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INCOME TAX ASSESSMENT ACT 1997 - SECT 67.30

Refundable tax offsets--R&D

             (1)  A * tax offset to which an * R&D entity is entitled under section 355-100 (about R&D) for an income year is subject to the refundable tax offset rules if all or part of the amount of the tax offset is worked out using the percentage in item 1 of the table in subsection 355-100(1).

Note 1:       Otherwise, the tax offset will be a non-refundable tax offset (see item 35 of the table in subsection 63-10(1)).

Note 2:       This subsection can apply to an entitlement under any subsection of section 355-100.

             (2)  Without limiting its effect apart from this subsection, subsection (1) also has the effect it would have if:

                     (a)  subsection (3) had not been enacted; and

                     (b)  the reference in subsection (1) to an * R&D entity were, by express provision, confined to an R&D entity that:

                              (i)  is a * constitutional corporation; or

                             (ii)  has its registered office (within the meaning of the Corporations Act 2001 ) or principal place of business (within the meaning of that Act) located in a Territory.

             (3)  Without limiting its effect apart from this subsection, subsection (1) also has the effect it would have if:

                     (a)  subsection (2) had not been enacted; and

                     (b)  this Act applied so that * tax offsets under section 355-100 could only be worked out in respect of * R&D activities conducted or to be conducted:

                              (i)  solely in a Territory; or

                             (ii)  solely outside of Australia; or

                            (iii)  solely in a Territory and outside of Australia; or

                            (iv)  for the dominant purpose of supporting * core R&D activities conducted, or to be conducted, solely in a Territory.


 

Contents

Chapter 2--Liability rules of general application                       1

Part 2-25--Trading stock                                                                                                   1

Division 70--Trading stock                                                                                        1

Guide to Division 70                                                                                                  1

70-1....................... What this Division is about................................................. 1

70-5....................... The 3 key features of tax accounting for trading stock........ 2

Subdivision 70-A--What is trading stock                                                             2

70-10..................... Meaning of trading stock .................................................... 3

70-12..................... Registered emissions units.................................................. 3

Subdivision 70-B--Acquiring trading stock                                                         3

70-15..................... In which income year do you deduct an outgoing for trading stock?       4

70-20..................... Non-arm's length transactions............................................ 4

70-25..................... Cost of trading stock is not a capital outgoing.................... 5

70-30..................... Starting to hold as trading stock an item you already own.. 5

Subdivision 70-C--Accounting for trading stock you hold at the start or end of the income year            8

General rules                                                                                                               8

70-35..................... You include the value of your trading stock in working out your assessable income and deductions      8

70-40..................... Value of trading stock at start of income year..................... 9

70-45..................... Value of trading stock at end of income year...................... 9

Special valuation rules                                                                                             10

70-50..................... Valuation if trading stock obsolete etc.............................. 10

70-55..................... Working out the cost of natural increase of live stock....... 11

70-60..................... Valuation of horse breeding stock.................................... 11

70-65..................... Working out the horse opening value and the horse reduction amount    12

Subdivision 70-D--Assessable income arising from disposals of trading stock and certain other assets                 13

Guide to Subdivision 70-D                                                                                       13

70-75..................... What this Subdivision is about......................................... 13

70-80..................... Why the rules in this Subdivision are necessary............... 14

Operative provisions                                                                                                14

70-85..................... Application of this Subdivision to certain other assets...... 14

70-90..................... Assessable income on disposal of trading stock outside the ordinary course of business        15

70-95..................... Purchase price is taken to be market value........................ 16

70-100................... Notional disposal when you stop holding an item as trading stock          16

70-105................... Death of owner................................................................. 18

70-110................... You stop holding an item as trading stock but still own it 19

70-115................... Compensation for lost trading stock................................. 20

Subdivision 70-E--Miscellaneous                                                                         20

70-120................... Deducting capital costs of acquiring trees......................... 20

Part 2-40 -- Rules affecting employees and other taxpayers receiving PAYG withholding payments    23

Division 80 -- General rules                                                                                      23

Guide to Division 80                                                                                                23

80-1....................... What this Division is about............................................... 23

Operative provisions                                                                                                23

80-5 ....................... Holding of an office .......................................................... 23

80-10 ..................... Application to the termination of employment .................. 24

80-15..................... Transfer of property.......................................................... 24

80-20..................... Payments for your benefit or at your direction or request. 24

Division 82 -- Employment termination payments                                        26

Guide to Division 82                                                                                                26

82-1....................... What this Division is about............................................... 26

Subdivision 82-A -- Employment termination payments: life benefits        26

Guide to Subdivision 82-A                                                                                       26

82-5....................... What this Subdivision is about......................................... 26

Operative provisions                                                                                                27

82-10..................... Taxation of life benefit termination payments................... 27

Subdivision 82-B -- Employment termination payments: death benefits    30

Guide to Subdivision 82-B                                                                                       30

82-60..................... What this Subdivision is about......................................... 30

Operative provisions                                                                                                31

82-65..................... Death benefits for dependants........................................... 31

82-70..................... Death benefits for non-dependants................................... 32

82-75..................... Death benefits paid to trustee of deceased estate............... 33

Subdivision 82-C -- Key concepts                                                                           34

Guide to Subdivision 82-C                                                                                       34

82-125................... What this Subdivision is about......................................... 34

Operative provisions                                                                                                35

82-130................... What is an employment termination payment ?.................. 35

