Capital gains tax

Date

E. Capital Gains Tax

E1 Capital gains tax exemption for valour or brave conduct decorations

Defence ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
.. .. .. .. .. .. .. ..
Tax expenditure type: Exemption 2014 TES code: E1
Estimate Reliability: Low    
Commencement date: 1985 Expiry date:  
Legislative reference: Paragraph 118-5(b) of the Income Tax Assessment Act 1997

Capital gains or losses arising from the disposal of a decoration awarded for valour or brave conduct are exempt from capital gains tax (CGT). This exemption is available unless the owner of the decoration had paid money or given any other property for it.

E2 Capital gains tax roll-over for membership interests in medical defence organisations

Health ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Deferral 2014 TES code: E2
Estimate Reliability: Not Applicable * Category 1+
Commencement date: 2007 Expiry date:  
Legislative reference: Subdivision 124-P of the Income Tax Assessment Act 1997

A CGT roll-over is available for capital gains arising from the exchange of a membership interest in a medical defence organisation for a similar interest in another medical defence organisation where both organisations are companies limited by guarantee and subject to certain other conditions, until the ultimate disposal of the replacement membership interest.

E3 Capital gains tax exemptions for special disability trusts

Social security and welfare ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Exemption 2014 TES code: E3
Estimate Reliability: Not Applicable * Category 1+
Commencement date: 1 July 2006 Expiry date:  
Legislative reference: Sections 118-85 and 118-215 to 118-230 of the Income Tax Assessment Act 1997

Assets donated to a special disability trust (SDT) are exempt from CGT. A trustee of an SDT is also eligible for the CGT main residence exemption to the extent the principal beneficiary uses the dwelling as a home.

E4 Capital gains tax concessions for conservation covenants

Housing and community amenities ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Reduction in taxable value 2014 TES code: E4
Estimate Reliability: Not Applicable * Category 1+
Commencement date: 15 June 2000 Expiry date:  
Legislative reference: Section 104-47 of the Income Tax Assessment Act 1997

For CGT purposes, perpetual conservation covenants are treated as a part disposal of land, rather than the creation of a right. This treatment results in a reduced capital gain because a portion of the cost base of the land is taken into account. Landowners can also benefit from any CGT concession or exemption that may apply to the capital gain.

E5 Capital gains tax main residence exemption

Housing and community amenities ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
14,000 15,500 20,500 24,500 24,500 24,500 25,000 25,000
Tax expenditure type: Exemption 2014 TES code: E5
Estimate Reliability: Low    
Commencement date: 1985 Expiry date:  
Legislative reference: Subdivision 118-B of the Income Tax Assessment Act 1997

Capital gains or losses on the disposal of an individual’s main residence and up to two hectares of adjacent land are exempt from CGT, to the extent the dwelling is used as a home.

See tax expenditure E6 for the 50 per cent discount component of the main residence exemption.

E6 Capital gains tax main residence exemption — discount component

Housing and community amenities ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
17,500 20,000 25,000 30,000 30,000 30,000 30,500 30,500
Tax expenditure type: Exemption 2014 TES code: E6
Estimate Reliability: Low    
Commencement date: 1999 Expiry date:  
Legislative reference: Division 115 of the Income Tax Assessment Act 1997

Capital gains or losses on the disposal of an individual’s main residence and up to two hectares of adjacent land are exempt from CGT, to the extent the dwelling is used as a home.

Disposals of other assets by individuals or trusts receive a CGT exemption applying to 50 per cent of any nominal gain where the asset has been owned for at least 12 months.

The CGT treatment of the main residence effectively provides a 100 per cent exemption. Conceptually, this can be split into a component reflecting the 50 per cent discount provided to disposals of non-main residence assets and a ‘top up’ component that brings the concession up to 100 per cent.

See tax expenditure E5 for the remainder of the value of the CGT main residence exemption. See tax expenditure E11 for detail on the 50 per cent discount applying to other assets.

