(b) you continue to hold the asset until a *realisation event happens in relation to the asset on or after 1 July 2027.
Deemed sale and reacquisition
(2) For the purposes of this Part, Part 3‑3 and Subdivision 960‑M, you are taken:
(a) to have sold the asset just before 1 July 2027, with your *capital proceeds for that sale taken to be the amount applying under subsection (3); and
(b) to have *acquired the asset again just after that sale for an amount equal to those capital proceeds.
Note 1: This subsection causes the asset to cease to be a pre‑CGT asset, and for the first element of the asset’s cost base to be reset, on 1 July 2027 (see paragraph 149‑10(a) and subsection 110‑25(2)).
Note 2: The sale under paragraph (a) happens on 30 June 2027, and the reacquisition under paragraph (b) happens on 1 July 2027.
Note 3: Any capital gain or capital loss you make from the sale on 30 June 2027 is disregarded (see subsection 104‑10(5)).
Note 4: For the purposes of working out whether you make a capital gain or capital loss from the realisation event, you are taken to have acquired the CGT asset at the time, and for the amount, applying under paragraph (b).
Note 5: Subdivision 960‑M deals with indexation of a CGT asset’s cost base.
(3) The *capital proceeds are taken to be equal to:
(a) unless paragraph (b) applies,the asset’s *market value immediately before 1 July 2027; or
(b) if you choose to use an apportioning method determined under section 112‑185,the amount of capital proceeds worked out using that method.
(4) For the purposes of paragraph 103‑25(1)(a), the *realisation event is the relevant *CGT event for such a choice.
Note 1: Section 103‑25 sets out rules for making choices.
Note 2: This subsection and section 103‑25 mean you do not have to make a choice until the day you lodge your income tax return for the income year in which the realisation event happens (see paragraph 103‑25(1)(a)).
(5) Except for the purposes of section 112‑185 (about making apportioning determinations), none of the following apply in relation to a sale and acquisition mentioned in paragraphs (2)(a) and (b) for which a choice is made under paragraph (3)(b):
(a) Subdivisions 112‑A, 112‑B, 112‑C and 112‑D (about modifications of the cost base and reduced cost base);
(b) sections 116‑25 to 116‑60 (about modifications of the general rules about capital proceeds).
(6) To avoid doubt, subsection (2) applies only for the purposes of the provisions mentioned in that subsection. For example, it does not apply for the purposes of Subdivision EA of Division 7A of Part III of the Income Tax Assessment Act 1936 (about unpaid present entitlements).
112‑180 Pre‑CGT assets,defer a gain from CGT event K6 from the deemed sale until the later realisation event happens
Application
(1) This section applies if:
(a) you own *shares in a company or an interest in a trust; and
(b) under subsection 112‑175(2), you are taken to have sold the shares or interest (the deemed sale) and acquired them again; and
(c) *CGT event K6 happens on 30 June 2027 as a result of the deemed sale, and you make a *capital gain from this CGT event (the initial notional gain); and
(d) you continue to hold the shares or interest until a *realisation event happens in relation to them on or after 1 July 2027.
Disregard the initial notional gain because it is to be deferred
(2) Disregard the initial notional gain, except for the purposes of subsection (3).
Deferring an initial notional gain
(3) For the purposes of Division 102:
(a) in the income year in which the *realisation event happens in relation to the *CGT asset,you are treated as having made a *capital gain (your deferred gain):
(i) for the *CGT event K6 mentioned in paragraph (1)(c); and
(ii) that is a *discount capital gain if the initial notional gain is a discount capital gain; and
(iii) that is equal to the amount of the initial notional gain; and
(b) disregard section 102‑20 in relation to your deferred gain.
Note 1: If the initial notional gain is a discount capital gain, then under step 5 of the method statement in subsection 102‑5(1), the 50% discount mentioned in paragraph 115‑100(aa) or (ab) can apply to your deferred gain.
Note 2: For a trust, a beneficiary of the trust may also be taken to have made, because of section 115‑215, a capital gain in relation to the deferred gain.
