(1) CGT event F4 happens if a lessee receives a payment from the lessor for agreeing to vary or waive a term of the lease.
The payment can include giving property: see section 103-5.
(2) The time of the event is when the term is varied or waived.
(3) The lessee makes a capital gain if the * capital proceeds from the event are more than the lease's * cost base (at the time of the event). If the lessee makes a * capital gain, the lease's cost base is also reduced to nil.
Note: The lessee cannot make a capital loss.
(4) On the other hand, if those * capital proceeds are less , the lease's * cost base is reduced by that amount at the time of the event.
Example: On 1 January 1999 a lessee enters a lease. On 1 May 1999 the lessee agrees to waive a term. The lessor pays the lessee $1,000 for this.
If the lease's cost base at the time of the waiver is $2,500, it is reduced from $2,500 to $1,500.
On 1 September 1999 the lessee agrees to waive another term. The lessor pays the lessee $2,000 for this.
If the lease's cost base at the time of the waiver is $1,500, the lessee makes a capital gain of $500, and the cost base is reduced to nil.
(5) A * capital gain the lessee makes is disregarded if:
(a) the lease was granted before 20 September 1985; or
(b) for a lease that has been renewed or extended--the start of the last renewal or extension occurred before that day.