Commonwealth Numbered Acts

TAXATION LAWS AMENDMENT ACT (No. 5) 1992 No. 224 of 1992 - SECT 5

5. Before section 160A of the Principal Act the following Subdivision and
heading are inserted:

"Subdivision A - Object, simplified outline, example and index Object

"160AX. The object of this Part is to provide for net capital gains to be
included in assessable income (see section 160ZO). Simplified outline of
scheme of Part (Simplified outline)

"160AY.(1) The following is a simplified outline of the scheme of this Part.
(Step 1 - disposal of an asset)

"(2) This Part applies if a taxpayer disposes of an asset. For a basic
definition of 'asset', see section 160A. The taxpayer must have acquired the
asset on or after 20 September 1985 and the disposal of the asset must occur
on or after that date (see section 160L). 160M is the basic provision defining
'disposal' and 'acquisition'. The timing of disposal and acquisition is dealt
with by section 160U. There are various exemptions, including the principal
residence exemption (see the Exemptions Sub Index in section 160AZA). There
are also various provisions giving roll-over relief on the disposal of assets
(see the Roll-overs Sub Index in section 160AZA). (Step 2 - disposal of asset
may result in a capital gain or a capital loss)

"(3) The disposal of the asset may result in a capital gain or capital loss
(see section 160Z).
Capital gain - asset owned for 12 months or more
            Consideration         Indexed cost

            in respect of    -    base of        =    Capital gain

            disposal              asset

Capital gain - asset owned for less than 12 months
            Consideration         Cost

            in respect of    -    base of        =    Capital gain

            disposal              asset

Capital loss
            Reduced cost          Consideraton

            base of          -    in respect of  =    Capital loss

            asset                 disposal
For a basic definition of 'consideration in respect of a disposal of an
asset', see section 160ZD. For basic definitions of 'cost base', 'indexed cost
base' and 'reduced cost base', see section 160ZH. The basic idea is that the
cost base of an asset consists of the cost of acquiring the asset and certain
other costs, the indexed cost base is the cost base indexed for inflation (see
section 160ZJ) and the reduced cost base is the cost base adjusted to take
account of certain capital deductions and balancing charges (see section
160ZK). (Step 3 - calculation of net capital gain)

"(4) Capital gains and capital losses are netted under section 160ZC to work
out the net capital gain.
Example:
          Capital gains          Capital losses

          accrued during    -    incurred during  =  Net capital gain

          year                   year
(Step 4 - net capital gain to be included in assessable income under section
160ZO)

"(5) The amount of the net capital gain is included in the taxpayer's
assessable income under section 160ZO. Example of how this Part works (Typical
example)

"160AZ.(1) This section sets out an example of how this Part will work in a
typical case involving the acquisition and disposal of an asset by a taxpayer.
The taxpayer acquired the asset on 29 September 1985 for a cost of $100,000
and disposed of the asset on 29 September 1991 for $300,000. The cost base is
$100,000. The indexed cost base is calculated as follows:
215.7 (index number for
  $149,600           $100,000               September 1991 quarter)

  (indexed       =   (cost       X    _____________________________

  cost base)        base)

144.2 (index number for
September 1985 quarter) (The fraction on the right is rounded up to 1.496.)
(Capital gain on disposal)

"(2) There is a capital gain on disposal of the asset.
Consideration
            in respect of        Indexed cost

            disposal         -   base of asset    =  Capital gain

            $300,000             $149,600            $150,400
(Calculation of net capital gain)

"(3) Assuming that the taxpayer has no capital losses, the net capital gain is
$150,400. (Inclusion of net capital gain in assessable income under section
160ZO)

"(4) The taxpayer's assessable income includes $150,400. Index of key concepts

"160AZA. The following is an index of the key concepts relevant to the
operation of this Part.
Main Index
    Acquisition                            160M

    Asset                                  160A

    Bankruptcy                             160W

    Capital gain                           160Z

    Capital loss                           160Z

    Capital receipts                       160M(6) and (7)

Consideration in respect of disposal
     of asset                              160ZD, 160ZF

Controlled foreign companies,
     attribution of income                 Divisions 6, 7, 8 and 10 of

