Commonwealth Consolidated Acts Commonwealth Consolidated Acts(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.
(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.
(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).
(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.
(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.
(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.
(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.
(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
(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.
(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
(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.