Personal investors guide to capital gains tax 2008

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About this guide

The Personal investors guide to capital gains tax 2007-08 explains the capital gains tax (CGT) consequences of:

• the sale or gift (or other disposal) of shares or units
• the receipt of distributions of capital gains from managed funds, and
• the receipt of non-assessable payments from companies or managed funds.

Who should use this guide?

Use this guide if you are a personal investor who has made a capital gain or capital loss from shares, units or managed funds in 2007-08.

Who should NOT use this guide?

Do not use this guide if you are an investor who is not a resident of Australia or if you have gains or losses included as part of your income under other provisions of the tax law - for example, if you are carrying on a business of share trading (see the fact sheet Carrying on a business of share trading ).

The guide does not explain more complex issues relating to shares (including employee shares), convertible notes and units. Nor does it apply to shares and units owned by companies, trusts and superannuation funds.

Also, this guide does not cover your CGT consequences when you sell other assets such as:

• a rental property
• collectables (for example, jewellery, art, antiques and collections), and
• assets for personal use (for example, a boat you use for recreation).

For these, see the Guide to capital gains tax 2008 (NAT   4151).

Publications and services

To find out how to get a publication referred to in this guide and for information about our other services, see More information

Unfamiliar terms

Some of the terms used in this guide may be new to you. Specific terms are explained in Definitions .

Introduction

This guide will help you complete:

• item 18 Capital gains on your Tax return for individuals (supplementary section) 2008 (NAT   2679), or
• item 9 Capital gains if you use Tax return for retirees 2008 (NAT   2597). Note: You cannot use Tax return for retirees 2008 if you had a distribution from a managed fund during the year.

If you sold or otherwise disposed of shares, or units in a unit trust (including a managed fund), in 2007-08, read part   A of this guide, then work through part   B .

If you received a distribution of a capital gain from a managed fund in 2007-08, read part   A of this guide, then work through part   C .

Managed funds include property trusts, share trusts, equity trusts, growth trusts, imputation trusts and balanced trusts.

Small business CGT concessions

If you are involved in the sale of shares or units for a small business, you may wish to read Capital gains tax (CGT) concessions for small business - overview , available only on our website.

Investments in foreign hybrids

A foreign hybrid is an entity that was taxed in Australia as a company but taxed overseas as a partnership. This can include a limited partnership, a limited liability partnership and a United States limited liability company.

If you have an investment in a foreign hybrid (referred to as being a member of a foreign hybrid), you are treated for Australian tax purposes as having an interest in each asset of the partnership.

As a consequence, any capital gain or capital loss made with respect to a foreign hybrid or its assets is taken to be made by the member. More information is available on our website.

General value shifting regime

If you own shares in a company or units (or other fixed interests) in a trust and value has been shifted in or out of your shares or units, you may be affected by value shifting rules. Generally, the rules only affect individuals who control the company or trust, or individuals who are related to individuals or entities that control the company or trust.

For more information, see General value shifting regime: who it affects , available only on our website.

Forestry managed investment schemes

The law has been changed to provide for specific CGT rules where secondary investors or subsequent participants hold forestry managed investment scheme (FMIS) interests on capital account. These new rules apply to FMIS interests sold or disposed of in the 2007-08 income year and later income years.

For more information, see the Guide to capital gains tax 2008 .

2008 budget announcements

Cancellation of interests in widely held entities

The Government announced that it will legislate to allow taxpayers to calculate their capital gains or losses using the actual proceeds received, where shares or units in widely held entities are cancelled or surrendered. This will take effect from the 2007-08 income year.

Demutualisation of health insurers

The Government announced that it will legislate to provide relief from CGT for policy holders of health insurers who receive shares when their insurer demutualises, with effect from 1   July 2007.

At the time of printing these instructions, the above two measures had not become law.

Removal of double taxation for employee share schemes

The Government announced that it will legislate to remove double taxation that arises in relation to certain employee share schemes that use employee share trusts. The changes are intended to apply in relation to CGT events occurring from 7.30pm Australian Eastern Standard Time on 13   May 2008.

For more information, visit our website at www.ato.gov.au or phone the Business Infoline (see More information ).

ATO references:
NO NAT 4152