Commonwealth Consolidated Acts Commonwealth Consolidated Acts(1) In working out the non - assessable part referred to in section 104 - 70, disregard any part of the payment that is:
(a) * non - assessable non - exempt income; or
(c) paid from an amount that has been assessed to the trustee; or
(d) paid from an amount that is * personal services income included in your assessable income, or another entity's assessable income, under section 86 - 15; or
(da) a payment to which paragraph 118 - 37(1)(ba) applies (about compensation paid through a trust); or
(db) a payment to which subsection 118 - 300(1A) applies (about insurance and annuity payments paid through a trust); or
(e) repaid by you; or
(f) compensation you paid that can reasonably be regarded as a repayment of all or part of the payment; or
(g) an amount referred to in section 152 - 125 (which exempts a payment of a small business 15 - year exemption amount) as an exempt amount.
The payment can include giving property (see section 103 - 5).
(2) However, the non - assessable part is not reduced by any part of the payment that you can deduct.
(3) The amount of the non - assessable part referred to in section 104 - 70 is adjusted to exclude any part of it that is attributable to:
(a) an amount that is not included in the assessable income of an entity because of section 124ZM or 124ZN (which exempt income arising from * shares in a * PDF) of the Income Tax Assessment Act 1936 ; or
(aa) an amount that is not included in the assessable income of an entity because of section 51 - 52 or subsection 51 - 54(1) or (1A) of this Act; or
(b) * capital proceeds from a * CGT event that happens in relation to * shares in a company that was a * PDF when that event happened; or
(c) capital proceeds from a CGT event if:
(i) the CGT event relates to an * eligible venture capital investment; and
(ii) the share of a partner in an ESVCLP in a * capital gain or * capital loss from the CGT event is disregarded under section 118 - 407; or
(d) that part of the capital proceeds from a CGT event, relating to an eligible venture capital investment, for which there is a partial exemption under section 118 - 408; or
(e) capital proceeds from a CGT event if a capital gain made from the event may be disregarded under subsection 360 - 50(4).
(4) The amount of the non - assessable part referred to in section 104 - 70 for an entity shown in the table is adjusted to exclude the amount or amounts applicable to the entity under the table.
Adjustment of non - assessable part | ||
Item | Entity | Amount excluded |
1 | Any entity | So much of the amount of a * discount capital gain excluded from the * net capital gain of the trust making the payment because of step 3 of the method statement in subsection 102 - 5(1) and that is reflected in the payment to the entity |
2 | Individual, company or trust that has a * capital loss or * net capital loss to reduce its * capital gain described in paragraph 115 - 215(3)(b) where the trust gain referred to in subsection 115 - 215(3) is reduced under Subdivision 152 - C | 1/2 of the amount of the capital loss or net capital loss |
3 | Individual or trust that has a * capital loss or * net capital loss to reduce its * capital gain described in paragraph 115 - 215(3)(c) | 1/4 of the amount of the capital loss or net capital loss |
4 | Company that has a * capital loss or * net capital loss to reduce its * capital gain described in paragraph 115 - 215(3)(c) where: (a) that capital loss or net capital loss is more than 1/2 of the trust gain referred to in subsection 115 - 215(3); and (b) that trust gain is reduced by an amount (the reduction amount) under Subdivision 152 - C | The excess of the reduction amount over the Subdivision 152 - C reduction to the paragraph 115 - 215(3)(c) amount |
5 | * Complying superannuation entity that has a * capital loss or * net capital loss to reduce its * capital gain described in paragraph 115 - 215(3)(b) where: (a) that capital loss or net capital loss is more than 1/2 of the trust gain referred to in subsection 115 - 215(3); and (b) that trust gain is reduced under Subdivision 152 - C | 1/2 of the amount of the capital loss or net capital loss |
6 | * Complying superannuation entity that has a * capital loss or * net capital loss to reduce its * capital gain described in paragraph 115 - 215(3)(c) where: (a) that capital loss or net capital loss is more than 1/4 of the trust gain referred to in subsection 115 - 215(3); and (b) that trust gain is reduced by an amount (also the reduction amount) under Subdivision 152 - C | The excess of the reduction amount over the Subdivision 152 - C reduction to the paragraph 115 - 215(3)(c) amount |
7 | Any entity receiving the payment where the trust making the payment, or another trust that is part of the same * chain of trusts, has a * capital loss or * net capital loss to reduce its * capital gain described in subsection 115 - 215(3) | The proportion of the capital loss or net capital loss reflected in the payment |
Example: Claude is paid $100 by the trustee of a unit trust. The trustee advises that the amount comprises $50 CGT discount, $25 small business 50% reduction and $25 net income from a capital gain made by the trust.
In applying the rules in Subdivision 115 - C of the Income Tax Assessment Act 1997 , Claude reduces his capital gain of $100 by a $20 net capital loss from an earlier year. He then reduces the remaining $80 gain by $40 (CGT discount) and $20 (small business 50% reduction) leaving a net capital gain of $20.
In applying the rules in CGT event E4, the $100 payment is reduced by $25 (being the amount assessed under section 97 of the Income Tax Assessment Act 1936 ). It is further reduced by $50 under item 1 of the table and $5 under item 3. Claude's non - assessable part is $20.
Effectively, CGT event E4 applies to the $20 small business 50% reduction allowed to Claude in applying Subdivision 115 - C of the Income Tax Assessment Act 1997 .
Note 1: Step 3 of the method statement in subsection 102 - 5(1) (see table item 1) reduces by 50% the trust's discount capital gains remaining after applying capital losses and earlier net capital losses. That 50% is excluded from the trust's net capital gain.
Note 2: Subdivision 152 - C (small business 50% reduction--see table items 2, 3, 4, 5, 6 and 7) reduces by 50% the trust's capital gains or discount capital gains remaining after applying step 3 of the method statement in subsection 102 - 5(1). That 50% is also excluded from the trust's net capital gain.
Note 3: Paragraph 115 - 215(3)(b) or (c) (see table items 2, 3, 4, 5 and 6) treats a beneficiary as having an extra capital gain if an amount of the trust's net income that is included in the beneficiary's assessable income is attributable to trust gains that were reduced by step 3 of the method statement in subsection 102 - 5(1) and/or the small business 50% reduction.
(5) A chain of trusts consists of 2 or more trusts where at least one of these conditions is satisfied for each of the trusts:
(a) the trustee of the trust owns units or interests in another of the trusts; or
(b) the trustee of another of the trusts owns units or interests in the trust.
(6) Item 7 of the table in subsection (4) does not apply if the entity making the payment is a * managed investment trust.