82-135................... Payments that are not employment termination payments . 37

82-140................... Tax free component of an employment termination payment 38

82-145................... Taxable component of an employment termination payment 38

82-150................... What is an invalidity segment of an employment termination payment?   39

82-155................... What is a pre-July 83 segment of an employment termination payment? 39

82-160................... What is the ETP cap amount ?........................................... 40

Division 83 -- Other payments on termination of employment              41

Guide to Division 83                                                                                                41

83-1....................... What this Division is about............................................... 41

Subdivision 83-A -- Unused annual leave payments                                          41

Guide to Subdivision 83-A                                                                                       41

83-5....................... What this Subdivision is about......................................... 41

Operative provisions                                                                                                42

83-10..................... Unused annual leave payment is assessable...................... 42

83-15..................... Entitlement to tax offset.................................................... 43

Subdivision 83-B -- Unused long service leave payments                                43

Guide to Subdivision 83-B                                                                                       43

83-65..................... What this Subdivision is about......................................... 43

General                                                                                                                       44

83-70..................... Application--long service leave....................................... 44

83-75..................... Meaning of unused long service leave payment ................ 45

83-80..................... Taxation of unused long service leave payments.............. 45

83-85..................... Entitlement to tax offset.................................................... 46

83-90 ..................... Meaning of pre-16/8/78 period , pre-18/8/93 period , post-17/8/93 period and long service leave employment period ............................................................................... 46

Employment wholly full-time or wholly part-time                                           47

83-95..................... How to work out amount of payment attributable to each period             47

83-100................... How to work out unused days of long service leave for each period       48

83-105................... How to work out long service leave accrued in each period 49

Employment partly full-time and partly part-time                                          50

83-110................... Leave accrued in pre-16/8/78, pre-18/8/93 and post-17/8/93 periods--employment full-time and part-time.......................................................................................... 50

Long service leave taken at less than full pay                                                    50

83-115................... Working out used days of long service leave if leave taken at less than full pay      50

Subdivision 83-C -- Genuine redundancy payments and early retirement scheme payments      51

Guide to Subdivision 83-C                                                                                       51

83-165................... What this Subdivision is about......................................... 51

Operative provisions                                                                                                52

83-170................... Tax-free treatment of genuine redundancy payments and early retirement scheme payments   52

83-175................... What is a genuine redundancy payment ?.......................... 53

83-180................... What is an early retirement scheme payment ?.................. 54

Subdivision 83-D -- Foreign termination payments                                          56

Guide to Subdivision 83-D                                                                                       56

83-230................... What this Subdivision is about......................................... 56

Operative provisions                                                                                                56

83-235................... Termination payments tax free--foreign resident period.. 56

83-240................... Termination payments tax free--Australian resident period 57

Subdivision 83-E -- Other payments                                                                     58

Guide to Subdivision 83-E                                                                                       58

83-290................... What this Subdivision is about......................................... 58

Operative provisions                                                                                                58

83-295................... Termination payments made more than 12 months after termination etc. 58

Division 83A--Employee share schemes                                                           59

Guide to Division 83A                                                                                              59

83A-1.................... What this Division is about............................................... 59

Subdivision 83A-A--Objects of Division and key concepts                            59

83A-5.................... Objects of Division........................................................... 60

83A-10.................. Meaning of ESS interest and employee share scheme ...... 60

Subdivision 83A-B--Immediate inclusion of discount in assessable income   61

Guide to Subdivision 83A-B                                                                                    61

83A-15.................. What this Subdivision is about......................................... 61

Operative provisions                                                                                                61

83A-20.................. Application of Subdivision............................................... 61

83A-25.................. Discount to be included in assessable income................... 62

83A-30.................. Amount for which discounted ESS interest acquired........ 62

83A-33.................. Reducing amounts included in assessable income--start ups  63

83A-35.................. Reducing amounts included in assessable income--other cases              65

83A-45.................. Further conditions for reducing amounts included in assessable income 67

Subdivision 83A-C--Deferred inclusion of gain in assessable income        69

Guide to Subdivision 83A-C                                                                                    69

83A-100................ What this Subdivision is about......................................... 69

Main provisions                                                                                                         70

83A-105................ Application of Subdivision............................................... 70

83A-110................ Amount to be included in assessable income.................... 73

83A-115................ ESS deferred taxing point--shares................................... 73

83A-120................ ESS deferred taxing point--rights to acquire shares......... 74

83A-125................ Tax treatment of ESS interests held after ESS deferred taxing points      76

Takeovers and restructures                                                                                    76

83A-130................ Takeovers and restructures............................................... 76

Subdivision 83A-D--Deduction for employer                                                   79

Guide to Subdivision 83A-D                                                                                    79

83A-200................ What this Subdivision is about......................................... 79

Operative provisions                                                                                                80

83A-205................ Deduction for employer.................................................... 80

83A-210................ Timing of general deductions............................................ 81

Subdivision 83A-E--Miscellaneous                                                                      81

83A-305................ Acquisition by associates.................................................. 82

83A-310................ Forfeiture etc. of ESS interest........................................... 82

83A-315................ Market value of ESS interest............................................ 83

83A-320................ Interests in a trust.............................................................. 83

83A-325................ Application of Division to relationships similar to employment               84

83A-330................ Application of Division to ceasing employment............... 85

83A-335................ Application of Division to stapled securities..................... 86

