Document ID: chunk:federal_register_of_legislation:C2004C00958:clause:1_14:p34
Version: federal_register_of_legislation:C2004C00958
Segment Type: clause
Provision Reference: sch 1 cl 14 (pt 34/40)
Character Range: 116963–119715

assets is made by the partners individually.

  Each partner's gain or loss is calculated by reference to the partnership agreement, or partnership law if there is no agreement.

Example 1: A partnership creates contractual rights in another entity (CGT event D1). Each partner's capital gain or loss is calculated by allocating an appropriate share of the capital proceeds from the event and the incidental costs that relate to the event (according to the partnership agreement, or partnership law if there is no agreement).

Example 2: Helen and Clare set up a business in partnership. Helen contributes a block of land to the partnership capital. Their partnership agreement recognises that Helen has a 75% interest in the land and Clare 25%. The agreement is silent as to their interests in other assets and profit sharing.

 When the land is sold, Helen's capital gain or loss will be determined on the basis of her 75% interest. For other partnership assets, Helen's gain or loss will be determined on the basis of her 50% interest (under the relevant Partnership Act).

 (2) Each partner has a separate *cost base and *reduced cost base for the partner's interest in each *CGT asset of the partnership.

 (3) If a partner leaves a partnership, a remaining partner *acquires a separate *CGT asset to the extent that the remaining partner acquires a share of the departing partner's interest in a partnership asset.

Note: The remaining partners would not be affected if the departing partner sells its interests to an entity that was not a partner.

Example: (Indexation is ignored for the purpose of this example).

 John, Wil and Patricia form a partnership (in equal shares).

 John contributes a building (which is a pre‑20 September 1985 asset) having a market value of $200,000. Wil and Patricia contribute $200,000 each in cash.

 The partnership buys another asset for $400,000.

 John is taken to have disposed of 2/3 of his interest in the building (1/3 to Wil and 1/3 to Patricia). His remaining 1/3 share in the building remains a pre‑CGT asset. The 1/3 shares that Wil and Patricia acquire are post‑CGT assets.

 Wil retires from the partnership when the partnership assets have a market value of $1,200,000 ($500,000 for the building and $700,000 for the other asset). John and Patricia pay Wil $400,000 for his interest in the partnership.

 Wil has a capital gain of $100,000 on the building and $100,000 on the other asset. John and Patricia each acquire an additional 1/6 interest in the partnership assets. These additional interests are separate assets and post‑CGT assets.

 (4) If a new partner is admitted to a partnership:

 (a) the new partner *acquires a share (according to the partnership agreement, or