E7 Capital gains tax main residence exemption extensions

Housing and community amenities ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Exemption 2014 TES code: E7
Estimate Reliability: Not Applicable * Category 3+
Commencement date: 1985 and 1996 Expiry date:  
Legislative reference: Sections 118-145, 118-195 and 118-200 of the Income Tax Assessment Act 1997

A taxpayer’s dwelling may continue to be treated as their main residence even if it ceases to be their main residence for up to six years, if the dwelling is used to produce assessable income; or indefinitely, if the dwelling is not used to produce assessable income. This is provided that no other dwelling is treated as the taxpayer’s main residence during the period of absence.

In addition, a taxpayer who receives a dwelling as beneficiary of a deceased estate, or who owns the dwelling as the trustee of a deceased estate, may be able to disregard all or a proportion of a capital gain or loss if certain conditions are met.

E8 Philanthropy — capital gains tax exemption for the disposal of assets under the Cultural Gifts program

Recreation and culture ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Exemption 2014 TES code: E8
Estimate Reliability: Not Applicable * Category 1+
Commencement date: 1999 Expiry date:  
Legislative reference: Subsection 118-60(2) of the Income Tax Assessment Act 1997

Capital gains or losses arising from gifts made under the Cultural Gifts program are exempt from CGT. The Cultural Gifts program, which does not apply to testamentary gifts, encourages donations of significant cultural items from private collections to public art galleries, public museums and public libraries or Artbank by offering tax benefits to the donor.

E9 Capital gains tax roll-over for worker entitlement funds

Other economic affairs — Total labour and employment affairs ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Deferral 2014 TES code: E9
Estimate Reliability: Not Applicable * Category 2+
Commencement date: 2003 Expiry date:  
Legislative reference: Subdivision 126-C of the Income Tax Assessment Act 1997

A CGT roll-over is available for a fund that amends or replaces its trust deed in order to become an approved worker entitlement fund for fringe benefits tax purposes.

E10 Capital gains tax concession for non-portfolio interests in foreign companies with active businesses

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Reduction in taxable value 2014 TES code: E10
Estimate Reliability: Not Applicable * Category 3+
Commencement date: 2004 Expiry date:  
Legislative reference: Section 768-505 of the Income Tax Assessment Act 1997

Capital gains and losses of Australian companies and controlled foreign companies arising from certain CGT events related to non-portfolio interests in foreign companies with active business assets are reduced. The reduction reflects the degree to which the assets of the foreign company are used in active business. The concession applies where the Australian company holds a direct voting percentage of 10 per cent or more in the foreign company throughout a 12 month period.

E11 Capital gains tax discount for individuals and trusts

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
4,930 4,080 4,250 5,800 6,150 6,840 7,600 8,570
Tax expenditure type: Reduction in taxable value 2014 TES code: E11
Estimate Reliability: Medium    
Commencement date: 1999; 2012 (removal for non-residents) Expiry date:  
Legislative reference: Division 115 of the Income Tax Assessment Act 1997

A CGT exemption applies to 50 per cent of any nominal capital gain made by a resident individual or trust where the asset has been owned for at least 12 months. Different rules may apply to assets acquired before 21 September 1999.

E12 Capital gains tax discount for investors in listed investment companies

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
35 35 40 60 70 80 90 90
Tax expenditure type: Deduction 2014 TES code: E12
Estimate Reliability: Low    
Commencement date: 2001 Expiry date:  
Legislative reference: Subdivision 115-D of the Income Tax Assessment Act 1997

The shareholders of a listed investment company (LIC) who receive dividends that represent a distribution of capital gains made by that company are entitled to a deduction equivalent to the CGT discount they would have received if they had realised the capital gains themselves. This concession applies in respect of gains realised by a LIC on or after 1 July 2001, provided the assets have been held by the LIC for at least 12 months.