83A-340................ Application of Division to indeterminate rights................ 86

Part 2-42--Personal services income                                                                         87

Division 84--Introduction                                                                                         87

Guide to Part 2-42                                                                                                    87

84-1....................... What this Part is about...................................................... 87

Operative provisions                                                                                                88

84-5....................... Meaning of personal services income .............................. 88

84-10..................... This Part does not imply that individuals are employees... 88

Division 85--Deductions relating to personal services income             89

Guide to Division 85                                                                                                89

85-1....................... What this Division is about............................................... 89

Operative provisions                                                                                                89

85-5....................... Object of this Division...................................................... 89

85-10..................... Deductions for non-employees relating to personal services income       90

85-15..................... Deductions for rent, mortgage interest, rates and land tax. 91

85-20..................... Deductions for payments to associates etc........................ 91

85-25..................... Deductions for superannuation for associates................... 92

85-30..................... Exception: personal services businesses........................... 92

85-35..................... Exception: employees, office holders and religious practitioners             93

85-40..................... Application of Subdivision 900-B to individuals who are not employees                93

Division 86--Alienation of personal services income                                 94

Guide to Division 86                                                                                                94

86-1....................... What this Division is about............................................... 94

86-5....................... A simple description of what this Division does.............. 94

Subdivision 86-A--General                                                                                    96

86-10..................... Object of this Division...................................................... 96

86-15..................... Effect of obtaining personal services income through a personal services entity      96

86-20..................... Offsetting the personal services entity's deductions against personal services income            98

86-25 ..................... Apportionment of entity maintenance deductions among several individuals            100

86-27..................... Deduction for net personal services income loss............ 101

86-30..................... Assessable income etc. of the personal services entity.... 101

86-35..................... Later payments of, or entitlements to, personal services income to be disregarded for income tax purposes........................................................................................ 102

86-40..................... Salary payments shortly after an income year................. 102

Subdivision 86-B--Entitlement to deductions                                                  103

86-60..................... General rule for deduction entitlements of personal services entities        104

86-65..................... Entity maintenance deductions........................................ 104

86-70..................... Car expenses................................................................... 105

86-75..................... Superannuation............................................................... 106

86-80..................... Salary or wages promptly paid....................................... 107

86-85..................... Deduction entitlements of personal services entities for amounts included in an individual's assessable income........................................................................................ 107

86-87..................... Personal services entity cannot deduct net personal services income loss                107

86-90..................... Application of Divisions 28 and 900 to personal services entities           108

Division 87--Personal services businesses                                                     109

Guide to Division 87                                                                                              109

87-1....................... What this Division is about............................................. 109

87-5....................... Diagram showing the operation of this Division............ 110

Subdivision 87-A--General                                                                                  112

87-10..................... Object of this Division.................................................... 112

87-15..................... What is a personal services business?............................. 112

87-18..................... The results test for a personal services business............. 114

87-20..................... The unrelated clients test for a personal services business 115

87-25..................... The employment test for a personal services business.... 116

87-30..................... The business premises test for a personal services business 117

87-35..................... Personal services income from Australian government agencies             117

87-40..................... Application of this Division to certain agents................. 118

Subdivision 87-B--Personal services business determinations                   120

87-60..................... Personal services business determinations for individuals 121

87-65..................... Personal services business determinations for personal services entities 123

87-70..................... Applying etc. for personal services business determinations 126

87-75..................... When personal services business determinations have effect 127

87-80..................... Revoking personal services business determinations...... 127

87-85..................... Review of decisions........................................................ 128

Chapter 3--Specialist liability rules                                                        129

Part 3-1--Capital gains and losses: general topics                                          129

Division 100--A Guide to capital gains and losses                                    129

General overview                                                                                                    129

100-1..................... What this Division is about............................................. 129

100-5..................... Effect of this Division..................................................... 130

100-10................... Fundamentals of CGT.................................................... 130

100-15................... Overview of Steps 1 and 2............................................. 132

Step 1--Have you made a capital gain or a capital loss?                             133

100-20................... What events attract CGT?............................................... 133

100-25................... What are CGT assets?..................................................... 134

100-30................... Does an exception or exemption apply?.......................... 134

100-33................... Can there be a roll-over?................................................. 135

Step 2--Work out the amount of the capital gain or loss                              136

100-35................... What is a capital gain or loss?......................................... 136

100-40................... What factors come into calculating a capital gain or loss? 136

100-45................... How to calculate the capital gain or loss for most CGT events                137

Step 3--Work out your net capital gain or loss for the income year         137

100-50................... How to work out your net capital gain or loss................ 137

100-55................... How do you comply with CGT?.................................... 138

Keeping records for CGT purposes                                                                    138

100-60................... Why keep records?......................................................... 138

100-65................... What records?................................................................. 139

100-70................... How long you need to keep records............................... 139

Division 102--Assessable income includes net capital gain                  140

Guide to Division 102                                                                                            140

102-1..................... What this Division is about............................................. 140

102-3..................... Concessions in working out your net capital gain........... 140

Operative provisions                                                                                              141

102-5..................... Assessable income includes net capital gain................... 141

102-10................... How to work out your net capital loss............................ 143

102-15................... How to apply net capital losses....................................... 144

102-20................... Ways you can make a capital gain or a capital loss......... 144

102-22................... Amounts of capital gains and losses............................... 144

102-23................... CGT event still happens even if gain or loss disregarded 145

