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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.


             (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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