TAXATION LAWS AMENDMENT ACT (NO. 7) 2000 NO. 173, 2000 - SCHEDULE 4

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TAXATION LAWS AMENDMENT ACT (NO. 7) 2000 NO. 173, 2000 - SCHEDULE 4

- Minor CGT changes

Income Tax Assessment Act 1936

1 Subsection 177A(1) (definition of capital loss)

Repeal the definition, substitute:

capital loss has the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997 .

2 Subparagraphs 177C(2)(c)(i) and (ii)

After "declaration," (wherever occurring), insert "agreement,".

3 Subparagraph 177C(2)(c)(i)

Repeal the subparagraph, substitute:

(i): the incurring of the capital loss by the taxpayer is attributable to the making of a declaration, agreement, choice, election or selection, the giving of a notice or the exercise of an option (expressly provided for by this Act or the Income Tax Assessment Act 1997 ) by any person, except one under Subdivision 126-B or 170-B of the Income Tax Assessment Act 1997 ; and

4 Subparagraph 177C(2A)(a)(i)

Repeal the subparagraph, substitute:

(i): the non-inclusion of the amount in the assessable income of the taxpayer is attributable to the making of a choice under Subdivision 126-B of the Income Tax Assessment Act 1997 or an agreement under Subdivision 170-B of that Act; and

5 Subparagraph 177C(2A)(b)(i)

Repeal the subparagraph, substitute:

(i): the incurring of the capital loss by the taxpayer is attributable to the making of a choice under Subdivision 126-B of the Income Tax Assessment Act 1997 or an agreement under Subdivision 170-B of that Act; and

Income Tax Assessment Act 1997

6 Subsection 100-30(2)

Repeal the subsection, substitute:

(2) There are 4 categories of exemptions:

1. exempt assets: for example, cars;

2. exempt or loss-denying transactions: for example, compensation for personal injury or your tenancy comes to an end;

3. anti-overlap provisions (that reduce your capital gain by the amount that is otherwise assessable);

4. small business relief.

: Note: Most of the exceptions are in Division 104. You will find most of the possible exemptions in Division 118. The small business relief provisions are in Division 152.

7 Section 103-5

Omit "one does", substitute "such a provision does say that a payment, cost or expenditure can include giving property".

8 Paragraph 104-10(5)(b)

After "for a lease", insert "that you granted".

9 Paragraph 104-25(5)(b)

After "for a lease", insert "that you granted".

10 Paragraph 104-60(5)(b)

Repeal the paragraph, substitute:

(b): you transferred the asset from another trust and the beneficiaries and terms of both trusts are the same.

11 At the end of subsection 104-70(2)

Add:

(e): compensation you paid that can reasonably be regarded as a repayment of all or part of the payment.

The payment can include giving property: see section 103-5.

12 After subsection 104-70(2)

Insert:

(2A) However, the non-assessable part is not reduced by any part of the payment that you can deduct.
13 At the end of subsection 104-70(5)

Add:

: Note: A capital gain under section 160ZM of the Income Tax Assessment Act 1936 is also taken into account for the purposes of this subsection: see subsection 104-70(3) of the Income Tax (Transitional Provisions) Act 1997 .

14 After subsection 104-135(1)

Insert:

(1A) In working out the non-assessable part, disregard any part of the payment that is:

(a): repaid by you; or
(b): compensation you paid that can reasonably be regarded as a repayment of all or part of the payment.

The payment can include giving property: see section 103-5.

(1B) However, the non-assessable part is not reduced by any part of the payment that you can deduct.
15 Subsection 104-135(3) (note)

Omit "Note", substitute "Note 1".

16 At the end of subsection 104-135(3)

Add:

: Note 2: A capital gain under section 160ZL of the Income Tax Assessment Act 1936 is also taken into account for the purposes of this subsection: see section 104-135 of the Income Tax (Transitional Provisions) Act 1997 .

17 After subsection 104-150(1)

Insert:

(1A) The amount of the deposit is reduced by any part of the deposit that is:

(a): repaid by you; or
(b): compensation you paid that can reasonably be regarded as a repayment of all or part of the deposit.

The payment can include giving property: see section 103-5.

(1B) However, the deposit is not reduced by any part of the payment that you can deduct.
18 Subdivision 104-J (heading)

Repeal the heading, substitute:

19 Subsection 104-175(7)

After "Subdivision 126-B", insert "(except where the roll-over asset has stopped being a ^*pre-CGT asset, for example, because of Division 149)".

20 Paragraph 104-185(1)(a)

Omit "an ^*active asset", substitute "your ^*active asset".

21 Subsection 104-185(1) (note)

Omit "Note", substitute "Note 1".

22 At the end of subsection 104-185(1)

Add:

: Note 2: CGT event J1 can also happen in relation to a capital gain you rolled-over under Division 17A of Part IIIA of the Income Tax Assessment Act 1936 or Division 123 of the Income Tax Assessment Act 1997 if the status of the replacement asset changes: see section 104-185 of the Income Tax (Transitional Provisions) Act 1997 .

