Capital Gains – Special Topics Chapter 18 Capital Gains – Special Topics © National Core Accounting Publications

© National Core Accounting Publications Small Business Relief The CGT concessions for small business are: 15 year asset exemption 50% active asset reduction Roll-over relief Retirement exemption © National Core Accounting Publications

© National Core Accounting Publications Small Business Relief To qualify for the concession a small business taxpayer must satisfy the following basic conditions: the taxpayer must own the asset. events would otherwise have resulted in a capital gain. net asset value test. the asset is an active asset. © National Core Accounting Publications

© National Core Accounting Publications Small Business Relief Qualifying conditions Net asset value test The total net value of business assets must not exceed $6 million when the CGT event happens. © National Core Accounting Publications

© National Core Accounting Publications Small Business Relief Qualifying conditions Active asset test are assets owned and used in carrying on a business, must have been held at least 7.5 years where asset owned more than 15 years, or if owned less than 15 years more than half of the period between acquisition and the CGT event. © National Core Accounting Publications

© National Core Accounting Publications CGT Concessions 15 year asset exemption A small business taxpayer may elect to be exempt from CGT when they sell an asset owned for 15 years if they are aged 55+ years and are retiring. When the 15 year asset exemption applies, any capital gain is disregarded. Also, the other three small business concessions therefore do not apply. © National Core Accounting Publications

© National Core Accounting Publications CGT Concessions 50% active asset reduction Small business taxpayers can elect to reduce their capital gain by 50% on the sale of an active asset. This reduction is in addition to the 50% discount method reduction. © National Core Accounting Publications

© National Core Accounting Publications CGT Concessions Small business roll-over relief Replacement asset period The replacement asset can be acquired one year before or two years after the last CGT event in the income year for which the roll-over is chosen. No tax is paid on the capital gain until the replacement asset or improved asset is sold. © National Core Accounting Publications

© National Core Accounting Publications CGT Concessions Retirement exemption The small business taxpayer must be aged over 55 years at the time of the CGT event. Can elect to be exempt from CGT on sale of a small business asset up to a lifetime limit of $500,000. © National Core Accounting Publications

© National Core Accounting Publications CGT Concessions Net Capital Gain calculation Total capital gains for the year  less Total capital losses for the year and any unapplied net capital losses from previous years  Any CGT discount Small business CGT concessions in the following order:   15 year asset exemption 50% active asset Small business roll-over relief Retirement exemption (election) © National Core Accounting Publications

© National Core Accounting Publications Roll-over Provisions There are two types of asset roll-overs: Replacement-asset roll-overs Same-asset roll-overs © National Core Accounting Publications

© National Core Accounting Publications Roll-over Provisions Replacement-asset roll-overs Examples of replacement-asset roll-over transactions include those arising as a result of: Involuntary disposals Strata Title conversions Depreciating assets Exchanges of shares, units, rights or options © National Core Accounting Publications

© National Core Accounting Publications Roll-over Provisions Same-asset roll-overs Examples of same-asset roll-over transactions include those arising as a result of: Marriage breakdown Companies in the same wholly-owned group Changes to superannuation trust deeds Demutualisation © National Core Accounting Publications

© National Core Accounting Publications Roll-over Provisions Assets for which roll-over relief not available Roll-over relief is not available for CGT assets which are collectables or personal-use assets © National Core Accounting Publications

CGT Consequences of Death A CGT asset passes to a beneficiary of the deceased taxpayer’s estate when the beneficiary becomes the owner of the asset: Under the deceased’s will, or By operation of intestacy law if no will. © National Core Accounting Publications

CGT Consequences of Death When a taxpayer dies, assets that pass to a beneficiary of the taxpayer’s estate or to the legal representative are taken to have been acquired by them on the date of the taxpayer’s death. © National Core Accounting Publications

CGT Consequences of Death Inheriting a dwelling If a taxpayer inherits a deceased person’s dwelling which was the deceased’s main residence, they may be exempt or partially exempt when a capital gains tax (CGT) event happens to it. © National Core Accounting Publications