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INCOME TAX ASSESSMENT ACT 1997 - SECT 104.95 Making a capital gain

INCOME TAX ASSESSMENT ACT 1997 - SECT 104.95

Making a capital gain

You are the only beneficiary

  (1)   If you are the only beneficiary with an interest in the trust capital and you * dispose of that interest, you work out if you have made a * capital gain in this way:

Working out your capital gain

Step 1.   Work out the * capital proceeds from the * disposal.

Step 2.   Work out the * net asset amount.

Step 3.   If the Step 1 amount is greater , you make a capital gain equal to the difference.

  (2)   The net asset amount is worked out in this way:

Working out the net asset amount

Step 1.   Work out the total of the * cost bases (at the time of the disposal) of the * CGT assets that the trustee * acquired on or after 20   September 1985 and that formed part of the trust capital at that time.

Step 2.   Work out the total of the * market values (at the time of the disposal) of the * CGT assets that the trustee * acquired before 20   September 1985 and that formed part of the trust capital at that time.

Step 3.   Work out the amount of money that formed part of the trust capital at the time of the disposal.

Step 4.   Add up the Step 1, 2 and 3 amounts.

Step 5.   Subtract from the Step 4 amount any liabilities of the trust at the time of the disposal.

Step 6.   The result is the net asset amount .

Example:   You dispose of your interest in the trust capital for $10,000 (the capital proceeds).

  The total of the cost bases of the CGT assets that the trustee acquired on or after 20   September 1985 is $6,000.

  The total of the market values of the CGT assets that the trustee acquired before 20   September 1985 is $2,500.

  There is $1,000 in the trust. The trust liabilities are $500.

  The net asset amount is:

Start formula $6,000 plus $2,500 plus $1,000 minus $500 equals $9,000 end formula

  You make a capital gain of:

Start formula $10,000 minus $9,000 equals $1,000 end formula

  (3)   If you * dispose of only part of that interest, any * capital gain is worked out using the method statement in subsection   (1), except that the Step 2 amount is replaced by:

Start formula The net asset amount times The part of the interest you are disposing of (expressed as a fraction) end formula

Example:   To vary the example in subsection   (2), suppose you dispose of 50% of your interest for $5,000 (the capital proceeds).

  The Step 2 amount becomes:

Start formula $9,000 times 50% equals $4,500 end formula

  You make a capital gain of:

Start formula $5,000 minus $4,500 equals $500 end formula

There is more than one beneficiary

  (4)   If you are not the only beneficiary with an interest in the trust capital and you * dispose of your interest, any * capital gain is worked out using the method statement in subsection   (1), except that the Step 2 amount is replaced by:

Start formula The net asset amount times Your interest in the trust capital (expressed as a fraction) end formula

Example:   To vary the example in subsection   (2), suppose you have a 20% interest in the trust capital and you dispose of it for $4,000 (the capital proceeds).

  The Step 2 amount becomes:

Start formula $9,000 times 20% equals $1,800 end formula

  You make a capital gain of:

Start formula $4,000 minus $1,800 equals $2,200 end formula

  (5)   If you are not the only beneficiary with an interest in the trust capital and you * dispose of part of your interest, any * capital gain is worked out using the method statement in subsection   (1), except that the Step 2 amount is replaced by:

 

Start formula The net asset amount times Your interest in the trust capital (expressed as a fraction) times The part of the interest you are disposing of (expressed as a fraction) end formula

Example:   To vary the example in subsection   (2), suppose you have a 50% interest in the trust capital. You dispose of 20% of it for $1,000 (the capital proceeds).

  The Step 2 amount becomes:

Start formula $9,000 times 50% times 20% equals $900 end formula

  You make a capital gain of:

Start formula $1,000 minus $900 equals $100 end formula

Exception

  (6)   A * capital gain you make is disregarded if you * acquired the * CGT asset that is the interest in the trust capital before 20   September 1985.

Note:   You can make a gain if you dispose of an interest in a trust that you acquired before that day: see CGT event K6.

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