23 At the end of subsection 104-190(1)

Add:

: Note: CGT event J2 can also happen in relation to a capital gain you rolled-over under Division 17A of Part IIIA of the Income Tax Assessment Act 1936 or Division 123 of the Income Tax Assessment Act 1997 if certain circumstances change: see section 104-190 of the Income Tax (Transitional Provisions) Act 1997 .

24 Subsection 104-205(3) (note)

Omit "Note", substitute "Note 1".

25 At the end of subsection 104-205(3)

Add:

: Note 2: A capital gain under section 160ZZD of the Income Tax Assessment Act 1936 is also taken into account for the purposes of this subsection: see section 104-205 of the Income Tax (Transitional Provisions) Act 1997 .

26 At the end of section 108-50

Add:

: Note: In addition to the circumstances set out in this Subdivision, separate asset treatment can apply under section 124-595 (about a roll-over for a Crown lease) and section 124-725 (about a roll-over for a prospecting or mining entitlement).

27 At the end of subsection 109-5(1)

Add "In this case, the time when you ^*acquire the asset is when you become its owner.".

28 Subsection 109-5(2)

Omit "for when", substitute "for the circumstances in which, and the time at which,".

29 Section 109-10

Omit "specific rules for some cases where", substitute "some specific rules for the circumstances in which, and the time at which,".

30 Section 109-55 (table item 9, column referring to "circumstances")

Omit "not".

31 Before section 110-40

Insert:

(1) If a later provision of this Subdivision says that:

(a): certain expenditure does not form part of the ^*cost base of a ^*CGT asset; or
(b): the cost base is reduced by certain expenditure;

the expenditure is initially included in the cost base, which is then reduced by the amount of the expenditure just before a ^*CGT event happens in relation to the asset.

: Note: This has the effect of recognising in the cost base any indexed component relating to the expenditure.

(2) On the other hand, if such a provision says that:

(a): certain expenditure does not form part of one or more elements of the ^*cost base of a ^*CGT asset; or
(b): one or more elements of the cost base are reduced by certain expenditure;

the expenditure is never included in the relevant elements of the cost base.

: Note: This has the effect of not recognising to any extent this expenditure in the cost base.

32 Subsection 110-40(1)

After "part of", insert "one or more elements of".

33 Subsection 110-43(1)

After "part of", insert "one or more elements of".

34 Subsection 110-45(1)

After " ^*cost base", insert ", or of an element of the cost base,".

35 Subsection 110-50(1)

After " ^*cost base", insert ", or of an element of the cost base,".

36 Subsection 110-53(1)

Omit "the first, fourth or fifth element of".

37 Section 112-97 (table item 10, column referring to "element affected")

Omit "The total cost base", substitute "First element of cost base".

38 Section 112-97 (table item 11, column referring to "element affected")

Omit "The total reduced cost base", substitute "First element of reduced cost base".

39 Section 112-97 (after table item 12)

Insert:

12A

You own an interest in infrastructure borrowing just before and just after the end of an exemption period

First element of cost base and reduced cost base

section 159GZZZZE

40 Section 112-115 (table item 1, column referring to "rules about this roll-over")

After "individual", insert "or trustee".

41 Section 116-75

Repeal the section, substitute:

The ^*capital proceeds from the expiry, surrender or forfeiture of a lease include any payment (because of the lease ending) by the lessor to the lessee for expenditure of a capital nature incurred by the lessee in making improvements to the leased property.
The payment or expenditure can include giving property: see section 103-5.
42 Subsection 118-10(1)

Repeal the subsection, substitute:

(1) A ^*capital gain or ^*capital loss you make from a ^*collectable is disregarded if the first element of its ^*cost base is $500 or less.
43 Subsection 118-10(3)

Repeal the subsection, substitute:

(3) A ^*capital gain you make from a ^*personal use asset, or part of the asset, is disregarded if the first element of the asset's ^*cost base is $10,000 or less.

: Note: A capital loss you make from a personal use asset is disregarded: see subsection 108-20(1).

44 At the end of Subdivision 118-A

Add:

A ^*capital loss made by an entity is disregarded if it was an ^*exempt entity at the time it made the loss.
45 Paragraph 118-210(5)(a)

After "E2,", insert "E5,".

46 After section 118-405

Insert:

(1) Section 118-405 applies differently in the case of ^*CGT event D1 (about creating contractual or other rights).
(2) In that case:

(a): the ^*CGT event does not have to happen in relation to a ^*CGT asset; and
(b): paragraph 118-405(1)(e) does not have to be satisfied; and
(c): instead, the right you create that triggers the CGT event must be inherently connected with a CGT asset of yours that satisfies the ^*active asset test (see section 118-445).

47 Subdivision 122-A (heading)

Repeal the heading, substitute:

Subdivision 122-A—Disposal or creation of assets by an individual or trustee to a wholly-owned company
48 Subsection 122-25(5)

Omit "because of Division 50", substitute "because it is an ^*exempt entity".

