(6) If the percentage that would result from this section for you and the *discount capital gain is 60%, then, despite subsection (2), 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 (2)(b)(i),you;
(b) if you make the discount capital gain in the way described in subparagraph (2)(b)(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)).
37 Section 115‑200
Omit “step 3”, substitute “step 5”.
38 At the end of subsection 115‑210(1)
Add:
Note: This Subdivision has an extended application under Subdivision 115‑CA (about trusts that would have net capital gains if indexation were disregarded).
39 Subsection 115‑215(4)
Omit “paragraph (3)(b) or (c)”, substitute “subsection (3)”.
40 Paragraph 115‑215(4)(a)
Omit “if the relevant trust gain was reduced under step 3 of the method statement in subsection 102‑5(1),”, substitute “if the relevant trust gain is a *discount capital gain (disregarding section 115‑20),”.
41 Before subsection 115‑225(2)
Insert:
Special rule if net income falls short of certain amount
42 At the end of section 115‑225
Add:
Special rule relating to indexation
(4) Subsection (5) applies if the *capital gain has been worked out using a *cost base that includes indexation because of subsection 110‑36(1A), and the amount mentioned in subsection (1) of this section:
(a) is being worked out for the purposes of subsection 115‑215(3) in circumstances where, had you:
(i) made the capital gain; and
(ii) *acquired and held any relevant *CGT asset in the same way as the trust estate did;
that indexation could not have applied to the cost base; or
(b) is being worked out for the purposes of subsection 115‑215(3) in connection with you having a resultant *discount capital gain to which section 115‑102 (about new residential dwellings etc.) or 115‑125 (about affordable housing) applies; or
(c) is being worked out for the purposes of subsection 115‑220(2) in relation to a beneficiary in circumstances where, had the beneficiary:
(i) made the capital gain; and
(ii) acquired and held any relevant CGT asset in the same way as the trust estate did;
that indexation could not have applied to the cost base; or
(d) is being worked out for the purposes of subsection 115‑220(2) in connection with a beneficiary having a resultant discount capital gain to which section 115‑102 (about new residential dwellings etc.) or 115‑125 (about affordable housing) applies; or
(e) is being worked out for the purposes of subsection 115‑222(4).
Note 1: For paragraph (a) or (c), indexation under subsection 110‑36(1A) is only applicable in relation to capital gains, of individuals and trusts, that arise from a CGT event that happens on or after 1 July 2027. In addition, residency requirements for individuals apply under section 114‑25.
Note 2: For paragraph (b) or (d), indexation may be able to be chosen by the trustee of a trust as an alternative to the discount percentage applying for a beneficiary’s attributed gain: see subsections 115‑102(5) and 115‑125(6).
Note 3: For paragraph (e), subsection 115‑222(4) relates to assessing trustees under section 99A of the Income Tax Assessment Act 1936.
(5) For the purposes of the provision mentioned in subsection (6) of this section, determine the amount of the *capital gain remaining assuming that:
(a) in working out the amount of the capital gain before any reductions under the method statement in subsection 102‑5(1) were applied, the *cost base was adjusted to remove the effect of indexation on its calculation; and
(b) the assumption in paragraph (a) did not result in any changes to the application of *capital losses, previously unapplied *net capital losses or quarantined amounts (including how much of each of those was applied) under that method statement to reduce the capital gain.
(6) The provision is:
(a) if subsection (3) does not apply,paragraph (1)(a); or
(b) if subsection (3) applies,subparagraph (1)(a)(i) (as taken to be included because of subsection (3)).
43 At the end of Subdivision 115‑C
Add:
115‑235 Giving information to beneficiaries
(1) If a trust is covered by a determination under subsection (4), the trustee must:
(a) prepare a statement for each beneficiary of the trust who, because of subsection 115‑215(3), makes one or more *capital gains for an income year in relation to capital gains of the trust estate for the income year; and
(b) ensure the statement complies with subsection (2); and
(c) give the statement to the beneficiary within the period specified in, or worked out under, the determination.
Note: Section 286‑75 in Schedule 1 to the Taxation Administration Act 1953 provides an administrative penalty for breach of this subsection.
(2) The statement complies with this subsection if it:
(a) is in the *approved form; and
(b) states the amount of each of those *capital gains that the beneficiary makes; and
(c) sets out which of those capital gains are *non‑residential capital gains, *residential capital gains, *deferred non‑residential capital gains or *deferred residential capital gains; and
(d) sets out the effect of subsections 115‑215(4), and 115‑225(5) if applicable, in relation to each of those capital gains.
Note: Subsection 115‑215(4) deals with the status of capital gains as discount capital gains, and the effect of Subdivision 152‑C having been applied to the trust gain. Subsection 115‑225(5) makes adjustments to remove the effect of indexation on the cost bases of the relevant CGT assets.
(3) A trustee of a trust is not required to prepare and give a statement under subsection (1) for an income year if a report is given, or required to be given, under section 393‑10 in Schedule 1 to the Taxation Administration Act 1953 in respect of the trust estate for the *financial year that corresponds to the income year.
