage is:

• 33   1/3% for complying superannuation entities, or
• 50% for individuals and trusts.

Individuals (including a beneficiary of a trust and a partner in a partnership) who have a period of foreign residency after 8 May 2012 may not be entitled to the full 50% discount on a capital gain from a CGT event that happened after 8 May 2012.

For more information, see Capital gains tax (CGT) discount for foreign resident individuals.

Write the amount of the CGT discount in row 2.

Calculate the amounts at B to H and transcribe to row 1 of table 8 .

Part 5 Small business CGT concessions

In this part, you are calculating the small business CGT concessions your entity is claiming. For more information about the small business CGT concessions, see Capital gains tax (CGT) concessions for small business - overview .

Write:

• the amount of your entity's small business 50% active asset reduction in row 1 of table 7
• the amount of your entity's small business retirement exemption in row 2 of table 7 , and
• the amount of your entity's small business rollover in row 3 of table 7 .

Write the total amount of the small business CGT concessions your entity is claiming at I to L of table 7 and transcribe those amounts to table 8 at I to L .

Part 6 Net capital gain calculation

Your entity's net capital gain is the amount remaining after applying any:

• current year capital losses
• net capital losses from prior income years
• net capital losses transferred in
• the CGT discount, and
• any applicable CGT small business concessions.

In table 8 , calculate the amount of your entity's net capital gain by taking the amounts in row 2 away from the amounts in row 1. Write your entity's net capital gain in row 3 and 6A .

Include a net capital gain as assessable income on your entity's tax return at the relevant item. See step   3 .

There is no Part 7 or Part 8

Part 9 Calculating net capital losses from collectables carried forward to later income years.

Only complete this part if you have any unapplied capital losses from collectables from part 2.

Using the amounts in Q and R transferred from part 2A and 2B , calculate the amount in 3A of table 9 .

 

Step 3 How to complete the capital gains item on your entity's tax return

In the earlier steps, you calculated your capital gain or capital loss for each CGT event, then worked out your net capital gain or net capital loss.

Print X in the Yes box at G Did you have a capital gains tax event during the year? at the capital gains item on your entity's tax return.

Exemptions and rollovers

If you applied an exemption or rollover, print X in the Yes box at M Have you applied an exemption or rollover? at the capital gains item on your entity's tax return. If you are lodging by paper print in the code box at M the code that represents the CGT exemption or rollover that produced the largest amount of capital gain or capital loss deferred or disregarded.

If you are lodging electronically, follow the instructions on screen.

CGT exemption and rollover codes:

• A Small business active asset reduction
• B Small business retirement exemption
• C Small business rollover
• D Small business 15 year exemption
• E Foreign resident CGT exemption
• F Scrip for scrip rollover
• G Inter-company rollover
• H Demerger exemption
• J Capital gains disregarded as a result of the sale of a pre-CGT asset
• K Disposal or creation of assets in a wholly-owned company
• L Replacement asset rollovers
• M Exchange of shares or units
• N Exchange of rights or options
• O Exchange of shares in one company for shares in another company
• P Exchange of units in a unit trust for shares in a company
• Q Disposal of assets by a trust to a company
• R Demerger rollover
• S Same asset rollovers
• X Other exemptions and rollovers .

If your entity is required to complete a CGT schedule, you may also need to provide details of certain exemptions or rollovers applied at item 8 of that schedule.

If you or your entity receive an amount of capital gains from a trust and the trust applied an exemption or rollover to that capital gain, you do not need to report the exemption or rollover on your income tax return at label M Have you applied an exemption or rollover? The trust will report the exemption or rollover on its own tax return.

Net capital gain

Transfer the amount at 6A in part 6 of your entity's CGT summary worksheet to A Net capital gain on your entity's tax return.

Losses information

Add the amounts, if any, at 3A in part 9 and 3B in part 3 of your entity's CGT summary worksheet and write the total amount at Losses information , V Net capital losses carried forward to later income years on your entity's tax return.