E13 Capital gains tax exemption for assets acquired before 20 September 1985

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Exemption 2014 TES code: E13
Estimate Reliability: Not Applicable * Category 2+
Commencement date: 1985 Expiry date:  
Legislative reference: Division 104 of the Income Tax Assessment Act 1997

Capital gains or losses on assets acquired before 20 September 1985 (the commencement date of the CGT regime) are generally exempt from CGT.

E14 Capital gains tax exemption for demutualisation of mutual entities

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Exemption 2014 TES code: E14
Estimate Reliability: Not Applicable * Category 1+
Commencement date: 1995 (mutual entities); 2007 (health insurers); 2008 (friendly societies) Expiry date:  
Legislative reference: Division 9AA and Schedule 2H of the Income Tax Assessment Act 1936
Division 315 and 316 of the Income Tax Assessment Act 1997

Capital gains and losses arising under the demutualisation of a mutual entity, including a life insurer, general insurer or health insurer are disregarded for members and/or policyholders that receive shares in the demutualised entity. Special rules determine the cost base of the shares received.

E15 Capital gains tax exemption for small business restructuring

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
- - - - - - 20 20
Tax expenditure type: Deferral 2014 TES code: New
Estimate Reliability: Very Low    
Commencement date: 1 July 2016 Expiry date:  
Legislative reference: Not yet legislated

Owners of small business assets will be eligible for capital gains roll-over relief when they change the legal structure of their business, provided the underlying economic ownership of the assets is unchanged. The enabling legislation for this measure has not yet been introduced to Parliament.

E16 Capital gains tax grandfathering indexation

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Reduction in taxable value 2014 TES code: E15
Estimate Reliability: Not Applicable * Category 2+
Commencement date: 1985 Expiry date:  
Legislative reference: Section 110-36 and Division 114 of the Income Tax Assessment Act 1997

For assets acquired at or before 11:45 am EST on 21 September 1999, taxpayers may choose to calculate the capital gain on
the asset by reference to its indexed cost base. Taxpayers that choose to use the indexed cost base cannot access the CGT discount. The indexed cost base for these assets was frozen as at 30 September 1999.

E17 Capital gains tax roll-over and exemption and related taxation relief for demergers

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Exemption, Deferral 2014 TES code: E16
Estimate Reliability: Not Applicable * Category 3+
Commencement date: 2002 Expiry date:  
Legislative reference: Division 125 of the Income Tax Assessment Act 1997
Subsection 44(4) of the Income Tax Assessment Act 1936

Concessions are available to defer or exempt the CGT payable in respect of the restructuring of a corporate or trust group, where the group is split into two or more entities or groups (that is, by demerging). There are three elements to demerger relief:

  • CGT roll-over at the shareholder or trust membership interest level for interests such as shares that are exchanged during the demerger process;
  • a CGT exemption for certain capital gains and losses at the entity level; and
  • an income tax exemption for certain ‘demerger dividends’.

E18 Capital gains tax roll-over for assets compulsorily acquired, lost or destroyed

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Deferral 2014 TES code: E17
Estimate Reliability: Not Applicable * Category 1+
Commencement date: 1985 Expiry date:  
Legislative reference: Subdivision 124-B of the Income Tax Assessment Act 1997

A CGT roll-over is available for capital gains where an asset is compulsorily acquired (whether by a private or public acquirer), lost or destroyed and the taxpayer purchases a replacement asset. The capital gains liability is deferred until the ultimate disposal of the replacement asset.

E19 Capital gains tax roll-over for complying superannuation funds in certain circumstances

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Deferral 2014 TES code: E18
Estimate Reliability: Not Applicable * Category 2+
Commencement date: 1994 (ADFs); 2008 (merging funds); 2013 (inter-fund MySuper mandatory transfers) and 2015 (intra-fund MySuper mandatory transfers) Expiry date: 2017 (merging funds and MySuper mandatory transfers)
Legislative reference: Subdivision 126-C (trust deeds), and Division 310 (merging funds) of the Income Tax Assessment Act 1997
Division 311 of the Income Tax Assessment Act 1997 (MySuper mandatory transfers)

A roll-over is available where a complying superannuation fund or a complying Approved Deposit Fund amends or replaces its trust deed.