(4) The Commissioner may, by legislative instrument, determine that trustees of all or specified kinds of trusts are required:
(a) to prepare and give statements under subsection (1) to beneficiaries of the trusts; and
(b) to do so before the end of:
(i) a specified period; or
(ii) a period worked out using a specified method.
44 After Subdivision 115‑C
Insert:
Subdivision 115‑CA,Extended application of rules about trusts with net capital gains (disregarding indexation)
Guide to Subdivision 115‑CA
115‑250 What this Subdivision is about
This Subdivision extends the application of Subdivision 115‑C in certain circumstances where indexation is used in working out the cost base for trust estate capital gains, and Subdivision 115‑C does not otherwise apply because the trust estate does not have a net capital gain.
Table of sections
Operative provisions
115‑255 Extended application of Subdivision 115‑C,disregarding indexation
Operative provisions
115‑255 Extended application of Subdivision 115‑C,disregarding indexation
(1) In addition to its application under subsection 115‑210(1), Subdivision 115‑C applies as set out in this section if:
(a) a trust estate has one or more *capital gains that have been worked out using a *cost base that includes indexation because of subsection 110‑36(1A); and
(b) that Subdivision does not apply under subsection 115‑210(1) in relation to the trust estate for an income year; and
(c) that Subdivision would so apply if, in working out whether the trust estate has a *net capital gain for the income year, the following assumptions applied in relation to each of those capital gains:
(i) in working out the amount of the capital gain before any reductions under the method statement in subsection 102‑5(1) were applied, the *cost base was adjusted to remove the effect of indexation on its calculation;
(ii) the assumption in subparagraph (i) did not result in any changes to the application of *capital losses, previously unapplied *net capital losses or quarantined amounts (including how much of each of those was applied) under that method statement to reduce the capital gain.
(2) Subdivision 115‑C applies under this section as follows in relation to such a *capital gain of the trust estate (the trust gain):
(a) that Subdivision applies for the purposes of treating a beneficiary of the trust estate as having a related capital gain under subsection 115‑215(3) in circumstances where subsection 115‑225(5) would apply for working out the amount of the trust gain;
(b) if paragraph (a) applies,section 115‑235 applies for such a related capital gain;
(c) that Subdivision applies for the purposes of increasing the trustee’s assessable amount under subsection 115‑220(2) or 115‑222(4) in circumstances where subsection 115‑225(5) would apply for working out the amount of the trust gain.
(3) The reference to the trust estate’s net income in subsection 115‑215(1) does not limit the application of section 115‑215 for those purposes.
(4) To avoid doubt, subsection 115‑210(2) applies in relation to the application of Subdivision 115‑C under this section.
(5) To avoid doubt, a reference in a *taxation law to Subdivision 115‑C or a provision of that Subdivision includes a reference to that Subdivision, or that provision (as the case requires), as it applies because of this section.
45 Section 149‑10 (note)
Omit “Note”, substitute “Note 1”.
46 At the end of section 149‑10
Add:
Note 2: A CGT asset will cease to be a pre‑CGT asset on 1 July 2027 (see section 112‑175).
47 Section 152‑205 (example)
Repeal the example, substitute:
Note: The cost bases of CGT assets of an individual are indexed from 1 July 2027, reducing capital gains that arise after 1 July 2027. This reduction applies after indexation, allowing the indexed gain to be reduced by a further 50%.
48 After subsection 960‑275(1A)
Insert:
(1B) For indexation under subsection 110‑36(1A) of the *cost base of a *CGT asset (except the first element of the cost base of an asset covered by subsection (3)), the indexation factor for expenditure:
(a) in an element of the cost base; and
(b) incurred on or after 1 July 2027;
is:
The expenditure can include giving property: see section 103‑5.
Note 1: This includes expenditure taken to have been incurred on 1 July 2027 as mentioned in paragraph 112‑155(2)(b), 112‑165(2)(b) or 112‑175(2)(b).
Note 2: There are rules affecting when the expenditure was incurred: see Division 114.
(1C) For indexation under subsection 110‑36(1A) of the first element of the *cost base of a *CGT asset that is a *share in a company, or unit in a unit trust, the indexation factor for an amount in that first element that was paid to the company or trust at a time:
(a) after the asset was *acquired; and
(b) on or after 1 July 2027;
is:
The payment can include giving property: see section 103‑5.
Example: Peter acquires shares in a company. The shares are partly‑paid, and the company makes a call on the shares. Peter sells the shares to Narina before Peter is liable to pay the call.
The amount Narina paid to Peter for the shares is indexed under subsection 960‑275(1B) from the quarter in which she incurred the expenditure to acquire the shares.
The amount Narina later pays for the call on the shares is indexed in accordance with this subsection from the quarter in which she made that later payment.
49 Subsection 960‑275(2)
After “For indexation”, insert “under subsection 110‑36(1)”.
50 Subsection 960‑275(3)
After “For indexation”, insert “under subsection 110‑36(1)”.
51 Subsection 995‑1(1)
Insert:
deferred non‑residential capital gain has the meaning given by subsection 102‑6(3).
deferred residential capital gain has the meaning given by subsection 102‑6(4).
non‑residential capital gain has the meaning given by subsection 102‑6(1).
residential capital gain has the meaning given by subsection 102‑6(2).