 

Foreign resident capital gains withholding payments

The foreign resident capital gains withholding regime can apply in the 2016 income year to foreign residents with a 2016 income tax year ending after 30 June 2016, in relation to contracts entered into on or after 1 July 2016. Where a foreign resident entered a contract to dispose of taxable Australian property on or after 1 July 2016, and the purchaser withheld such amounts, the foreign resident is entitled to claim a credit in their tax return when this amount has been paid. The ATO will advise the foreign resident of receipt of the withholding from the purchaser. For 2016, there is no place on the tax return form for the foreign resident can claim the credit for the foreign resident withholding that has been paid.

To claim the credit:

• On a separate sheet of paper, provide details from the confirmation receipt you received from the ATO showing that the foreign resident capital gains withholding has been paid.
• Write "Attachment" at the top of your tax return.
• Send the attachment with your tax return form.

Step 4 How to complete the CGT schedule

Your entity must complete a CGT schedule for the 2015-16 income year if:

• the total current year capital gains are greater than $10,000, or
• the total current year capital losses are greater than $10,000.

If your entity is required to complete a CGT schedule, attach it to your entity's 2016 tax return. You should lodge only one CGT schedule with your entity's tax return.

If you are lodging a paper tax return and CGT schedule, print and complete the CGT schedule provided. To get copies of the schedule, phone our Publications Distribution Service on 1300   720   092 .

Print your entity's tax file number (TFN), name and Australian business number in the boxes provided. The CGT schedule must be signed in the same way that the 2016 tax return is signed.

If you are a multi-class AMIT you will be required to lodge your tax return and CGT schedule electronically. If you are a multi-class AMIT show the name of the AMIT class that the schedule relates to on the CGT schedule for each class. The name should be identical to the AMIT class name used in the related AMIT tax schedule.

Consolidated groups

If a group consolidates during the income year, the head company must lodge a CGT schedule if the total capital gains or total capital losses that it makes (as head company of the consolidated group and while not a member of a consolidated group) are greater than $10,000.

An entity that has joined a consolidated group or groups during the income year as a subsidiary member must lodge a CGT schedule covering any periods of non-membership if the entity satisfies the requirements for lodgment of that schedule.

Attribution Managed Investment Trusts (AMIT)

If an AMIT chooses multi-class treatment, complete a separate CGT schedule for each class with a total capital gain or loss greater than $10,000.

AMITs that do not choose multi-class treatment must lodge a CGT schedule if the entity has a total capital gain or loss greater the $10,000.

Item 1 Current year capital gains and capital losses

Transcribe the amounts at 1A to 1I for capital gains and from 1K to 1R for capital losses in table 1 on your CGT summary worksheet - to the corresponding labels at item 1 of the CGT schedule. For example, transcribe the figure at 1A in table 1 of the CGT summary worksheet - to A Shares in companies listed on an Australian securities exchange item 1 of the CGT schedule.

For an AMIT that chooses multi-class treatment, include any:

• capital gains as a result of transfers of assets between classes of the AMIT at 1I
• any capital losses as a result of transfers of assets between classes at 1R .

Sum labels A to I at item 1 of the CGT schedule and write the total at J Total current year capital gains .

Item 2 Capital losses

Sum labels K to R item 1 and write the total at A Total current year capital losses item 2 .

From your CGT summary worksheet , transcribe the amounts at 2B in table 2, 2C in table 3 and 2D in table 4 to the corresponding labels at item 2 of the CGT schedule.

Sum labels B , C and D in item 2 and write the total at E Total capital losses applied .

Item 3 Unapplied net capital losses carried forward

Transcribe the amounts at 3A in table 9 and 3B in table 5 from your CGT summary worksheet - to the corresponding labels at item 3 of the CGT schedule.

Item 4 CGT discount

Transcribe the amount at 4A in table 6 from your CGT summary worksheet - to A at item 4 of the CGT schedule.

Item 5 CGT concessions for small business

Transcribe the amounts 5A , 5B and 5C in table 7 from your CGT summary worksheet - to the corresponding labels at item 5 of the CGT schedule.

