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

2. © 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

3. © 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

4. © 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

5. © 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

6. © 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

7. © 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

8. © 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

9. © 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

10. © 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

11. © 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

12. © 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

13. © 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

14. © 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

15. 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

16. 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

17. 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