Taxation Administration Act 1953
52 After subsection 286‑75(2) in Schedule 1
Insert:
(2AAA) You are also liable to an administrative penalty if:
(a) you are required under subsection 115‑235(1) of the Income Tax Assessment Act 1997 (giving information to beneficiaries) to prepare and give a statement to an entity (other than the Commissioner) by a particular day; and
(b) you do not give the statement to the entity by that day.
53 Paragraph 286‑80(2)(a) in Schedule 1
After “(1),”, insert “(2AAA),”.
Part 2,Minimum rate of tax on capital gains
Income Tax Assessment Act 1997
54 Section 4‑25
Omit “Subsection 392‑35(3)” (first occurring), substitute “Subsection 119‑10(1) or 392‑35(3)”.
55 Section 4‑25 (before the note)
Insert:
Note 1: Subsection 119‑10(1) increases some individuals’ tax liability by requiring them to pay extra income tax in relation to certain capital gains.
56 Section 4‑25 (note)
Omit “Note”, substitute “Note 2”.
57 At the end of section 102‑1
Add:
Some or all of your net capital gain may be subject to a 30% minimum tax (see Division 119).
58 After Division 118
Insert:
Division 119,Minimum rate of tax on capital gains
Guide to Division 119
119‑1 What this Division is about
If you are an individual who is an Australian resident, you may have to pay extra income tax relating to certain capital gains you make during an income year to ensure a rate of tax of 30% on those gains (before applying offsets).
This Division sets out how to work out when extra income tax is payable and matters relating to the amount of that tax.
The requirement to pay extra income tax does not apply if you received certain payments during the income year.
Table of sections
Operative provisions
119‑5 Your minimum tax capital gain for an income year
119‑10 When extra income tax is payable on your minimum tax capital gain
119‑15 Exception for recipients of certain payments
Operative provisions
119‑5 Your minimum tax capital gain for an income year
(1) Your minimum tax capital gain (if any) for an income year is the total of the amounts of *capital gains (if any) covered by subsection (2) that are remaining after applying step 6 of the method statement in subsection 102‑5(1).
(2) This subsection covers a *capital gain you made during the income year, including because of section 115‑215 (about attribution of trust gains to beneficiaries), if:
(a) the capital gain is:
(i) a *residential capital gain; or
(ii) a *non‑residential capital gain; and
(b) section 115‑102 (about new residential dwellings etc.) does not apply to the capital gain; and
(c) section 115‑125 (about affordable housing) does not apply to the capital gain.
119‑10 When extra income tax is payable on your minimum tax capital gain
(1) You must pay extra income tax on your *minimum tax capital gain for an income year if:
(a) you are an individual; and
(b) you are an Australian resident at any time during the income year; and
(c) you have a *minimum tax gap amount for the income year.
Note: Section 12AA of the Income Tax Rates Act 1986 sets the rate at which you must pay extra income tax on your minimum tax capital gain. It does so in such a way that the extra income tax you must pay equals the minimum tax gap amount.
(2) Use this method statement to work out whether you have a minimum tax gap amount for the income year:
Method statement
Step 1. Multiply your *minimum tax capital gain for the income year by 30%.
Step 2. Work out your basic income tax liability for the income year under step 2 of the method statement in subsection 4‑10(3), disregarding this Division.
Step 3. Work out what the amount at step 2 of this method statement would be if your taxable income for the income year were reduced (but not below nil) by the amount of your *minimum tax capital gain.
Step 4. Subtract the amount at step 3 from the amount at step 2.
Step 5. Subtract the amount at step 4 from the amount at step 1.
Step 6. Round the result down to the nearest whole dollar if the result is not already a number of whole dollars.
Step 7. If the result (as rounded) is more than nil, you have a minimum tax gap amount for the income year equal to that amount.
119‑15 Exception for recipients of certain payments
(1) Section 119‑10 does not apply if you receive, at any time during the income year, a payment of a kind determined under subsection (2).
(2) The Minister may, by legislative instrument, determine a kind of payment for the purposes of subsection (1) if:
(a) such a payment is a social security payment (within the meaning of the Social Security Act 1991); or
(b) such a payment is made by an *Australian government agency under an *Australian law, and the eligibility for, or the amount of, the payment depends on one or more of the following:
(i) the recipient’s means or financial position;
(ii) the recipient’s impaired ability to work or incapacity.
59 Subsection 995‑1(1)
Insert:
minimum tax capital gain has the meaning given by section 119‑5.
minimum tax gap amount has the meaning given by subsection 119‑10(2).
Income Tax (Transitional Provisions) Act 1997
60 After Division 118
Insert:
Division 119,Minimum rate of tax on capital gains
Table of sections
119‑1 Application of Division 119 of the Income Tax Assessment Act 1997
119‑1 Application of Division 119 of the Income Tax Assessment Act 1997
Division 119 of the Income Tax Assessment Act 1997 applies in relation to capital gains from CGT events happening on or after 1 July 2027.