Sum labels A , B and C at item 5 and write the total at D Total small business concessions applied .

Item 6 Net capital gain

Follow the instructions on the schedule to calculate A Net capital gain at item 6 of the CGT schedule.

Item 7 Earnout arrangements

Are you a party to an earnout arrangement?

Print X in the appropriate box at A .

If you are a party to more than one earnout arrangement you will need to provide details of all earnout arrangements in which you are a party. To do this, attach a separate sheet to the CGT schedule providing the details listed in this item for each additional earnout arrangement.

If you are a buyer, complete B and C .

If you are the seller,

• B and C
• D and E for arrangements which do not involve look-through earnout rights.

Also, if you're a seller, complete F and G if:

• you received or provided a financial benefit under a look-through earnout right created in an earlier income year; and
• you wish to seek an amendment to that earlier income year via this schedule; and
• you satisfy all the following conditions:
  • the look-through earnout right was created on or after 24 April 2015
  • you are an individual or a company (not in a trustee capacity)
  • you are lodging your current year income tax return before its lodgment due date, and
  • none of the following apply to you:
    • you have a substituted accounting period
    • you are the head company of a consolidated group
    • you are no longer eligible to CGT concessions for the earlier income year to which you are seeking the amendment
    • you are a company seeking to utilise tax losses as a result of this amendment
    • you need to request an amendment to more than one income year as a result of receiving or providing financial benefits
    • you need to amend amounts other than your net capital gains or capital losses carried forward in the earlier income year for which you are seeking the amendment.

If you received or provided a financial benefit under a look-through earnout right created in an earlier income year, you may need to seek an amendment to your net capital gain (or capital losses carried forward amount) of that earlier income year. You can request such amendment via this schedule by completing labels 7F and 7G if you satisfy all the conditions above. Completing the labels

Write at B the number of years the earnout arrangement runs for in total.

Write at C the year of the earnout arrangement you are in.

For example, if you are in the second year of a four year earnout arrangement, you would write '4' at B and '2' at C .

Write at D the total estimated capital proceeds from the earnout arrangement.

Write at E the amount of any capital gain or loss you made under your earnout arrangement in the income year for which this schedule is being completed. If this amount is a loss, print ' L ' in the box at the right of the amount at E .

For F and G , if you meet all the conditions above:

• write at F the income year in which the look-through earnout right or rights were created
• write at G the amended net capital gain or capital losses carried forward amount resulting from the financial benefits received or provided.
  • If you are amending your capital losses carried forward amount, you must print L in the box at the right of the amount at G .
  • If your CGT position changes from a net capital gain to a capital loss as a result of receiving or providing a financial benefit under a look-through earnout right and you are required to temporarily disregard that capital loss as explained below, write ' 0 ' at G.

Capital losses arising from the disposal of assets to which look-through earnout rights relate are temporarily disregarded if the capital losses could be reduced by you receiving future financial benefits. You can recognise such capital losses only until such time as the losses become certain.

For example, if you are a seller in a standard or combination look-through earnout arrangement and you are in a capital loss position resulting from the disposal of the underlying asset to which the look-through earnout right relates and not in the last year of the arrangement, you must temporarily disregard the capital loss as it could potentially be reduced by you receiving future financial benefits. However, if you are in a reverse earnout arrangement then a capital loss can be recognised as the capital loss can only be increased through your provision of financial benefits to the buyer.

If your circumstances do not satisfy the conditions above

If your circumstances do not satisfy the conditions above and you are applying the look-through CGT treatment, you will need to lodge an amendment request for the relevant income tax assessment. In your amendment request, you should clearly indicate that the amendment you are seeking is in relation to a look-through earnout right . This allows us to process your amendment correctly and to ensure no penalties or interests will apply if other conditions are met.

Example

Mark is retiring and he sold all of the shares in his business XYZ Co Pty Ltd, to Janet on 24 April 2015.

