Commonwealth Consolidated Acts

INCOME TAX ASSESSMENT ACT 1997 - SECT 118.12

  (1)   A * capital gain or * capital loss you make from a * CGT asset that you used solely to produce your * exempt income or * non - assessable non - exempt income is disregarded.

  (2)   However, the exemption does not apply if the asset was used to gain or produce an amount that is * non - assessable non - exempt income because of:

  (a)   any of these provisions of this Act:

  (i)   section   59 - 15 (mining payments);

  (ia)   section   59 - 35 (amounts that would be mutual receipts but for prohibition on distributions to members or issue of MCIs);

  (ii)   subsection   70 - 90(2) (disposing of trading stock outside the ordinary course of business);

  (iii)   section   86 - 30 (income of a personal services entity);

  (iv)   subsection   86 - 35(1) (payment by a personal services entity);

  (v)   subsection   86 - 35(2) (share of personal services entity's net income);

  (vi)   section   240 - 40 (treatment of arrangement payments);

  (via)   section   242 - 40 (about luxury car lease payments);

  (vib)   section   768 - 5 (foreign equity distributions on participation interests);

  (vii)   section   802 - 15 (foreign residents--exempting CFI from Australian tax);

  (viii)   section   840 - 815 (foreign residents--final withholding tax on managed investment trust income); or

  (b)   any of these provisions of the Income Tax Assessment Act 1936 :

  (i)   section   23AH (foreign branch profits of Australian companies);

  (ii)   section   23AI (amounts paid out of attributed income);

  (iv)   section   23AK (attributed foreign investment fund income);

  (v)   subsection   23L(1) (fringe benefits);

  (vi)   subsection   99B(2A) (attributed trust income);

  (vii)   section   128D (dividends, royalties and interest subject to withholding tax);

  (viii)   subsection   271 - 105(3) in Schedule   2F (amounts subject to family trust distribution tax).

Note:   These provisions make amounts non - assessable non - exempt income to prevent them being double taxed rather than to remove them entirely from the taxation system. Therefore, the policy reason for disregarding gains and losses does not apply to assets used to produce those amounts.