From 24 December 2008 to 2 July 2017, complying superannuation funds that merge are provided with loss relief and an asset roll-over. Loss relief and an asset roll-over will also be provided between 1 July 2013 to 1 July 2017 for mandatory transfers of default members’ balances and relevant assets to a MySuper product in another complying superannuation fund. In addition, from 29 June 2015 to 1 July 2017 an asset roll-over will be provided for mandatory transfers of default members’ balances and relevant assets to a MySuper product within a complying superannuation fund’s structure.

E20 Capital gains tax roll-over for replacement small business active assets

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
170 200 200 220 230 230 240 250
Tax expenditure type: Deferral 2014 TES code: E19
Estimate Reliability: Medium — High    
Commencement date: 1997 Expiry date:  
Legislative reference: Subdivision 152-E of the Income Tax Assessment Act 1997

A CGT roll-over is available for eligible small businesses, for capital gains arising from the disposal of active small business assets if the proceeds of the sale are used to purchase other active small business assets. Active assets include assets used in carrying on a business and intangible assets inherently connected with a business.

E21 Capital gains tax roll-over for statutory licences and water entitlements

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Deferral 2014 TES code: E20
Estimate Reliability: Not Applicable * Category 1+
Commencement date: 1985, 2005 and 2006 Expiry date:  
Legislative reference: Subdivision 124-C (statutory licences) and 124-R (water entitlements) of the Income Tax Assessment Act 1997

A CGT roll-over is available where a statutory licence ends and is replaced with a new licence that authorises substantially similar activity to the original licence. In addition, a CGT roll-over is available where a taxpayer’s ownership of one or more water entitlements ends and the taxpayer receives one or more replacement water entitlements.

E22 Capital gains tax roll-over for transfer of assets on marriage or relationship breakdown

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Deferral 2014 TES code: E21
Estimate Reliability: Not Applicable * Category 2+
Commencement date: 1985 Expiry date:  
Legislative reference: Subdivision 126-A of the Income Tax Assessment Act 1997

An automatic roll-over is available where a CGT asset is transferred to a spouse or former spouse because of a marriage or relationship breakdown, or under a binding financial agreement or an arbitral award entered into under the Family Law Act 1975 or similar arrangements under state, territory or foreign legislation.

E23 Capital gains tax roll-overs not otherwise recognised

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Deferral 2014 TES code: E22
Estimate Reliability: Not Applicable * Category NA
Commencement date: Various Expiry date:  
Legislative reference: Divisions 122, 124 and 126 of the Income Tax Assessment Act 1997

This tax expenditure encompasses other CGT roll-overs not specifically covered in existing CGT roll-over tax expenditures. For example, the crown lease roll-over in Subdivision 124-J, the roll-over for the disposal of assets by a trust to a company provided in Subdivision 124-N, and the roll-overs facilitating a change to a company structure in Division 122.

E24 Capital gains tax scrip-for-scrip roll-over

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
310 -150 -300 -150 * * * *
Tax expenditure type: Deferral 2014 TES code: E23
Estimate Reliability: Low * Category 3+
Commencement date: 1999 Expiry date:  
Legislative reference: Subdivision 124-M of the Income Tax Assessment Act 1997

A CGT roll-over is available for capital gains arising from an exchange of interests in companies or fixed trusts, removing impediments to takeovers or similar arrangements. The roll-over ensures that an equity holder who exchanges original shares or other equity for new equity in a takeover or merger can defer a CGT liability arising from the exchange until the ultimate disposal of the replacement asset. From 7:30pm (Australian Eastern Standard Time) on 8 May 2012, strengthened integrity provisions ensure tax minimisation opportunities are removed and CGT cannot be indefinitely deferred.