According to the sale contract, Mark would

• receive an upfront payment of $1 million at the time of sale;
• have a right to future payments of $150,000 in the next five income years provided the turnover of XYZ Co Pty Ltd exceeds an agreed threshold in the prior income year; and
• be obliged to provide $100,000 to Janet if the turnover of previous year falls short of the agreed threshold.

The following assumptions are made for this example:

• Mark has a cost base of XYZ Co Pty Ltd of $1.1 million;
• The business turnover exceeds the agreed threshold for the 2015 income year;
• Mark is only entitled to the 50% CGT discount;
• there are no other CGT events in those relevant income years;
• the right is a look-through earnout right; and
• there are no capital losses brought forward from prior years;

In June 2018, Mark offers to pay Janet $100,000, as well as giving up his right to the potential future benefits, if Janet agrees to forgo her right to further payments under the look-through earnout right. Janet agrees to this offer.

2015 income tax return

At this time, Mark has received an upfront payment of $1 million for the sale of the XYZ Co Pty Ltd shares. Under the treatment provided in TR 2007/D10, Mark would need to exclude from the capital proceeds of this CGT event so much of the payment as is reasonably attributable to the granting of the right to provide financial benefits to Janet. Mark would also need to include in the capital proceeds the value of the right to receive future financial benefits from Janet. However, as this is a look through earnout right, the amount attributable to the granting of the right to provide financial benefits as well as the value of the right to receive financial benefits are disregarded when working out the capital proceeds. Accordingly, for the 2015 income year, Mark has a capital loss of $100,000 (capital proceeds of $1 million less the cost base of $1.1 million) as a result of the sale of XYZ Co Pty Ltd shares. However, as the capital loss could be reduced by Mark receiving future financial benefits, Mark must temporarily disregard the capital loss of $100,000. He cannot recognise the capital loss at the net capital losses carried forward label of his 2015 income tax return.

2016 income tax return

XYZ Co Pty Ltd's turnover exceeds the agreed threshold in the 2015 income year and therefore Janet pays Mark a further amount of $150,000 in the 2016 income year.

As a result of this payment, Mark's capital proceeds from the sale of XYZ Co Pty Ltd shares are now considered to be $1.15 million - made up of the $1 million initial payment and the $150,000 payment he received in 2016. Mark has now made a capital gain of $50,000 (capital proceeds of $1.15 million less the cost base of $1.1 million).

Accordingly, Mark now needs to amend his 2015 income tax return to include a net capital gain of $25,000 (after applying the 50% CGT discount). Mark meets all the conditions listed above, and therefore has the option of completing F and G to inform the Commissioner of the amended net capital gain or alternatively Mark can write to the Commissioner to seek an amendment. If Mark decides to complete F and G , he would need to write '2015' at F and '25,000' at G . By writing '25,000' at G Mark's net capital gain for the 2015 income tax return will be amended to $25,000.

2017 income tax return

In the 2017 income year, Mark is required to provide Janet with $100,000 as the turnover for the 2016 income year is less than the agreed threshold. As a result, the total capital proceeds from the sale of all the shares in XYZ Co Pty Ltd changes to $1.05 million, resulting in a capital loss of $50,000. As previous mentioned, Mark cannot recognise this capital loss. Therefore, when Mark seeks an amendment, he should write '0' at G . We will reduce the net capital gain from $25,000 (the net capital gain reported in the prior amendment request) to Nil.

2018 income tax return

Janet accepts Mark's offer and foregoes her right to future financial benefits for $100,000.

The amount of $100,000 paid by Mark is a financial benefit provided to terminate a look-through earnout right and is treated in the same way as a financial benefit provided under the right.

As the turnover in 2017 does not exceed the agreed threshold, Mark also pays Janet $100,000 as per the earnout arrangement.

Consequently, Mark's total capital proceeds for the sale reduces to $850,000, made up of the $1 million initial payment, the subsequent $150,000 payment received, $200,000 provided to Janet under the earnout right for the business performance not achieving the agreed threshold , as well as the payment of $100,000 to end the earnout right.