102-25................... Order of application of CGT events................................ 145

102-30................... Exceptions and modifications......................................... 146

Division 103--General rules                                                                                  149

Guide to Division 103                                                                                            149

103-1..................... What this Division is about............................................. 149

Operative provisions                                                                                              149

103-5..................... Giving property as part of a transaction.......................... 149

103-10................... Entitlement to receive money or property........................ 149

103-15................... Requirement to pay money or give property................... 150

103-25................... Choices........................................................................... 150

103-30................... Reduction of cost base etc. by net input tax credits......... 151

Division 104--CGT events                                                                                     152

Guide to Division 104                                                                                            152

104-1..................... What this Division is about............................................. 152

104-5..................... Summary of the CGT events.......................................... 153

Subdivision 104-A--Disposals                                                                             166

104-10................... Disposal of a CGT asset: CGT event A1........................ 166

Subdivision 104-B--Use and enjoyment before title passes                         168

104-15................... Use and enjoyment before title passes: CGT event B1... 168

Subdivision 104-C--End of a CGT asset                                                           169

104-20................... Loss or destruction of a CGT asset: CGT event C1........ 169

104-25................... Cancellation, surrender and similar endings: CGT event C2 170

104-30................... End of option to acquire shares etc.: CGT event C3....... 171

Subdivision 104-D--Bringing into existence a CGT asset                            172

104-35................... Creating contractual or other rights: CGT event D1........ 172

104-40................... Granting an option: CGT event D2................................. 174

104-45................... Granting a right to income from mining: CGT event D3 175

104-47................... Conservation covenants: CGT event D4......................... 175

Subdivision 104-E--Trusts                                                                                   177

104-55................... Creating a trust over a CGT asset: CGT event E1........... 178

104-60................... Transferring a CGT asset to a trust: CGT event E2........ 179

104-65................... Converting a trust to a unit trust: CGT event E3............. 180

104-70................... Capital payment for trust interest: CGT event E4............ 180

104-71................... Adjustment of non-assessable part................................. 182

104-72................... Reducing your capital gain under CGT event E4 if you are a trustee       186

104-75................... Beneficiary becoming entitled to a trust asset: CGT event E5  187

104-80................... Disposal to beneficiary to end income right: CGT event E6 188

104-85................... Disposal to beneficiary to end capital interest: CGT event E7  189

104-90................... Disposal by beneficiary of capital interest: CGT event E8 191

104-95................... Making a capital gain...................................................... 191

104-100................. Making a capital loss...................................................... 194

104-105................. Creating a trust over future property: CGT event E9...... 196

104-107A.............. AMIT--cost base reduction exceeds cost base: CGT event E10             197

104-107B.............. Annual cost base adjustment for member's unit or interest in AMIT       198

104-107C.............. AMIT cost base net amount............................................ 199

104-107D.............. AMIT cost base reduction amount.................................. 199

104-107E............... AMIT cost base increase amount.................................... 200

104-107F............... Receipt of money etc. increasing AMIT cost base reduction amount not to be treated as income            201

104-107G.............. Effect of AMIT cost base net amount on cost of AMIT membership interest or unit that is a revenue asset--adjustment of cost of asset.............................................. 201

104-107H.............. Effect of AMIT cost base net amount on cost of AMIT membership interest or unit that is a revenue asset--amount included in assessable income............................ 203

Subdivision 104-F--Leases                                                                                   204

104-110................. Granting a lease: CGT event F1...................................... 204

104-115................. Granting a long-term lease: CGT event F2..................... 205

104-120................. Lessor pays lessee to get lease changed: CGT event F3. 206

104-125................. Lessee receives payment for changing lease: CGT event F4 206

104-130................. Lessor receives payment for changing lease: CGT event F5 207

Subdivision 104-G--Shares                                                                                  208

104-135................. Capital payment for shares: CGT event G1.................... 208

104-145................. Liquidator or administrator declares shares or financial instruments worthless: CGT event G3              209

Subdivision 104-H--Special capital receipts                                                   211

104-150................. Forfeiture of deposit: CGT event H1.............................. 211

104-155................. Receipt for event relating to a CGT asset: CGT event H2 212

Subdivision 104-I--Australian residency ends                                                213

104-160................. Individual or company stops being an Australian resident: CGT event I1               213

104-165................. Exception for individuals................................................ 214

104-170................. Trust stops being a resident trust: CGT event I2............. 215

Subdivision 104-J--CGT events relating to roll-overs                                 216

104-175................. Company ceasing to be member of wholly-owned group after roll-over: CGT event J1         216

104-180................. Sub-group break-up........................................................ 218

104-182................. Consolidated group break-up.......................................... 220

104-185................. Change in relation to replacement asset or improved asset after a roll-over under Subdivision 152-E: CGT event J2........................................................................... 220

104-190................. Replacement asset period ............................................... 222

104-195................. Trust failing to cease to exist after roll-over under Subdivision 124-N: CGT event J4            223

104-197................. Failure to acquire replacement asset and to incur fourth element expenditure after a roll-over under Subdivision 152-E: CGT event J5.................................. 225

104-198................. Cost of acquisition of replacement asset or amount of fourth element expenditure, or both, not sufficient to cover disregarded capital gain: CGT event J6................. 226

Subdivision 104-K--Other CGT events                                                             227

104-205................. Incoming international transfer of emissions unit: CGT event K1            228