112‑185 Method for apportioning capital gains and losses between realisation events and earlier deemed CGT events
(1) The Minister may, by legislative instrument, determine a method for apportioning *capital gains and *capital losses between:
(a) *realisation events happening on or after 1 July 2027 in relation to *CGT assets; and
(b) earlier *CGT events relating to those CGT assets that are taken to have happened under subsection 112‑155(2), 112‑165(2) or 112‑175(2).
(2) For such a *CGT asset, such a method must take into account:
(a) the *acquisition of the *CGT asset that is taken to have happened under paragraph 112‑155(2)(b), 112‑165(2)(b) or 112‑175(2)(b); and
(b) any expenditure (including indexation) in an element of the *cost base or *reduced cost base of the CGT asset on or after 1 July 2027; and
(c) any other matter the Minister considers relevant.
(3) For such a *CGT asset, such a method must enable the following to be worked out:
(a) the *capital proceeds for the sale of the CGT asset that is taken to have happened under paragraph 112‑155(2)(a), 112‑165(2)(a) or 112‑175(2)(a);
(b) the *cost base and *reduced cost base of the CGT asset when it is taken to have been *acquired under paragraph 112‑155(2)(b), 112‑165(2)(b) or 112‑175(2)(b).
The method may also enable other things to be worked out.
14 Section 114‑1
Repeal the section, substitute:
114‑1 Indexing elements of cost base
(1) In working out the *cost base of a *CGT asset under subsection 110‑36(1A), index expenditure incurred in each element (except the third element).
Note 1: The expenditure can include giving property (see section 103‑5).
Note 2: Subdivision 960‑M shows you how to index amounts (see subsections 960‑275(1B) and (1C) in particular).
Note 3: You have to work out the cost base of a CGT asset if a CGT event happens in relation to it or if there is a cost base modification.
Note 4: You cannot index expenditure in the third element (costs of ownership) (see subsection 960‑275(4)).
(2) In working out the *cost base of a *CGT asset under subsection 110‑36(1), index expenditure incurred in each element (except the third element) at or before the time mentioned in paragraph 110‑36(1)(a).
Note 1: The expenditure can include giving property (see section 103‑5).
Note 2: Subdivision 960‑M shows you how to index amounts. Indexation under subsection 110‑36(1) does not take account of inflation after 30 September 1999 (see subsections 960‑275(2) and (3)).
Note 3: You have to work out the cost base of a CGT asset if a CGT event happens in relation to it or if there is a cost base modification.
Note 4: You cannot index expenditure in the third element (costs of ownership) (see subsection 960‑275(4)).
Note 5: Indexation under subsection 110‑36(1) is not relevant to expenditure incurred after 11.45 am on 21 September 1999 or any expenditure relating to a CGT asset acquired after that time.
15 Subsection 114‑5(2)
Omit all of the words before the table (including the heading), substitute:
Indexation for some entities only if indexation chosen
(2) Indexation is not relevant for the purposes of working out under subsection 110‑36(1):
(a) the *cost base of a *CGT asset; and
(b) the *capital gain of an entity mentioned in an item of the table from a *CGT event happening in relation to the CGT asset after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999;
unless the relevant entity mentioned in that item chooses that the cost base includes indexation.
16 Subsection 114‑5(3)
Repeal the subsection (not including the note), substitute:
(3) Indexation is not relevant for the purposes of working out under subsection 110‑36(1):
(a) the *cost base of a *CGT asset; and
(b) the *capital gain of a *life insurance company from a *CGT event happening after 30 June 2000 in respect of a CGT asset that is a *complying superannuation asset;
unless the company chooses that the cost base includes indexation.
17 Subsection 114‑10(1)
Repeal the subsection, substitute:
(1) You only index expenditure in the *cost base of a *CGT asset because of subsection 110‑36(1A) or (1) for a *CGT event happening in relation to the asset if you, or the entity whose cost base is being worked out, had *acquired the asset at least 12 months before the time of the CGT event.
Note: Generally, expenditure is indexed from when it is incurred: see subsection 960‑275(1B) or (2). The exception is when there is an acquisition that did not result from a CGT event. The first element in this case is indexed from when the expenditure was paid: see subsection 960‑275(1C) or (3).