Mark's capital loss from the share sale is now $250,000 (capital proceeds of $850,000 less the cost base of $1.1 million). As no further financial benefits could be received, Mark can recognise this capital loss which resulted from the share disposal to which the look-through earnout right relates. Mark will need to record '2015' at F and '250,000' at G and write L in the box at the right of this amount. By writing $250,000 at G and L in the box at the right of this amount, Mark's 2015 income tax return is amended to reflect net capital losses carried forward of $250,000.

The table below summarises how Mark will complete F and G .

Year	Financial benefits received	Financial benefits provided	Total capital proceeds from the disposal	Net Capital gain	Capital loss	How to complete F and G
2015	$1 million (upfront payment)	N/A	$1 million	N/A	$100,000	N/A
2016	$150,000 (received as agreed threshold is met for 2015 income tax year)	N/A	$1.15 million	$25,000 (after applying the 50% CGT discount)	N/A	F : 2015 G : $25,000
2017	N/A	$100,000	$1.05 million	N/A	$50,000	F :2015 G : $0
2018	N/A	$200,000 ($100,000 for payment to end earnout rights plus $100,000 for business performance falling to meet the agree threshold)	$850,000	N/A	$250,000	F : 2015 G : $250,000(L)

Item 8 Other CGT information required (if applicable)

Small business 15-year exemption

Write the total amount of any capital gains disregarded by the small business 15-year exemption at A item 8 of the CGT schedule. Do not apply the CGT discount.

Print in the code box at A the code from the list below that best describes the CGT asset or CGT event from which your entity made the capital gain. If your entity made capital gains from more than one CGT asset or CGT event, select the code which best describes the type of CGT asset or CGT event that produced the largest amount of capital gain.

CGT asset or CGT event code:

•   S shares
•   U units in unit trusts
•   R real estate
•   G goodwill
•   O other CGT assets or CGT events not listed above.

Capital gains disregarded by a foreign resident

If you are a foreign resident , you are subject to CGT if a CGT event happens to a CGT asset that is 'taxable Australian property'. However, if you are eligible for an exemption then you may disregard the capital gain you have made. If your CGT asset is not a taxable Australian property, you do not need to answer this question.

Write the total amount of any capital gains disregarded by the application of foreign resident exemption at B item   8 of the CGT schedule. Do not apply the CGT discount.

Capital gains disregarded as a result of scrip for scrip rollover

During the income year, did your entity choose a scrip for scrip rollover when an arrangement was made to exchange original interests for replacement interests?

Original interests are shares or units or other interests (or an option, right or similar interest in a company or trust), while replacement interests are similar interests in another company or trust.

Write the total amount of any capital gains disregarded by the application of the scrip for scrip rollover at C item 8 of the CGT schedule.

Capital gains disregarded as a result of inter-company assets rollover

A same asset rollover may be available where a company transfers or creates a CGT asset in another company that is a member of the same wholly-owned group, where at least one of the companies is a foreign resident.

Write the total amount of any capital gains disregarded by the application of the inter-company asset rollover at D item 8 of the CGT schedule.

Capital gains disregarded by a demerging entity

You may be eligible to disregard any capital gains arising from a demerger if you are a demerging entity in a demerger group, see Demerger exemption .

Write the total amount of any capital gains disregarded by the application of the demerger exemption at E item 8 of the CGT schedule. Do not include any amounts disregarded by the application of a Demerger rollover .

After following all these steps, you have completed your entity's CGT schedule.

Remember to lodge the CGT schedule with your entity's tax return.

Do not lodge your worksheets. Keep these with your own records.

 

Capital gains and capital losses from transfers to other classes

This section applies to all Attribution Managed Investment Trusts (AMITs).

You must lodge an AMIT's income tax return, and where applicable its CGT schedule, electronically.

You may make an irrevocable election to treat separate classes of interests in the AMIT as separate AMITs. If you made this election and transferred assets between separate AMIT classes in 2015-16, show the capital gains and losses arising from those asset transfers at.

• Total capital gains from transfers to other classes
• Total capital losses from transfers to other classes

ATO references:
NO NAT 4151