104-210................. Bankrupt pays amount in relation to debt: CGT event K2 229

104-215................. Asset passing to tax-advantaged entity: CGT event K3.. 230

104-220................. CGT asset starts being trading stock: CGT event K4...... 230

104-225................. Special collectable losses: CGT event K5....................... 231

104-230................. Pre-CGT shares or trust interest: CGT event K6............ 232

104-235................. Balancing adjustment events for depreciating assets and certain assets used for R&D: CGT event K7   235

104-240................. Working out capital gain or loss for CGT event K7: general case            238

104-245................. Working out capital gain or loss for CGT event K7: pooled assets          239

104-250................. Direct value shifts: CGT event K8.................................. 241

104-255................. Carried interests: CGT event K9..................................... 241

104-260................. Certain short-term forex realisation gains: CGT event K10 243

104-265................. Certain short-term forex realisation losses: CGT event K11 243

104-270................. Foreign hybrids: CGT event K12................................... 243

Subdivision 104-L--Consolidated groups and MEC groups                       244

104-500................. Loss of pre-CGT status of membership interests in entity becoming subsidiary member: CGT event L1........................................................................................ 244

104-505................. Where pre-formation intra-group roll-over reduction results in negative allocable cost amount: CGT event L2........................................................................................ 246

104-510................. Where tax cost setting amounts for retained cost base assets exceeds joining allocable cost amount: CGT event L3................................................................................... 246

104-515................. Where no reset cost base assets and excess of net allocable cost amount on joining: CGT event L4       247

104-520................. Where amount remaining after step 4 of leaving allocable cost amount is negative: CGT event L5         248

104-525................. Error in calculation of tax cost setting amount for joining entity's assets: CGT event L6        248

104-535................. Where reduction in tax cost setting amounts for reset cost base assets cannot be allocated: CGT event L8........................................................................................ 250

Division 106--Entity making the gain or loss                                              252

Guide to Division 106                                                                                            252

106-1..................... What this Division is about............................................. 252

Subdivision 106-A--Partnerships                                                                       252

106-5..................... Partnerships.................................................................... 252

Subdivision 106-B--Bankruptcy and liquidation                                           255

106-30................... Effect of bankruptcy....................................................... 255

106-35................... Effect of liquidation........................................................ 255

Subdivision 106-C--Absolutely entitled beneficiaries                                   256

106-50................... Absolutely entitled beneficiaries..................................... 256

Subdivision 106-D--Securities, charges and encumbrances                        256

106-60................... Securities, charges and encumbrances............................ 257

Division 108--CGT assets                                                                                      258

Guide to Division 108                                                                                            258

108-1..................... What this Division is about............................................. 258

Subdivision 108-A--What a CGT asset is                                                         258

108-5..................... CGT assets..................................................................... 258

108-7..................... Interest in CGT assets as joint tenants............................ 259

Subdivision 108-B--Collectables                                                                        259

108-10................... Losses from collectables to be offset only against gains from collectables               260

108-15................... Sets of collectables.......................................................... 261

108-17................... Cost base of a collectable................................................ 261

Subdivision 108-C--Personal use assets                                                            262

108-20................... Losses from personal use assets must be disregarded.... 262

108-25................... Sets of personal use assets.............................................. 262

108-30................... Cost base of a personal use asset.................................... 263

Subdivision 108-D--Separate CGT assets                                                        263

Guide to Subdivision 108-D                                                                                  263

108-50................... What this Subdivision is about....................................... 263

Operative provisions                                                                                              264

108-55................... When is a building a separate asset from land?............... 264

108-60................... Depreciating asset that is part of a building is a separate asset 264

108-65................... Land adjacent to land acquired before 20 September 1985 265

108-70................... When is a capital improvement a separate asset?............. 265

108-75................... Capital improvements to CGT assets for which a roll-over may be available           267

108-80................... Deciding if capital improvements are related to each other 269

108-85................... Meaning of improvement threshold................................ 270

Division 109--Acquisition of CGT assets                                                       271

Guide to Division 109                                                                                            271

109-1..................... What this Division is about............................................. 271

Subdivision 109-A--Operative rules                                                                  271

109-5..................... General acquisition rules................................................. 272

109-10................... When you acquire a CGT asset without a CGT event.... 274

Subdivision 109-B--Signposts to other acquisition rules                              275

109-50................... Effect of this Subdivision............................................... 275

109-55................... Other acquisition rules.................................................... 275

109-60................... Acquisition rules outside this Part and Part 3-3.............. 281

Division 110--Cost base and reduced cost base                                         286

Guide to Division 110                                                                                            286

110-1..................... What this Division is about............................................. 286

110-5..................... Modifications to general rules......................................... 286

110-10................... Rules about cost base not relevant for some CGT events 286

Subdivision 110-A--Cost base                                                                             288

110-25................... General rules about cost base ......................................... 289

110-35................... Incidental costs............................................................... 291

110-36................... Indexation....................................................................... 292

What does not form part of the cost base                                                          293

110-37................... Expenditure forming part of cost base or element........... 293

110-38................... Exclusions...................................................................... 294

110-40................... Assets acquired before 7.30 pm on 13 May 1997.......... 295

110-43................... Partnership interests acquired before 7.30 pm on 13 May 1997              296

110-45................... Assets acquired after 7.30 pm on 13 May 1997............. 296

110-50................... Partnership interests acquired after 7.30 pm on 13 May 1997 299

