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INCOME TAX ASSESSMENT ACT 1997 - SECT 104.25 Cancellation, surrender and similar endings: CGT event C2

INCOME TAX ASSESSMENT ACT 1997 - SECT 104.25

Cancellation, surrender and similar endings: CGT event C2

  (1)   CGT event C2 happens if your ownership of an intangible * CGT asset ends by the asset:

  (a)   being redeemed or cancelled; or

  (b)   being released, discharged or satisfied; or

  (c)   expiring; or

  (d)   being abandoned, surrendered or forfeited; or

  (e)   if the asset is an option--being exercised; or

  (f)   if the asset is a * convertible interest--being converted.

  (2)   The time of the event is:

  (a)   when you enter into the contract that results in the asset ending; or

  (b)   if there is no contract--when the asset ends.

  (3)   You make a capital gain if the * capital proceeds from the ending are more than the asset's * cost base. You make a capital loss if those capital proceeds are less than the asset's * reduced cost base.

Note:   The capital proceeds referred to in this subsection are reduced if the gain or loss was for shares and an amount was taken into account as a capital gain for the shares under former section   160ZL of the Income Tax Assessment Act 1936 for the 1997 - 98 income year or an earlier income year: see section   104 - 25 of the Income Tax (Transitional Provisions) Act 1997 .

  (4)   A lease is taken to have expired even if it is extended or renewed.

Exceptions

  (5)   A * capital gain or * capital loss you make is disregarded if:

  (a)   you * acquired the asset before 20   September 1985; or

  (b)   for a lease that you granted:

  (i)   it was granted before that day; or

  (ii)   if it has been renewed or extended--the start of the last renewal or extension occurred before that day.

Note 1:   There are other exceptions if:

  your lease expires and you did not use it mainly to produce assessable income: see section   118 - 40; or

  you exercise rights to acquire shares or units: see section   130 - 40; or

  you acquire shares or units by converting a convertible interest: see section   130 - 60; or

  you exercise an option: see section   134 - 1.

Note 2:   A company can agree to forgo any capital loss it makes as a result of forgiving a commercial debt owed to it by another company where the companies are under common ownership: see section   245 - 90.

Note 3:   A capital gain or loss a company makes because shares in its 100% subsidiary are cancelled (an example of CGT event C2) on the liquidation of the subsidiary may be reduced if there was a roll - over for a CGT asset under Subdivision   126 - B: see section   126 - 85.

Note 5:   Cost base adjustments are made only under Subdivision   125 - B if there is a roll - over under that Subdivision for CGT event C2 happening as a result of a demerger.

Note 6:   A capital gain or loss made by a demerging entity from CGT event C2 happening as a result of a demerger is also disregarded: see section   125 - 155.

Note 7:   A capital gain or loss you make from the meeting of your entitlement under Division   2AA (Financial claims scheme for account - holders with insolvent ADIs) of Part   II of the Banking Act 1959 or Part   VC (Financial claims scheme for account - holders with insolvent general insurers) of the Insurance Act 1973 is disregarded: see sections   253 - 10 and 322 - 30 of this Act.

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