There are a number of CGT events which are sometimes overlooked or restructures which are undertaken which may have a significant impact when determining the capital gains or future capital gains implications for clients.
This paper will look at the following CGT issues and traps:
▪ Pre-CGT assets
- A capital gain from a CGT asset which a taxpayer acquired prior to 20 September 1985 (pre- CGT) is generally disregarded.
However, there may be CGT issues where a CGT event happens in relation to a pre-CGT asset in the following circumstances:
- The pre-CGT asset is owned by a company or trust and Division 149 of the 1997 Tax Act is triggered.
- The pre-CGT asset is an interest in a company or trust and CGT event K6 occurs.
- GT event K6 issues which may arise as a result of a restructure in which roll-over relief under Division 615 (inserting a holding company) or Subdivision 124-N (transfer from a unit trust to a company) is applied but Division 149 had been triggered in the original entity.
▪ Dealing with CGT event E4 issues where non assessable payments are made to unitholders in relation to their interests in the unit trust.
▪ Triggering CGT event J4 – which may happen if a restructure from a unit trust to a company occurs where Subdivision 124-N roll-over relief is applied but the unit trust is not wound up within six months of a restructure commencing.
▪ Passing assets to exempt entities or foreign residents under a Will and triggering CGT event K3.
▪ Issues to consider when a company has debts which need to be dealt with prior to it being deregistered.
In this paper references to “1997 Tax Act” means Income Tax Assessment 1997 (Cth) and “1936 Tax Act” means Income Tax Assessment 1936 (Cth).