110-53................... Exceptions to application of sections 110- 45 and 110-50 301

110-54................... Debt deductions disallowed by thin capitalisation rules.. 301

Subdivision 110-B--Reduced cost base                                                             302

110-55................... General rules about reduced cost base ............................ 302

110-60................... Reduced cost base for partnership assets........................ 306

Division 112--Modifications to cost base and reduced cost base      308

Guide to Division 112                                                                                            308

112-1..................... What this Division is about............................................. 308

112-5..................... Discussion of modifications........................................... 308

Subdivision 112-A--General modifications                                                     309

112-15................... General rule for replacement modifications..................... 309

112-20................... Market value substitution rule......................................... 310

112-25................... Split, changed or merged assets...................................... 311

112-30................... Apportionment rules....................................................... 313

112-35................... Assumption of liability rule............................................ 314

112-36................... Acquisitions of assets involving look-through earnout rights  314

112-37................... Put options...................................................................... 317

Subdivision 112-B--Finding tables for special rules                                     317

112-40................... Effect of this Subdivision............................................... 318

112-45................... CGT events..................................................................... 318

112-46................... Annual cost base adjustment for member's unit or interest in AMIT       319

112-48................... Gifts acquired by associates............................................ 319

112-50................... Main residence................................................................ 320

112-53................... Scrip for scrip roll-over.................................................. 320

112-53AA............. Statutory licences............................................................ 321

112-53AB............. Change of incorporation................................................. 321

112-53A................ MDO roll-over............................................................... 321

112-53B................ Exchange of stapled ownership interests for units in a unit trust              322

112-53C................ Water entitlement roll-overs............................................ 322

112-54................... Demergers...................................................................... 322

112-54A................ Transfer of assets between certain trusts......................... 323

112-55................... Effect of you dying......................................................... 323

112-60................... Bonus shares or units..................................................... 324

112-65................... Rights............................................................................. 324

112-70................... Convertible interests....................................................... 325

112-77................... Exchangeable interests.................................................... 325

112-78................... Exploration investments.................................................. 326

112-80................... Leases............................................................................. 326

112-85................... Options........................................................................... 327

112-87................... Residency....................................................................... 327

112-90................... An asset stops being a pre-CGT asset............................ 328

112-92................... Demutualisation of certain entities.................................. 328

112-95................... Transfer of tax losses and net capital losses within wholly-owned groups of companies        328

112-97................... Modifications outside this Part and Part 3-3................... 329

Subdivision 112-C--Replacement-asset roll-overs                                         339

112-100................. Effect of this Subdivision............................................... 339

112-105................. What is a replacement-asset roll-over?............................ 339

112-110................. How is the cost base of the replacement asset modified? 340

112-115................. Table of replacement-asset roll-overs.............................. 340

Subdivision 112-D--Same-asset roll-overs                                                       341

112-135................. Effect of this Subdivision............................................... 342

112-140................. What is a same-asset roll-over?....................................... 342

112-145................. How is the cost base of the asset modified?.................... 342

112-150................. Table of same-asset roll-overs........................................ 342

Division 114--Indexation of cost base                                                             344

114-1..................... Indexing elements of cost base....................................... 344

114-5..................... When indexation relevant................................................ 345

114-10................... Requirement for 12 months ownership........................... 346

114-15................... Cost base modifications.................................................. 348

114-20................... When expenditure is incurred for roll-overs................... 350

Division 115--Discount capital gains and trusts' net capital gains 351

Guide to Division 115                                                                                            351

115-1..................... What this Division is about............................................. 351

Subdivision 115-A--Discount capital gains                                                      352

What is a discount capital gain?                                                                          352

115-5..................... What is a discount capital gain ?..................................... 352

115-10................... Who can make a discount capital gain?........................... 352

115-15................... Discount capital gain must be made after 21 September 1999  353

115-20................... Discount capital gain must not have indexed cost base... 353

115-25................... Discount capital gain must be on asset acquired at least 12 months before              354

115-30................... Special rules about time of acquisition............................ 356

115-32................... Special rule about time of acquisition for certain replacement-asset roll-overs         360

115-34................... Further special rule about time of acquisition for certain replacement-asset roll-overs             360

What are not discount capital gains?                                                                 362

115-40................... Capital gain resulting from agreement made within a year of acquisition 362

115-45................... Capital gain from equity in an entity with newly acquired assets             362

115-50................... Discount capital gain from equity in certain entities........ 364

115-55................... Capital gains involving money received from demutualisation of friendly society health or life insurer  367

Subdivision 115-B--Discount percentage                                                         367

115-100................. What is the discount percentage for a discount capital gain 367

115-105................. Foreign or temporary residents--individuals with direct gains                368

115-110................. Foreign or temporary residents--individuals with trust gains  369

115-115................. Foreign or temporary residents--percentage for individuals 371

115-120................. Foreign or temporary residents--trusts with certain gains 374

115-125................. Investors disposing of property used for affordable housing.. 375

Subdivision 115-C--Rules about trusts with net capital gains                     377

Guide to Subdivision 115-C                                                                                  377

115-200................. What this Division is about............................................. 377

Operative provisions                                                                                              378

115-210................. When this Subdivision applies........................................ 378

115-215................. Assessing presently entitled beneficiaries....................... 378

115-220................. Assessing trustees under section 98 of the Income Tax Assessment Act 1936          380

