Capital Gains Tax

1. What is the 'trigger' that makes the capital gains tax provisions of the ITAA 97 apply to a transaction?
3. What are 'CGT events' and why are they important?
5. What are 'CGT assets'?
7. Why are cars 'exempt assets' for CGT purposes?
9. What other assets are excluded from the capital gains tax net because of some express provision of the Act?
11. List four (4) reasons why the timing of an acquisition and disposal of an asset is important for capital gains tax purposes.
13. What elements can be included in a CGT asset's cost base?
15. What are 'incidental costs incurred that relate to a CGT event'?
17. How would you determine whether particular expenditure qualifies as an 'incidental cost'?
19. What are 'non-capital costs of ownership' and when can they be included in a CGT asset's cost base?
21. You expend money on something that falls within the 2^nd, 3^rd, 4^th or 5^th elements of an asset's cost base under s 110-25 BUT you then claim a deduction for that expenditure. Can you ALSO include the amount in the asset's cost base? Why/why not?
23. What pre-conditions must be met before you can index the cost base of a CGT asset?
25. How do you index the cost base of a CGT asset?
27. What is the 'indexation factor' used to index elements of the cost base? Where do you find the formula?
29. What is the difference between indexation of the third element of the cost base and indexation of the other four elements?
31. To how many decimal places is the indexation factor calculated?
33. What three months fall in the 'September quarter' for indexation purposes?
35. What is the latest date to which a cost base can be indexed?
37. When do you use cost base and when do you use reduced cost base?
39. Explain the differences between 'cost base' and 'reduced cost base'.
41. What outgoings are NOT included in the reduced cost base? Under which sections?
43. List the occurrences that would reduce your reduced cost base?
45. A buys a house and rents it out. He pays $10,000 in interest while he owns it but claims and is allowed a deduction for it in the calculation of his taxable income for that year (on the grounds that it is incurred in earning assessable income - the rent). Can he include it in his cost base under s 110-25(4)? Why/why not?
47. What are 'discount capital gains'?
49. Who can make a 'discount capital gain'?
51. How long must you have held an asset for any capital gain on its disposal to be subject to the 'discount'?
53. A bought an asset on 1 January 1998 and sold it on 15 August 2016. Could he have treated the gain as a discount capital gain?
55. Did he have to treat it as a discount capital gain?
57. If a gain is a discount capital gain which entities are entitled to the discount?
59. What 'discount percentage' is applicable to those entities? Under what section?
61. Define 'capital proceeds'.
63. When do you use the 'market value substitution rule' to calculate your capital proceeds?
65. When do you use the 'apportionment rule' to calculate your capital proceeds?
67. When do you use the 'non-receipt rule' to calculate your capital proceeds?
69. When do you use the 'repaid rule' to calculate your capital proceeds?
71. When do you use the 'assumption of liability rule' to calculate your capital proceeds?
73. What happens if there were no capital proceeds received from a CGT event?
75. What happens if the capital proceeds are less than market value?
77. What happens if the capital proceeds are more than market value?
79. Generally speaking, when do you 'acquire' a CGT asset under s 109-5?
81. G signs a contract to sell her holiday home on the 30 May. The sale actually settles on 2 July the same year. When did G dispose of her holiday home for capital gains tax purposes?
83. H purchased a holiday home on 1 April last year for $300,000 and sold it on 30 March this year for $350,000. Calculate her taxable net capital gain for the year (assume that this is the only capital transaction in that year).
85. Can she claim the discount percentage in relation to that gain when she calculates her net capital gain at the end of the tax year?
87. J purchased a motor car for his own private use for $20,000 in February 2010 and sold it for $12,000 in December last year. Calculate his capital gain/capital loss.
89. K purchased a 1930 penny (pre-decimal currency) on 15 September 1985 for $15,000 and sold it in January this year for $35,000. Calculate her taxable capital gain.
91. L bought an interest in a time-share development for $10,000 in December 1994 and sold it for $20,000 in June last year. Calculate his taxable capital gain. Use all available methods.
93. M bought some shares on a 'tip' intending to sell them immediately they rose in price. The Commissioner believes that her profit is taxable under s 15-15 as well as under the CGT provisions. How should the profit be declared in her tax return? Why?
95. How are part disposals treated for capital gains tax purposes?
97. Define net capital gains and net capital losses.
99. What is the difference between a capital gain or a capital loss and a 'net capital gain' or 'net capital loss'?
101. How do you calculate a taxpayer's 'net capital gain' for a year? Under which provision?
103. How do you calculate a taxpayer's 'net capital loss' for a year? Under which provision?
105. How are net capital gains treated for income tax purposes?
107. How are net capital losses treated for income tax purposes?
109. What happens if you still have unused net capital losses when you die?
111. What are 'personal use assets'?
113. What is the difference between a 'personal use asset' and a 'collectable'?
115. How is a capital gain on disposal of a personal use asset dealt with?
117. How is a capital losson disposal of a personal use asset dealt with?
119. How is a capital gain on disposal of a collectable dealt with?
121. How is a capital losson disposal of a collectable dealt with?
123. Why are sales of trading stock not taxed under the CGT provisions?

Answer rating: 100% (QA)

1 The trigger for the capital gains tax provisions of the ITAA 97 to apply to a transaction is the occurrence of a CGT event such as selling or disposing of a CGT asset 2 CGT events are specific event... View the full answer