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22 (Capital Gains Tax)[1]

Personal injury compensation ? special rules ?

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Personal injury compensation Special rules: Deceased estates Foreign and temporary residents Roll-overs Prevention of double-taxation CGT event A1 CGT event A1 Arises where taxpayer “disposes” of a “CGT asset” Disposal occurs where there is a change of beneficial ownership (eg sale or gift of  CGT asset)
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Time of CGT event is when:  A contract for disposal is entered into, or If no contract, when change of ownership occurs Capital gains and losses made on CGT assets acquired before 20 September 1985  are disregarded Cost base Cost base Cost base is used to calculate a  capital gain  from certain CGT events Cost base has five elements Cost base elements may be indexed in certain cases Elements of the cost base Elements of the cost base 1st element  – total of the money paid, or required to be paid, and the market value  of any property given, or required to be given, in respect of acquiring the asset 2nd element  – “incidental costs” incurred to acquire the asset or that relate to the  CGT event 3rd element  – costs of owning the asset (only applies to assets acquired after 20  August 1991 but not personal use assets or collectables) 4th element  – capital expenditure incurred to increase or preserve the asset’s  value (except goodwill) 5th element  – capital expenditure incurred to establish, preserve or defend  taxpayer’s title to asset Reduced cost base Reduced cost base
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Reduced cost base used to calculate a  capital loss  from certain CGT events Reduced cost base has 5 elements: 1 st , 2 nd , 4 th  and 5 th  elements mirror are same as for cost base 3 rd  element: amount that is assessable as a result of a balancing adjustment in  relation to the asset No indexation of elements Modifications Modifications Cost base/reduced cost base reduced by: Deductible and recouped expenditure Net input tax credits Special modifications: Market value substitution rule Split or changed asset rules Apportionment rules Assumption of liability rule Indexation of cost base Indexation of cost base Elements of a cost base (other than the 3 rd  element) may be indexed for inflation  provided: Asset was acquired prior to 11:45 am on 21 September 1999 Asset was held for more than 12 months Choice to index has been made Elements of a reduced cost base cannot be indexed  Indexation cannot be used where the taxpayer chooses to use the discount capital  gains treatment under Div 115
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Indexation (cont) Indexation (cont) Indexation of cost base elements generally calculated by multiplying the relevant 
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