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INCOME TAX ASSESSMENT ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-1 - CAPITAL GAINS AND LOSSES: GENERAL TOPICS  

Division 116 - Capital proceeds  

Modifications to general rules  

SECTION 116-30  Market value substitution rule: modification 1  

 ITAA 36

No capital proceeds

116-30(1)  

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If you received no *capital proceeds from a *CGT event, you are taken to have received the *market value of the *CGT asset that is the subject of the event. (The market value is worked out as at the time of the event.)

Example:

You give a CGT asset to another entity. You are taken to have received the market value of the CGT asset.

There are capital proceeds

116-30(2)  

 View history reference ITAA 36
The *capital proceeds from a *CGT event are replaced with the *market value of the *CGT asset that is the subject of the event if:


(a) some or all of those proceeds cannot be valued; or


(b) those capital proceeds are more or less than the market value of the asset and:

(i) you and the entity that *acquired the asset from you did not deal with each other at *arm's length in connection with the event; or

(ii) the CGT event is CGT event C2 (about cancellation, surrender and similar endings).
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(The market value is worked out as at the time of the event.)

116-30(2A)  

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Subsection (2) does not apply if there is a partial roll-over for the *CGT event because of section 124-150.

116-30(2B)  

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Subsection (2) does not apply to a situation that would otherwise be covered by paragraph (2)(b) if the *CGT event is *CGT event C2 (about cancellation, surrender and similar endings) and the *CGT asset that is the subject of the event is:


(a) a *share in a company that has at least 300 *members and is not a company that is covered by section 116-35; or


(b) a unit in a unit trust that has at least 300 unit holders and is not a trust that is covered by section 116-35.

Note:

So, for one of these assets, the capital proceeds for the cancellation will be what you actually received.

Market value for CGT events C2 and D1

116-30(3)  

 ITAA 36
Subsection (1) does not apply to:


(a) these examples of *CGT event C2:

(i) the expiry of a *CGT asset you own;

(ii) the cancellation of your *statutory licence; or
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(b) *CGT event D1 (about creating contractual or other rights).

116-30(3A)  

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If you need to work out the *market value of a *CGT asset that is the subject of *CGT event C2, work it out as if the event had not occurred and was never proposed to occur.

Example:

A company cancels shares you own in it. You work out the market value of the shares by disregarding the cancellation.

CGT assets the subject of certain events

116-30(4)  

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To avoid doubt, the *CGT asset that is the subject of a *CGT event specified in this table is the asset so specified.
*CGT assets the subject of certain events
For this *CGT event:This asset is the subject of the event:
D1the right you created
...........
D2the option you granted
...........
D3the right you granted
...........
E8your interest or part interest in the trust capital
...........
K1(Repealed by No 77 of 2001)
...........
K6the *share or interest you *acquired before 20 September 1985

Carried interests

116-30(5)  

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This section does not apply to *CGT event A1 or C2 to the extent that the CGT event is constituted by ceasing to own:


(a) the *carried interest of a *general partner in a *VCLP, an *ESVCLP or an *AFOF or a *limited partner in a *VCMP; or
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(b) an entitlement to receive a payment of such a carried interest.

Note:

This section does not apply to ESS interests acquired under employee share schemes: see subsection 130-80(4).


 



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