49 Subsection 122-135(5)

Omit "because of Division 50", substitute "because it is an ^*exempt entity".

50 After section 123-5

Insert:

(1) Section 123-5 applies differently in the case of ^*CGT event D1 (about creating contractual or other rights).
(2) In that case:

(a): the ^*CGT event does not have to happen in relation to a ^*CGT asset; and
(b): paragraph 123-5(2)(a) does not have to be satisfied; and
(c): instead, the right you create that triggers the CGT event must be inherently connected with a CGT asset of yours that satisfies the ^*active asset test (see section 123-65).

51 Subsection 124-140(1) (note 1)

Repeal the note, substitute:

: Note 1: The roll-over consequences are set out in Subdivision 124-A. The original asset is the original licence. The new asset is the licence you get by renewing or extending the original licence.

52 Subsection 126-50(4)

Omit "because of Division 50", substitute "because it is an ^*exempt entity".

53 Subsection 126-60(3) (note)

Omit "see Division 149", substitute "see, for example, Division 149".

54 Subsection 130-20(2) (note 3, second occurring)

Omit "Note 3", substitute "Note 4".

55 Subsection 130-83(3)

Repeal the subsection, substitute:

(3) If that event does not happen in relation to the ^*share or right (or any ^*share you ^*acquired by exercising the right) in an arm's length transaction at the ^*cessation time, or within 30 days after that time, the first element of the ^*cost base and ^*reduced cost base of the share or right is its market value (worked out under sections 139FA to 139FF of the Income Tax Assessment Act 1936 ) at that time.
56 At the end of subsection 134-1(1)

Add:

: Note 3: Item 1 in the table is modified for shares or rights acquired at a discount (within the meaning of Subdivision C of Division 13A of Part III of the Income Tax Assessment Act 1936 ) under an employee share scheme—in certain circumstances you can be taken to have paid the market value for an option: see Subdivision 130-D and section 112-15.

57 Subsection 140-15(2)

After "entity", insert "(being a ^*controller (for CGT purposes) of the company)".

58 Subsection 995-1(1) (paragraph (a) of the definition of acquire)

Repeal the paragraph, substitute:

(a): a ^*CGT asset: you acquire a CGT asset (in its capacity as a CGT asset) in the circumstances and at the time worked out under Division 109 (including under a provision listed in Subdivision 109-B); and

Note: A CGT asset acquired before 20 September 1985 may be treated as having been acquired on or after that day: see, for example, Division 149.

59 Subsection 995-1(1) (definition of dispose of)

Repeal the definition, substitute:

dispose of a ^*CGT asset: you dispose of a CGT asset (in its capacity as a CGT asset) in the circumstances specified in section 104-10.

Income Tax (Transitional Provisions) Act 1997

60 At the end of section 104-70

Add:

(3) Subsection 104-70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under section 160ZM of the Income Tax Assessment Act 1936 .
61 After section 104-72

Insert:

Subsection 104-135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under section 160ZL of the Income Tax Assessment Act 1936 .
62 After section 104-175

Insert:

104-185 Change of status of replacement asset for a roll-over under Division 17A of Part IIIA of the 1936 Act or Division 123 of the 1997 Act
Section 104-185 of the Income Tax Assessment Act 1997 applies to a CGT asset you chose as a replacement asset for a roll-over under:

(a): Division 17A of Part IIIA of the Income Tax Assessment Act 1936 ; or
(b): Division 123 of the Income Tax Assessment Act 1997 ;

in the same way as it applies to a CGT asset you chose as a replacement asset for a roll-over under Subdivision 152-E of the Income Tax Assessment Act 1997 .

104-190 Change of circumstances where a share or interest is a replacement asset for a roll-over under Division 17A of Part IIIA of the 1936 Act or Division 123 of the 1997 Act
Section 104-190 of the Income Tax Assessment Act 1997 applies to a share in a company or an interest in a trust you chose as a replacement asset for a roll-over under:

(a): Division 17A of Part IIIA of the Income Tax Assessment Act 1936 ; or
(b): Division 123 of the Income Tax Assessment Act 1997 ;

in the same way as it applies to a share or interest you chose as a replacement asset for a roll-over under Subdivision 152-E of the Income Tax Assessment Act 1997 .

63 Before section 104-210

Insert:

Subsection 104- 205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under section 160ZZD of the Income Tax Assessment Act 1936 .
64 Subsection 118-10(2)

Repeal the subsection, substitute:

(2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less.
65 Application of amendments

(1) The amendments made by this Schedule (except those made by items 2, 6 and 30) apply to assessments for the 1998-99 income year and later income years.
(2) The amendment made by item 2 applies to schemes entered into after 3 pm, by legal time in the Australian Capital Territory, on 29 April 1997.
(3) The amendment made by item 30 applies to things done on or after 1 July 1998.

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