Division 102—Assessable income includes net capital gain

Guide to Division 102

102-1 What this Division is about

This Division tells you how to work out if you have made a net capital gain or a net capital loss for the income year. A net capital gain is included in your assessable income. However, you cannot deduct a net capital loss.

Table of sections

Operative provisions

sec102_5 Assessable income includes net capital gain

sec102_10 How to work out your net capital loss

sec102_15 How to apply net capital losses

sec102_20 Ways you can make a capital gain or a capital loss

sec102_25 Order of application of CGT events

Operative provisions

102-5 Assessable income includes net capital gain

(1) Your assessable income includes your net capital gain (if any) for the income year. You work out your net capital gain in this way:

Working out your net capital gain

Step 1. Add up the *capital gains you made during the income year. Also add up the *capital losses you made.

Step 2. Subtract your *capital losses from your *capital gains. (If your capital losses exceed your capital gains, you have no net capital gain for the income year.)

Note: You do have a net capital loss if your capital losses exceed your capital gains: see section 102-10.

Step 3. If the Step 2 amount is more than zero, reduce it by applying any unapplied *net capital losses from previous income years. (If this reduces it to zero, you have no net capital gain for the income year.)

Note: To apply net capital losses: see section 102-15.

Step 4. If the Step 3 amount is more than zero, it is your net capital gain for the income year.

Note: For exceptions and modifications to these rules: see section 102-30.

(2) However, if during the income year:

(a) you became bankrupt; or

(b) you were released from debts under a law relating to bankruptcy;

any *net capital loss you made for an earlier income year must be disregarded in working out whether you made a *net capital gain for the income year or a later one.

(3) Subsection (2) applies even though your bankruptcy is annulled if:

(a) the annulment happens under section 74 of the Bankruptcy Act 1966; and

(b) under the composition or scheme of arrangement concerned, you were, will be or may be released from debts from which you would have been released if instead you had been discharged from the bankruptcy.

102-10 How to work out your net capital loss

(1) You work out if you have a net capital loss for the income year in this way:

Working out your net capital loss

Step 1. Add up the *capital losses you made during the income year. Also add up the *capital gains you made.

Step 2. Subtract your *capital gains from your *capital losses.

Step 3. If the Step 2 amount is more than zero, it is your net capital loss for the income year.

Note: For exceptions and modifications to these rules: see section 102-30.

(2) You cannot deduct from your assessable income a *net capital loss for any income year.

Note: However, it can be applied against your capital gains for a later income year: see section 102-5 and subsection 102-15(3).

102-15 How to apply net capital losses

(1) In working out if you have a *net capital gain, your *net capital losses are applied in the order in which you made them.

(2) A *net capital loss can be applied only to the extent that it has not already been applied.

(3) To the extent that a *net capital loss cannot be applied in an income year, it can be carried forward to a later income year.

Example: You have capital gains for the income year of $1,000 and capital losses for the income year of $600. Your capital losses are subtracted from your capital gains to leave a balance of $400.

You have available net capital losses of $300 (for last year) and $200 (for the year before that).

The $400 is reduced to zero by applying the available net capital losses in the order in which you made them. This leaves $100 of the $300 to be carried forward and extinguishes the $200.

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

You can make a *capital gain or *capital loss if and only if a *CGT event happens. The gain or loss is made at the time of the event.

Note: The full list of CGT events is in section 104-5.

102-22 Amounts of capital gains and losses

Most *CGT events provide for calculating a *capital gain or *capital loss by comparing 2 different amounts. The amount of the gain or loss is the difference between those amounts.

102-25 Order of application of CGT events

(1) Work out if a *CGT event (except *CGT events D1 and H2) applies to your situation. If more than one event can apply, the one you use is the one that is the most specific to your situation.

(2) However, there is an exception for *CGT event K5 (which depends on CGT event A1, C2 or E8 happening). In that case, CGT event K5 applies in addition to the other event.

(3) If no *CGT event (except *CGT events D1 and H2) applies:

(a) work out if CGT event D1 applies and use that event if it does; and

(b) if it does not, work out if CGT event H2 applies and use that event if it does.

Note: The full list of CGT events is in section 104-5.

102-30 Exceptions and modifications

 

Special rules affecting capital gains and capital losses


Item

For this kind of entity:


There are these special rules:


See:
 

All entities

You can subtract capital losses from collectables only from your capital gains from collectables.

section 108-10
 

All entities

Disregard capital losses you make from personal use assets.

section 108-20
 

All entities

If any of your commercial debts have been forgiven in the income year, your net capital losses (including net capital losses from collectables) may be reduced.

sections 245-130 and 245-135 of Schedule 2C to the Income Tax Assessment Act 1936
 

A company

If it has a change of ownership or control during the income year, and has not carried on the same business, it works out its net capital gain and net capital loss in a special way.

Subdivision 165-CB
 

A company

It cannot apply a net capital loss unless:

· the same people owned the company during both the loss year and the income year; and

· no person controlled the company’s voting power at any time during the income year who did not also control it during the whole of the loss year;

or the company has carried on the same business and commenced no additional business or new transactions.

Subdivision 165-CA
 

A company

If one or more of these things happen:

· a capital gain or loss is injected into it;

· a tax benefit is obtained from its available net capital losses or current year capital losses;

· a tax benefit is obtained because of its available capital gains;

the Commissioner can disallow its net capital losses or current year capital losses, and it may have to work out its net capital loss in a special way.

Division 175
 

A company

A company can transfer a surplus amount of its net capital loss to another company so that the other company can apply the amount in the income year of the transfer. (Both companies must be members of the same wholly-owned group.)

Subdivision 170-B

 

 

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