L4 CGT1

Tuesday,11August2009 10:37AM

Wedidhavesometaxcapgainbefore1985 Eg.taxshorttermgains lessthan12mthbuy/sell Alsotaxspeculativegains.

Onlytaxonassetsacquiredpast thatdateandindexedcostfor inflationandsigexemptedfamily home/principleresidentsfromcgt 2ndhaslapsedthough Somesigcourtcases [heples]madedrafters rethinkdesigningcgt. 1997introcgtevents

Absenceofcomprehensivecgtmeantnot veryconstructivetaxplanning. Ifyoubroadenmorethingsthencantax atlowerrate philosophyofgovts Appointedralphreview^lookedatwholetaxsysandw/cgtrecommendedabolitionofcostof cgtforinflationandintrosysforindie,superfundsandtrustsofdiscountingcgtforinflation Taxheaviersinceitsonlyonrealisation.'.getbenefitbytaxingonrealisationbenefit

aretherecapgain taxandhowto preventdeductions +capitalloss Cgta1 disposalofcgtasseteventisthemajoronewefocuson Netcapgaingetsincludedinassessable income s1025 Ifproceeds>costthencapgain.Addthem upandthentakeassetsmadecaplosson anddothatonassetbyassetbasistoo

LEGT2751 Page 1

Cgtd1getsno[???]

Example6.2intxtbk i.d.capgainandcaplossandanynetcaploss Doinassetbyassetbasisandchoosewhentoapply Id.capgainonyrbyyrbasis Idcaplossonyrbyyrbasis Idcaplosscarriedfwd Ifexcessthengotocapincome Ifgreater{]thanlossthencarryfwd Musthavecgtfirstafter97 Twoprovisions s160m6ands160m7of1936act

Whycgtevents? Problem tryingtofit everythingintoadisposal situation.

Iflotsofcgteventsthenwhatif morethan1applies.Withstatutory provisionspotentiallyappliedto something.[themorespecificone applies] Insubsection2a,2band2c,afewexceptionsbutdon'tworryaboutthem

Subsection3 ifnootherthand1orh2apply,thenworkoutifd1happens[thentakesplace],ifnot thenh2applies.Applytheonemostspecifictothesituationexceptd1[2ndlast]andh2 Hardtofindh2apply.Eg.inmcneilcase[putoptions] fedcourtthoughth2appliedbutdiffinhigh court

Orica issueddebenturesto debentureholders. Oricapays$62MtoMMBWfrom the$98Mborrowedfrom debentureholders. MMBWassumestheliabunder thedebentures.Debenture holderscanstillsueoricaand thencouldclaim.Highcourtsaid notordincome. Capreceipt.However,therights wereintangiblecgtasset,so everytimemmbwperformed thatobligationunder Everytimetheypayout[andtheypayinnominalvalues),theorica eachtimeitsobligationpaymentonitsbehalfwhichentailsthe98m

Otherwaystodisposeexcepttoanotherperson eg. losingit Contractualobligationsubjecttorulessuch asthefactthattheremaybemorerelevant cgt ^dulux=timing C2happenswhencontractualrightsatisfied. Orifcancelled.

LEGT2751 Page 2

Entercontractorright. Makecapgainwhenproceedsreceivedare morethanincidentalcostrelatingtothe eventi.e.legalcosts. Nodiscountingnoindexation.Doesn't happenwhenrightcreatedbyborrowing fromsomeoneelse.Eg.iforicaissue debenturecreatingrightsindebentureholder buts10435saysd1doesn'thappen.Happens w/shareissueincompany.S10435(5)(d). D1doesn'thappenin10335(5)(b) another cgteventhappenstoyoueg.sellhouseto youcreatesrightsbutthatrequiresdoing somethingi.e.transferhouse[anA1]

D1 happenswhencreatecontractual/equitablerightinanotherequity

pg.257andinexamples

A1 disposeCGTfromyoutoanotherperson.