18 Subsection 114‑10(2)
Omit “5 exceptions”, substitute “6 exceptions”.
19 At the end of subsection 114‑10(2)
Add:
; and • one for a sale and reacquisition taken to have happened under subsection 112‑155(2), 112‑165(2) or 112‑175(2): see subsection (9).
20 At the end of section 114‑10
Add:
Sales and reacquisitions taken to have happened in relation to adjustments to the 50% capital gains discount
(9) Disregard subsections 112‑155(2), 112‑165(2) and 112‑175(2) for the purposes of applying the 12 month rule.
21 Subsection 114‑15(1)
After “indexation”, insert “because of subsection 110‑36(1A) or (1)”.
22 Subsection 114‑15(6) (note)
Omit “960‑275(3)”, substitute “960‑275(1C) or (3)”.
23 Section 114‑20
Before “you index”, insert “when indexing that element because of subsection 110‑36(1A) or (1),”.
24 After section 114‑20
Insert:
114‑25 Residency requirements for individuals for indexation to be included in a cost base under subsection 110‑36(1A)
(1) This section sets out requirements for indexation to be included under subsection 110‑36(1A) in the *cost base of a *CGT asset for the purposes of working out your *capital gain from a *CGT event happening in relation to the *CGT asset if:
(a) you are an individual; and
(b) the CGT event happened while you were holding the CGT asset (as a result of earlier *acquiring it).
Note: This section applies for working out a capital gain you make from directly holding the asset. A similar result arises for any capital gain you make indirectly as a beneficiary of a trust (see Subdivision 115‑C, in particular subsections 115‑225(4) and (5)).
(2) You must be neither a foreign resident nor a *temporary resident at any time during the period (the testing period):
(a) starting on the later of 1 July 2027 and the day of *acquiring the *CGT asset; and
(b) ending on the day the *CGT event happens.
(3) For the purposes of subsection (2), if:
(a) another individual owned the *CGT asset on a particular day before the testing period ends; and
(b) on that day, that individual was one of the following (that individual’s residency status):
(i) an Australian resident (but not a *temporary resident);
(ii) a temporary resident;
(iii) a foreign resident; and
(c) section 115‑30 treats you as having *acquired the CGT asset when that individual, or an earlier owner of the CGT asset, acquired it;
you are treated as having the same residency status on that day as that individual had on that day.
(4) Section 115‑30 applies to subsections (2) and (3) of this section in a corresponding way to the way that section applies in relation to section 115‑105.
Note: Section 115‑30 has special rules about when assets are acquired.
114‑30 Asset requirements for indexation to apply for a cost base worked out under subsection 110‑36(1A)
(1) This section sets out requirements for indexation to be included under subsection 110‑36(1A) in the *cost base of a *CGT asset for the purposes of working out your *capital gain from a *CGT event happening in relation to the CGT asset if:
(a) you are an individual; and
(b) you make the capital gain directly or, because of section 115‑215, as a beneficiary of a trust.
(2) The *CGT asset must not be an asset for which either of the following sections applies in relation to the *capital gain:
(a) section 115‑102 (about new residential dwellings etc.);
(b) section 115‑125 (about affordable housing).
Note 1: If you are a beneficiary of a trust, the requirements in this section do not affect whether indexation is included in the cost base of the CGT asset for the purposes of working out whether the trust estate makes a capital gain. If section 115‑102 or 115‑125 (the discount section) applies for your capital gain, then in working out your capital gain:
(a) the cost base will be adjusted to remove the effect of indexation (see subsection 115‑225(5)); and
(b) instead, the discount relating to the discount section applies (see paragraph 115‑215(4)(a)).
Note 2: However, the result in paragraphs (a) and (b) of note 1 does not happen for your capital gain if the trust chooses under the discount section for that section not to apply. If the trust makes this choice, the indexation included in the cost base of the CGT asset will flow through to working out your capital gain (see subsection 115‑215(3)(a)).