115-222................. Assessing trustees under section 99 or 99A of the Income Tax Assessment Act 1936             381

115-225................. Attributable gain............................................................. 382

115-227................. Share of a capital gain..................................................... 382

115-228................. Specifically entitled to an amount of a capital gain........... 383

115-230................. Choice for resident trustee to be specifically entitled to capital gain         384

Subdivision 115-D--Tax relief for shareholders in listed investment companies          385

Guide to Subdivision 115-D                                                                                  385

115-275................. What this Subdivision is about....................................... 385

Operative provisions                                                                                              386

115-280................. Deduction for certain dividends...................................... 386

115-285................. Meaning of LIC capital gain .......................................... 389

115-290................. Meaning of listed investment company ........................... 390

115-295................. Maintaining records........................................................ 391

Division 116--Capital proceeds                                                                           392

Guide to Division 116                                                                                            392

116-1..................... What this Division is about............................................. 392

116-5..................... General rules................................................................... 393

116-10................... Modifications to general rules......................................... 393

General rules                                                                                                           394

116-20................... General rules about capital proceeds .............................. 394

Modifications to general rules                                                                             396

116-25................... Table of modifications to the general rules...................... 396

116-30................... Market value substitution rule: modification 1................ 399

116-35................... Companies and trusts that are not widely held................ 401

116-40................... Apportionment rule: modification 2................................ 402

116-45................... Non-receipt rule: modification 3..................................... 403

116-50................... Repaid rule: modification 4............................................. 404

116-55................... Assumption of liability rule: modification 5.................... 404

116-60................... Misappropriation rule: modification 6............................. 405

Special rules                                                                                                             405

116-65................... Disposal etc. of a CGT asset the subject of an option..... 405

116-70................... Option requiring both acquisition and disposal etc......... 406

116-75................... Special rule for CGT event happening to a lease............. 406

116-80................... Special rule if CGT asset is shares or an interest in a trust 406

116-85................... Section 47A of 1936 Act applying to rolled-over asset.. 407

116-95................... Company changes residence from an unlisted country... 408

116-100................. Gifts of property............................................................. 410

116-105................. Conservation covenants.................................................. 410

116-110................. Roll-overs for merging superannuation funds................ 410

116-115................. Farm-in farm-out arrangements...................................... 410

116-120................. Disposals of assets involving look-through earnout rights 411

Division 118--Exemptions                                                                                      414

Guide to Division 118                                                                                            414

118-1..................... What this Division is about............................................. 414

Subdivision 118-A--General exemptions                                                         415

Exempt assets    416

118-5..................... Cars, motor cycles and valour decorations...................... 416

118-10................... Collectables and personal use assets............................... 416

118-12................... Assets used to produce exempt income etc..................... 418

118-13................... Shares in a PDF.............................................................. 419

118-15................... Registered emissions units.............................................. 419

Anti-overlap provisions                                                                                         419

118-20................... Reducing capital gains if amount otherwise assessable... 419

118-21................... Carried interests.............................................................. 422

118-22................... Superannuation lump sums and employment termination payments        422

118-24................... Depreciating assets......................................................... 423

118-25................... Trading stock.................................................................. 423

118-27................... Division 230 financial arrangements and financial arrangements to which Subdivision 250-E applies    424

118-30................... Film copyright................................................................ 425

118-35................... R&D............................................................................... 425

Exempt or loss-denying transactions                                                                 425

118-37................... Compensation, damages etc............................................ 425

118-40................... Expiry of a lease............................................................. 429

118-42................... Transfer of stratum units................................................. 429

118-45................... Sale of rights to mine...................................................... 430

118-55................... Foreign currency hedging gains and losses.................... 430

118-60................... Certain gifts.................................................................... 430

118-65................... Later distributions of personal services income.............. 431

118-70................... Transactions by exempt entities...................................... 431

118-75................... Marriage or relationship breakdown settlements............. 431

118-77................... Native title and rights to native title benefits.................... 432

Boat capital gains                                                                                                    433

118-80................... Reduction of boat capital gain......................................... 433

Special disability trusts                                                                                          433

118-85................... Special disability trusts................................................... 433

Subdivision 118-B--Main residence                                                                  433

Guide to Subdivision 118-B                                                                                  433

118-100................. What this Subdivision is about....................................... 433

118-105................. Map of this Subdivision................................................. 436

Basic case and concepts                                                                                         437

118-110................. Basic case....................................................................... 437

118-115................. Meaning of dwelling ....................................................... 438

118-120................. Extension to adjacent land etc......................................... 439

118-125................. Meaning of ownership period ........................................ 440

118-130................. Meaning of ownership interest in land or a dwelling...... 440

Rules that may extend the exemption                                                                 441

118-135................. Moving into a dwelling................................................... 441

118-140................. Changing main residences.............................................. 441

118-145................. Absences........................................................................ 441

118-147................. Absence from dwelling replacing main residence that was compulsorily acquired, destroyed etc.           442

118-150................. If you build, repair or renovate a dwelling...................... 444

118-155................. Where individual referred to in section 118-150 dies...... 445

118-160................. Destruction of dwelling and sale of land......................... 446

Rules that may limit the exemption                                                                    447

118-165................. Separate CGT event for adjacent land or other structures 447

118-170................. Spouse having different main residence.......................... 447

118-175................. Dependent child having different main residence............ 448

Roll-overs under Subdivision 126-A                                                                   448