Part X
    Cost base                              160ZH

    Disposal                               160M

    Employee's shares                      160ZYHD to 160ZYJA

    Exemptions                             See Exemptions Sub Index below

    Indexed cost base                      160ZH, 160ZJ

    Industrial property                    160ZZD

    Joint owners                           160ZN

    Leases                                 160ZR to 160ZW

    Life assurance companies               Division 8 of Part III

    Net capital gain                       160ZC, 160ZO

    Net capital loss                       160ZC, 160ZO

Net capital loss - transfer within
     company group                         160ZP

    Non-residents                          160L(2), 160M(8) to (14A), 160T

    Part of asset, disposal of             160R, 160ZI

    Personal-use assets                    160B, 160ZE, 160ZG, 160ZQ

Pooled superannuation trusts, units in 160ZYEB
    Prospecting and mining rights          160ZZE to 160ZZG

    Reduced cost base                      160ZH, 160ZK

    Roll-overs                             See Roll-overs Sub Index below

    Securities lending arrangements        26BC

    Security  -  transfer by way of        160S

              -  person enforcing          160V(2)

    Shares    -  bonus shares              160ZYF to 160ZYHC

              -  buy-back of shares        Division 16K of Part III

              -  cancellation of           Division 16J of Part III

subsidiary's shares
in holding company
              -  return of capital         160ZL

              -  valueless, of company     160WA

in liquidation
    Superannuation funds, complying ADFs   Division 10 of Part IX

and PST
    Time of acquisition and disposal       160U

    Transitional                           160ZZS, 160ZZT

    Trusts - accruals system of taxation   Subdivision D of Division

             on certain non-resident       6AAA of Part III

trust estates
           - bare trustee                  160V(1)

           - bonus units in unit trusts    160ZYC to 160ZYEA

           - other than unit trusts        160ZX TO 160ZYB

           - return of capital on          160ZM

investment
    Value shifting, adjustment of          Division 19A of Part IIIA

cost base
Sub Index - Exemptions
    Approved deposit funds, rights under   160ZZJ

    Exemptions  -  general                 160L, 160Z, 160ZB

    Goodwill                               160ZZR, 160ZZRAA

    Insurance policies                     160ZZH

    Life assurance policies                160ZZI

    Principal residence                    160ZZQ

    Superannuation funds, rights under     160ZZJ

Sub Index - Roll-overs
    Company group, transfer of asset       160ZZO

within
    Convertible notes  -  companies        160ZYY to 160ZZB, 160ZZBE

    Convertible notes  -  unit trusts      160ZZBA to 160ZZBD, 160ZZBF

    Crown leases                           160ZWA

    Death                                  160J, 160X, 160Y

    Incorporated association, conversion   160ZZPH

to company incorporated under
company law
    Involuntary disposal                   160ZZK, 160ZZL

    Marriage, breakdown, transfer of       160ZZM, 160ZZMA

assets upon
    Options generally                      160ZZC

    Partnership assets, transfer of to     160ZZNA

wholly owned company
    Prospecting and mining rights          160ZZF

Shares - exchange of shares in the
    same company                           160ZZP

        - exchange of shares in original   160ZZPC

company for shares in interposed
company
        - in specie distribution of        160ZZPF

shares by trustee of public
trading trust
        - options and rights to acquire    160ZZPAB

unissued shares affected by
share splits or share
consolidations
        - options to shareholders to       160ZYR to 160ZYX

acquire unissued shares
        - redemption or cancellation       160ZZPD

of shares in original company
in exchange for shares in
interposed company
        - rights to acquire shares         160ZYK to 160ZYQ

    Statutory licence, renewal or          160ZZPE

extension of
    Strata title conversion                160ZZPG

    Units - exchange of units in the       160ZZPAA

same unit trust
          - exchange of units in a unit    160ZZPA

trust for shares in a company
          - options and rights to          160ZZPAC

acquire unissued units
affected by unit splits or
unit consolidations
          - options to unitholders to      160ZYXA to 160ZYXF

acquire unissued units
          - redemption or cancellation     160ZZPB

of units in a unit trust in
exchange for shares in a company
          - rights to acquire units in     160ZYQA to 160ZYQF

a unit trust
    Wholly owned company, transfer         160ZZN

of asset to
               "Subdivision B - Interpretation".