Alotofexceptions.Ins10410 Needstobechangeinfull ownershipnottrusteeetc Ifnocontractw/changein ownership.Capgainifcap proceeds>costbaseand if>[readthesectioN!!] Whatisproperty? Gettheproperty Transferitnormallyand Priority SomethingcanbeCGTassetw/obeing capitalasset.Doesn'taskifitisacapital asset. CoveredbywhitfordbeachnotCGT?Butno. itdoesn'thavetobeacapitalasset.Every timecapitaleventneedtoconsiderifCGTor not. Nottaxedonthesamethingbutsometime CGT>capitalincomegain Thoughsomecgteventsdiff,its typicalina1andmorerelevantthan therest

Setoutins10410

Defineanasset=futureecobenefitsw/accountingbutins1085 Hepples listedrightshethoughtnotrightsofpropertypersonalright.Alsow/services Personperformingcontractforyouisimportantegsurgeonwithabricklayer Thosearen'trightsofproperty,they'relegalrightsbutnotproprights Anylegalorequitablerightnotpropinclude:*righttounliquidateddamagesrecovery, damagesforcontractofpersonalservices,etc.butwhatisthelimit? Libertytoworkbutifnojobthencan'twork Personaluseasset=keptforyourenjoymenteg.shoebeltetc. admindifficulttotryandtaxgainsandlossonpersonaluse assets.Alsodeclineinvaluewhenyoubuyit. Soifwetaxedit,therevenuewouldbealoserandgovt wantstobeawinnersospecialrules. Can'tmakecapitallossonpersonalasset. Alsosetrule setofpersonaluseassets,egcutleryand younormallybuyasaset ifdisposeoneatatime that's partdisposalofaset.i.e.regardedasoneasset dothat becausewithpersonaluseassets capitalgains disregardedwherecost<$10000.eg.youbuyexpensive cutleryandsetcostsmorethan$10000,stopyoubuying indieitemsseparatetogetbelowthresholdofcost.Eg.so gainsaretaxableingroup

Collectablesalsospecificallydefined exhaustivedefinition definedas includingthingspeoplecollecteg. Antiques/stamps/coinsbutpplcollect allsortsofthingseg.Phantom comics? isartworkrarefolioor book doesitfitintothatdefinition. Alsocollectbutterfliesbuttheywould bepersonaluse.What'sthediff?can Alsoasetrulew/collectibles treatasoneassetand makeacapitallossoncollectiblebut disposals=partdisposals.Againcapitalgainson thatisquarantined onlyoffset collectiblesdisregardedwherecost$500ormore stop againstcapitalgainsyoumakeon breakingupsettoavoidCGT collectiblesnotoffsetcapitalgains generally Personaluseyoucan'tmakecapitalloss Collectibleyoucanbutcaplossquarantinedandcanonlybeoffsetonothercollectibles

LEGT2751 Page 3

Similarcase steveinUTL[w/solnonwebpageinthebook] Gothrueachcategoryand A1 firstneedtohaveacquireelsecan'tdispose solookatwhat thinkwhichiscollectible is/amountstoacquisitionofCGTasset Eg.yacht thatcollectibleor personal?Itsexpensive personal(>$10000)andcan sometimesappreciateinvalue

