History of Capital Gains Tax
History
Capital Gains Tax (CGT) was introduced on the 20th September 1985, prior to which there was no formal CGT. Any capital gain before this date is not subject to CGT.
▪ Between 1985 – 1998: the relevant legislation was under PTIII, subdivision A of the ITAA36 (7-020)
The statutory provisions in operations between 1985-1998, PtIIIA ITAA36, was criticised for being too complex, having unfair outcomes, and for distorting commercial decisions. When the Tax Law Improvement Project in 1994 was established, the opportunity arose to amend the approach to taxing capital gains. ▪ On the 1st of July 1998: the CGT tax legislation was revised under PT3-1 and 3-3 ITAA97 (7-025). Such legislation is used to date.
CGT
CGT affects your income tax liability because your assessable income includes your net capital gain for the income year. Your net capital gain is the total of your capital gains for the income year, reduced by certain losses you have made.
STEP1: Identifying a CGT Event • You can make a capital gain or loss only if a CGT event happens [s 100-20(1)] • Division 104 ITAA 97 sets out all the CGT events that may result in a capital gain or capital loss.
N.B. Some CGT events will not have a capital gain or capital loss.
The 12 major categories of CGT events are summarised in s 104-5: 1. Disposal of a CGT asset - A1 2. Use and enjoyment of a CGT asset before title passes – B1 3. End of a CGT asset – C1 to C3 4. Bringing into existence a CGT asset – D1 to D4 5. Trusts: CGT events – E1 to E9 6. Leases: CGT events – F1 to F5 7. Shares: CGT events – G1 to G3 8. Special capital receipts – H1 and H2 9. Australian residency ends – I1 to I2 10. Reversal of roll-overs – J1 to J4 11. Other CGT events – K1 to K12 12. Consolidated groups – L1 to L8
• When determining if a CGT event has occurred relating to a specific taxpayer, each situation must be considered in light of all the possible CGT
Capital Gains Tax (CGT) was introduced on the 20th September 1985, prior to which there was no formal CGT. Any capital gain before this date is not subject to CGT.
▪ Between 1985 – 1998: the relevant legislation was under PTIII, subdivision A of the ITAA36 (7-020)
The statutory provisions in operations between 1985-1998, PtIIIA ITAA36, was criticised for being too complex, having unfair outcomes, and for distorting commercial decisions. When the Tax Law Improvement Project in 1994 was established, the opportunity arose to amend the approach to taxing capital gains. ▪ On the 1st of July 1998: the CGT tax legislation was revised under PT3-1 and 3-3 ITAA97 (7-025). Such legislation is used to date.
CGT
CGT affects your income tax liability because your assessable income includes your net capital gain for the income year. Your net capital gain is the total of your capital gains for the income year, reduced by certain losses you have made.
STEP1: Identifying a CGT Event • You can make a capital gain or loss only if a CGT event happens [s 100-20(1)] • Division 104 ITAA 97 sets out all the CGT events that may result in a capital gain or capital loss.
N.B. Some CGT events will not have a capital gain or capital loss.
The 12 major categories of CGT events are summarised in s 104-5: 1. Disposal of a CGT asset - A1 2. Use and enjoyment of a CGT asset before title passes – B1 3. End of a CGT asset – C1 to C3 4. Bringing into existence a CGT asset – D1 to D4 5. Trusts: CGT events – E1 to E9 6. Leases: CGT events – F1 to F5 7. Shares: CGT events – G1 to G3 8. Special capital receipts – H1 and H2 9. Australian residency ends – I1 to I2 10. Reversal of roll-overs – J1 to J4 11. Other CGT events – K1 to K12 12. Consolidated groups – L1 to L8
• When determining if a CGT event has occurred relating to a specific taxpayer, each situation must be considered in light of all the possible CGT