118-178................. Previous roll-over under Subdivision 126-A.................. 448

118-180................. Acquisition of dwelling from company or trust on marriage or relationship breakdown--roll-over provision applying.......................................................................... 449

Partial exemption rules                                                                                         450

118-185................. Partial exemption where dwelling was your main residence during part only of ownership period         450

118-190................. Use of dwelling for producing assessable income.......... 451

118-192................. Special rule for first use to produce income.................... 453

Dwellings acquired from deceased estates                                                        454

118-195................. Dwelling acquired from a deceased estate....................... 454

118-197................. Special rule for surviving joint tenant............................. 456

118-200................. Partial exemption for deceased estate dwellings.............. 456

118-205................. Adjustment if dwelling inherited from deceased individual 458

118-210................. Trustee acquiring dwelling under will............................. 459

Special disability trusts                                                                                          461

118-215................. What the following provisions are about........................ 461

118-218................. Exemption available to trustee--main case..................... 461

118-220................. Exemption available to trustee--after the principal beneficiary's death    462

118-222................. Exemption available to other beneficiary who acquires the CGT asset after the principal beneficiary's death........................................................................................ 463

118-225................. Amount of exemption available after the principal beneficiary's death--general     463

118-227................. Amount of exemption available after the principal beneficiary's death--cost base and reduced cost base........................................................................................ 465

118-230................. Application of CGT events E5 and E7 in relation to main residence exemption and special disability trusts........................................................................................ 466

Compulsory acquisitions of adjacent land only                                              466

118-240................. What the following provisions are about........................ 466

118-245................. CGT events happening only to adjacent land.................. 466

118-250................. Compulsory acquisitions of adjacent land....................... 468

118-255................. Maximum exempt area ................................................... 470

118-260................. Partial exemption rules.................................................... 471

118-265................. Extension to adjacent structures...................................... 471

Subdivision 118-D--Insurance and superannuation                                      472

118-300................. Insurance policies........................................................... 472

118-305................. Superannuation............................................................... 474

118-310................. RSA's............................................................................. 475

118-313................. Superannuation agreements under the Family Law Act.. 475

118-315................. Segregated exempt assets of life insurance companies.... 475

118-320................. Segregated current pension assets of a complying superannuation entity 475

Subdivision 118-E--Units in pooled superannuation trusts                         475

118-350................. Units in pooled superannuation trusts............................. 475

Subdivision 118-F--Venture capital investment                                             476

Guide to Subdivision 118-F                                                                                   476

118-400................. What this Subdivision is about....................................... 476

Operative provisions                                                                                              478

118-405................. Exemption for certain foreign venture capital investments through venture capital limited partnerships  478

118-407................. Exemption for certain venture capital investments through early stage venture capital limited partnerships........................................................................................ 479

118-408................. Partial exemption for some capital gains otherwise fully exempt under section 118-407         482

118-410................. Exemption for certain foreign venture capital investments through Australian venture capital funds of funds........................................................................................ 483

118-415................. Exemption for certain venture capital investments by foreign residents   486

118-420................. Meaning of eligible venture capital partner etc.............. 487

118-425................. Meaning of eligible venture capital investment --investments in companies            490

118-427................. Meaning of eligible venture capital investment --investments in unit trusts             500

118-428................. Additional investment requirements for ESVCLPs........ 509

118-430................. Meaning of at risk .......................................................... 510

118-432................. Findings of substantially novel applications of technology 511

118-435................. Special rule relating to investment in foreign resident holding companies                512

118-440................. Meaning of permitted entity value ................................... 513

118-445................. Meaning of committed capital ........................................ 516

118-450................. Values of assets and investments of entities without auditors  516

118-455................. Impact Assessment of this Subdivision.......................... 517

Subdivision 118-G--Venture capital: investment by superannuation funds for foreign residents            518

Guide to Subdivision 118-G                                                                                  518

118-500................. What this Subdivision is about....................................... 518

118-505................. Exemption for certain foreign venture capital.................. 518

118-510................. Meaning of resident investment vehicle .......................... 519

118-515................. Meaning of venture capital entity .................................... 520

118-520................. Meaning of superannuation fund for foreign residents .. 520

118-525................. Meaning of venture capital equity ................................... 521

Subdivision 118-H--Demutualisation of Tower Corporation                     523

118-550................. Demutualisation of Tower Corporation.......................... 523

Subdivision 118-I--Look-through earnout rights                                          523

118-560................. Object............................................................................. 524

118-565................. Look-through earnout rights .......................................... 524

118-570................. Extra ways a CGT asset can be an active asset............... 526

118-575................. Creating and ending look-through earnout rights............ 527

118-580................. Temporarily disregard capital losses affected by look-through earnout rights          527

Division 121--Record keeping                                                                             529

Guide to Division 121                                                                                            529

121-10................... What this Division is about............................................. 529

Operative provisions                                                                                              529

121-20................... What records you must keep........................................... 529

121-25................... How long you must retain the records............................ 531

121-30................... Exceptions...................................................................... 532

121-35................... Asset register entries....................................................... 532


Table of Subdivisions

             Guide to Division 70

70-A     What is trading stock

70-B      Acquiring trading stock

70-C      Accounting for trading stock you hold at the start or end of the income year

70-D     Assessable income arising from disposals of trading stock and certain other assets

70-E      Miscellaneous

Guide to Division 70



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