Canacquires10910 w/oCGT assethappeningtosomeoneelse eg.Youhirepainterwhocreates anasset timingrule acquire asset constructionstarted importantarea=internally Certainassetsseparatewherewouldn'taccordingtogeneralrule generatedgoodwill foracct purposedon'trecogniseonBS Important building/structurebuiltaftersept1995onland Mustdisposeoftheasset definedins10410(2) butfortax,internalgoodwill[FCT acquiredb4thatdate landacquiredwillbepreCGT normalrule youownassetnowsomeoneelseownsit. Whethercapgainor vmurray asset=CGTassetand oflaw fixturebecomespartoflandbutthissaysbuildingis Issueswherenotsoclear. loss what'sthecap underthisrule,internalgoodwill separateassetfromlandacquiredwhenbuilt Navalclub hadaclubrunningclubinadelaideold proceeds acquiredwhenstartworkthat Landwon'thavecgtconsequence/capgain/lossdiscardbut Totalmoneyreceiveor gentlemen'stypeclubonlandquitevaluablein resultincreationoftheasseteg. buildingwill becomeapostCGTasset entitledtoreceive+mkt adelaideCBD.Adelaidehasweirdplanning whencommencebiz/dateof Rulesrelatingtoimprovements improvementaboveimprovement restrictionsonbuildingmorestoreysbutifnotreach valueofprop acquisition importantifbiz thresholdi.e.wherecostbasemorethanthresholdindexeachyr maxstoreysyoucouldhavetransferrablefloorspace startb419sept1995orbefore (112500).Alsohavetobemorethan5%ofthecapproceedswhen receive/expectedto receiveasworkoutat spacecanbetransferredtosomeoneelse club 21sept1999andyou'rea sellelseimprovementseparateassetfromoriginalasset decidedto'transfer'floorspacetoanotherparty. timeoftheevent companysinceyoucanget eithermoneyorother Severalissues 1issue A1happeninthiscase? indexationforcapgainpurpose. propinrespectofevent Isthereachangeinownershipoftransferrablefloor Afteritsexempt] happening.Usuallyclear spacerightsfromnavaltopurchaser[alsoother Item2=issuesharestoyouortrusteeofunit issuesw/D1andH2notdiscussed] courtheldrights butsometimesprice trustissuetoyou whenthathappens theclubhadandtherightsthepurchaseracquired mightvarybasedon issue/allotmentofsharestoyou nocgt futureperformanceof weren'tidentical eventhappensatthattime a1doesn't Eventhoughtransferrable hadarighttobuildon biz earnoutbiz. happencosconeverownedtheshares CLUBlandandtransferredrighttobuildonANOTHER Marrenrelevantsay D1doesn'thappensinceexcludedexpressly righttoreceiveinfuture land notidentical itwasforanotherland fromhappeningsotimeandacq=timeof =CGTasset soattime Needclosedegreeofidentity/identicalsoifasset contractifthereisoneorifthere'sno ofcontract accountfor changesintheprogresswhichaffectslegalrights contract,thenwhenissued/alloted[that's itatmktvaluebutthen thenassetnolongeridenticalandnolongerA1 rare] whenreceiveinthe Disposaltakesplacewhen?inSaralee decided futurei.e.actual Lendlease propotherthanmoney payment/rightsatisfied beforethesectionfor timingrulesfordisposal Agreetosellsharestoanotherco. then ifthathappensits s10410(3b) commissionersaysundertermsof Hadcontractinvolvingasalevariedbya2nd C2 agreement vendorcanretaintillbalanceof Costbaseoftheright= contract pricechange+additionalpurchadded 3 purchpricepaidbutcourtsaysthatsnota thingsincontract:party+prop+priceandtwo mktvalueattime right notaformofprop letsomeonelivein changed timingimportantwithinayear acquiredandwhen yourhousetilltheyfinishpayingoff noextra satisfyactualpayment= Courtheld disposedunder1stcontractnot2nd rightotherthantheoneyoualreadyhadto capitalproceedsthenit sourceofobligationtoaffectdisposal eventho livethereforeg. partieschanged,disposalin1stcontract obligation equalsC2 todispose Capitalgain=costbase Wherenocapproceeds eggift theCGTerodedif CapLoss=reducedcostbase alwaystransferredasgift.'.Submktvalueattimeof eventforactualproceeds=0 Apportionmentrule acquireCGT Othermarketvaluesuboccur whereitcan'tbe orseveralw/oneconsideration valued[eg.notwithaccuracy] rulecanapportioncostbtwnthe Wherearmslengthtransaction capproceedsmore assets.Samew/capproceeds.Or orlessarmslength realbargainingbtwnparties entercontracttosellsomething unrelated marketvaluesub actualmoreorless anddowork thensoldw/one thanarmslengthconsideration/probablysamebut sum sellingwon'tbecapproceeds aren'talwaysthesame butthesellingofthepropertywill C2 getmktvaluesubbutimportantexception be.Andrulesallowapportionbtwn s10310 expiryofanassetthatyouowneg. difftypesofconsideration. hepples rightstodisposesecrets entercontract= CGTD1.costbaseisverylittle[lawyercoststo Apportioninreasonableway create]andcapproceeds=moneyhereceives. Howeverwhenrightsexpirecapproceeds=0andit ends=C2 Costforassets=moneypaidhepples.'.caplossofr thecoButfor...