25 Division 115 (heading)
Omit “trusts’ net capital gains”, substitute “certain trust capital gains”.
26 Section 115‑1
After “net income of trusts with net capital gains”, insert “(and in certain other circumstances)”.
27 At the end of section 115‑1
Add:
For a discount capital gain from a CGT event happening on or after 1 July 2027, a discount of at least 50% continues to be available if the CGT event relates to a new residential dwelling, to the provision of affordable housing, or to other CGT assets of a kind determined by the Minister.
28 Paragraph 115‑100(a)
Repeal the paragraph, substitute:
(a) 50% if section 115‑102 (about new residential dwellings etc.) applies to the gain; or
(aa) 50% if:
(i) the gain is made by an individual from a *CGT event happening before 1 July 2027; and
(ii) neither section 115‑105 nor 115‑110 (about foreign or temporary residents) applies to the gain; or
(ab) 50% if:
(i) the gain is made by a trust (other than a trust that is a *complying superannuation entity) from a *CGT event happening before 1 July 2027; and
(ii) section 115‑120 (about foreign or temporary residents) does not apply to the gain; or
29 At the end of section 115‑100
Add:
; or (f) 0% if none of the above paragraphs applies to the gain.
30 After section 115‑100
Insert:
115‑102 New residential dwellings etc.
(1) This section applies to a *discount capital gain if:
(a) you are an individual; and
(b) neither section 115‑105 nor 115‑110 (about foreign or temporary residents) applies to the discount capital gain; and
(c) either:
(i) you make the discount capital gain from a *CGT event happening on or after 1 July 2027 in relation to a *CGT asset covered by subsection (2); or
(ii) because of section 115‑215, Division 102 applies to you as if you had made the discount capital gain for a *capital gain of a trust covered by subsection (4); and
(d) where subparagraph (c)(ii) applies,the trust’s capital gain was made directly, or indirectly through one or more entities that are all covered by subsection (4), from a CGT event happening on or after 1 July 2027 in relation to a CGT asset covered by subsection (2).
Note: The discount percentage for the discount capital gain is 50% (see paragraph 115‑100(a)).
Kinds of CGT assets to which this section relates
(2) This subsection covers the following *CGT assets:
(a) a *new residential dwelling;
(b) a CGT asset of a kind determined under subsection (3).
(3) The Minister may, by legislative instrument, determine one or more kinds of *CGT assets to be covered by subsection (2).
Relevant trusts and interposed entities
(4) This subsection covers the following:
(a) a trust, other than a *superannuation fund or a public unit trust (within the meaning of section 102P of the Income Tax Assessment Act 1936);
(b) a partnership.
Note: For paragraph (a), a trust includes a managed investment trust.
Indexation may be able to be chosen as an alternative
(5) Despite subsection (1), the following person may choose for this section not to apply to the *discount capital gain:
(a) if you make the discount capital gain in the way described in subparagraph (1)(c)(i),you;
(b) if you make the discount capital gain in the way described in subparagraph (1)(c)(ii),the trustee of the trust.
Such a choice by the trustee applies to you in a similar way to a choice made by you for a gain covered by paragraph (a).
Note: Instead, the cost base of the CGT asset may be able to be indexed (see subsection 110‑36(1A)).
31 Subsection 115‑125(2) (note)
Omit “Note”, substitute “Note 1”.
32 At the end of subsection 115‑125(2)
Add:
Note 2: It may be possible to choose indexation as an alternative to a discount under this section (see subsection (6)).
33 Paragraph 115‑125(3)(b)
Repeal the paragraph.
34 At the end of subsection 115‑125(3)
Add:
Note: For paragraph (a), a trust includes a managed investment trust.
35 Paragraph 115‑125(4)(a)
Repeal the paragraph, substitute:
(a) either:
(i) 50% if neither section 115‑105 nor 115‑110 (about foreign or temporary residents) applies to the *discount capital gain; or
(ii) the *discount percentage that, apart from this section, would result from section 115‑115 if section 115‑105 or 115‑110 applies to the discount capital gain; and
36 At the end of section 115‑125
Add:
Indexation may be able to be chosen as an alternative