E25 Deferral of capital gains tax liability when taxpayer dies

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Deferral 2014 TES code: E24
Estimate Reliability: Not Applicable * Category 3+
Commencement date: 1999 Expiry date:  
Legislative reference: Division 128 of the Income Tax Assessment Act 1997

There is no CGT taxing point when a taxpayer dies. Recognition of the gains or losses accruing during the life of the deceased is deferred until the person inheriting the CGT asset later disposes of it. An exception applies if the asset passes to an exempt entity, the trustee of a complying superannuation entity, or a foreign resident.

E26 Exemption from the market value substitution rule for certain interests in widely held entities

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Exemption 2014 TES code: E25
Estimate Reliability: Not Applicable * Category 1+
Commencement date: 2006 Expiry date:  
Legislative reference: Section 116-30 of the Income Tax Assessment Act 1997

The CGT market value substitution rule deems assets that are disposed of for less than their market value to have been disposed for a consideration equal to their market value. This treatment exempts membership interests in widely-held entities that are disposed of by way of a redemption, cancellation or surrender of the interest from the market value substitution rule.

E27 Philanthropy — capital gains tax exemption for testamentary gifts to deductible gift recipients

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Exemption 2014 TES code: E26
Estimate Reliability: Not Applicable * Category 1+
Commencement date: 1999 (expanded 2005) Expiry date:  
Legislative reference: Subsections 118-60(1) and (1A) of the Income Tax Assessment Act 1997

Testamentary gifts (gifts made under a will) of certain property to deductible gift recipients are exempt from CGT.

E28 Quarantining of capital losses

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Denial of deduction 2014 TES code: E27
Estimate Reliability: Not Applicable * Category 4-
Commencement date: 1985 Expiry date:  
Legislative reference: Section 100-50 of the Income Tax Assessment Act 1997

Capital losses may only be offset against capital gains, which means they are quarantined from ordinary income.

E29 Removal of taxation of certain financial instruments at point of conversion or exchange

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Deferral 2014 TES code: E28
Estimate Reliability: Not Applicable * Category 2+
Commencement date: 2002 Expiry date:  
Legislative reference: Sections 26BB and 70B of the Income Tax Assessment Act 1936

Gains or losses from conversion or exchange of convertible or exchangeable interests issued after 14 May 2002 are not subject to taxation at the point of conversion or exchange, but instead, taxation is deferred until the ultimate disposal of the shares.

Convertible interests are financial instruments that may convert into shares in the company that issued the convertible interest. Exchangeable interests are instruments that may convert into shares in a company other than the issuer.

E30 Small business capital gains tax 50 per cent reduction

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
550 570 570 540 550 560 560 570
Tax expenditure type: Exemption 2014 TES code: E29
Estimate Reliability: Medium    
Commencement date: 1999 Expiry date:  
Legislative reference: Subdivision 152-C of the Income Tax Assessment Act 1997

A capital gain that arises from the sale of active assets held in an eligible small business can be reduced by 50 per cent. This applies in addition to any CGT discount entitlement of the taxpayer. Active assets include assets used in carrying on a business and intangible assets inherently connected with a business (for example, goodwill).

E31 Tax exemption for certain investments in venture capital

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Exemption 2014 TES code: E30
Estimate Reliability: Not Applicable * Category 2+
Commencement date: 2002 Expiry date:  
Legislative reference: Venture Capital Act 2002
Sections 51-54 and 51-55 and Subdivisions 118-F and 118-G of the Income Tax Assessment Act 1997

Certain investors are exempt from tax on profits and gains in respect of their investments in a registered Venture Capital Limited Partnership. A Venture Capital Limited Partnerships is a venture capital fund structured as a limited partnership that makes equity investments in relatively high-risk start-up and expanding Australian companies.