1095 generalacquisitionrules eg.diffwaystoacquireasset 1. Purchoffsomeoneelse 2. Eg.acquiresharesinaco[theycreaterightsinyou]Or contractualrightsfromacquiringshares. 3. 1095tellsyouwhenyouacquireassets.Structuredarounddiff cgtevents.Eg.acquirebypurchfromsomeoneelsethendealing withA1 disposalsexcepttoyouwhencompuslorilyacquired. 4. Acquireattimeofcontractorifnocontract whenentitystops beingtheowner.Howtoacquirefromanotherpersonw/oa contract?i.e.someoneownssomethingandyouacquiregood title howdoyoudosow/oacontract?Eg.presents no considerationinagift!Althougheg.theft nogoodtitlebutcan getfromtitleofadversepossessioninland worksbysetting outCGTeventsandwhenyouacquireassetifyouacquirefrom aneventhappening.Eg.D1 someoneenterscontract restrictivecovenant didn'townassetbutCGTeventhappened andsomeoneacquiredanasseteg.contractualrights.

LEGT2751 Page 4

Moneypaid/propgiventoacquireasset.

Dingwall obligationtodoinfuturecontingentonfuture event doesthatfit1stelementofcostbase acquiredpartly paidshares diff/parvalueofsharesbeincludedincostbase. Heldthatdiffnotincludeincostbasebutnoobligationtopay inthefutureonlycont.obl.whencallmade. Oram also1stelement hebuildhouseonlandowned [didntlive]claimincincostbaseforlabourvalue11225 didntpayhimselfanythingorgiveprop essentiallyadding thecostofhislabour butthereisnoproperty providing yourownservices=/=propandnotincostbaseofasset importantw/internallygengoodwillinsmallbizwhereonly youworkyoucan'tincludeyourabilityin

Evenwithassetsyoucanindexcostofinflationi.e.cow/assetsbefore1999 Neverindexreducedcostbase!!Don'tgivecaplossforinflationaryloss 11055 the3rdelementis diffincostbase[non deductiblecostofownership eg.interestrentonland non deductiblesinceincome producing.Diffelementfor reducedcostbase]

Historicallydeductiblecanbe includedincostbasebutwhen reducedcostbasealwaysthe reducedoneunderordinarytax provisions Samenowtho

Recap Happenswhendisposefrom youtoanotherentity Id.CGT Acquire/disposeandwhen Whatcapproceedsare Whatcostbaseis[relevant fordeterminingifcapgain] Andreduced[caploss]

Manyexemptionssomepoliticallydriven

Before19sept1985 eventhappen butcapgain/lossdiscarded

AOprovcont Whenyoudisposeofdepreciating asseti.e.writtendownformorethan writtendownvalueyouget recaptureddepreciation includein incomeands11824tellsusanycap gain/losmaderombalancing adjustmentondepreciatingassetis disregarded.Exception where there'sapartialprivateuseofthe asset S11820 genantioverlapprovision Absencesprovisions canrentoutyour residencetill6yrsandthenreturnandsellit Ifnorentalincomethencanreturnevenwhen amounttodieandclaim limittaxraised underCGT

Creatingasset can'tturnbackandcreatebeforebutnoruleforit. alsocertainassetsexemptcapgain/lossdisregarded payalotfor cars driveandcrash Decorationseg.victoriacrossthensoldisexempt Collectibles<$500exempt

Antioverlapprovisions sincenotdefinedintermslimitedtocapassets cgtcanbeanyassetaslotasitfitsdefinition situationwhereyour acquiredassetmaxdivyield sellwhendroptoolow makegains assessableunderordinarygains. Eg.tradingstock/inventory 11825 capgain/lossfromtradingstockis disregarded

LEGT2751 Page 5

Applyexemptionfirstinparticularorders

Scriptforscriptrollover/takeovers say toSHwegiveoursharesinourcoifyou transfersharesinthetargetco rollover situation SHownacquiringco Aacquiringcoacquireacquiredco CGTdiscardedandthenewshares havesameCGTcharaastheshares inthetargeti..eCGTdefferedtil latertimeandsellsharesinthe acquiringCO

Differtolatertime fairlyimportanteg.where soletraderhasbizanddecidetoincorpthebiz Eg.transferassetandgetbackshares Normallyw/orolloverthenCGissuesbutdueto rollover,shareshavesameCGTcharacteristicsas didthetransferredassetsandtheassetskeepCGT characteristicsasinthehandsofsoletrade Mightbeworthmoreeg.goodwillwith0costto soletrader coget0attimeofacqi.e.attimeof acquisition.

LEGT2751 Page 6

L4 CGT2
Tuesday,11August2009 10:36AM

LEGT2751 Page 7

LEGT2751 Page 8