Document ID: chunk:federal_register_of_legislation:C2010C00679:section:1987:p4
Version: federal_register_of_legislation:C2010C00679
Segment Type: section
Provision Reference: s 1987 (pt 4/51)
Character Range: 19019–22255

The disposal of the asset may result in a capital gain or capital loss
(see section 160Z).
  Capital gain - asset owned for 12 months or more
            Consideration         Indexed cost
            in respect of    -    base of        =    Capital gain
            disposal              asset
  Capital gain - asset owned for less than 12 months
            Consideration         Cost
            in respect of    -    base of        =    Capital gain
            disposal              asset
  Capital loss
            Reduced cost          Consideraton
            base of          -    in respect of  =    Capital loss
            asset                 disposal
For a basic definition of 'consideration in respect of a disposal of an
asset', see section 160ZD.  For basic definitions of 'cost base', 'indexed
cost base' and 'reduced cost base', see section 160ZH.  The basic idea is that
the cost base of an asset consists of the cost of acquiring the asset and
certain other costs, the indexed cost base is the cost base indexed for
inflation (see section 160ZJ) and the reduced cost base is the cost base
adjusted to take account of certain capital deductions and balancing charges
(see section 160ZK).
(Step 3 - calculation of net capital gain)
  "(4) Capital gains and capital losses are netted under section 160ZC to work
out the net capital gain.
  Example:
          Capital gains          Capital losses
          accrued during    -    incurred during  =  Net capital gain
          year                   year
(Step 4 - net capital gain to be included in assessable income under section
160ZO)
  "(5) The amount of the net capital gain is included in the taxpayer's
assessable income under section 160ZO.
Example of how this Part works
(Typical example)
  "160AZ.(1) This section sets out an example of how this Part will work in a
typical case involving the acquisition and disposal of an asset by a taxpayer.
The taxpayer acquired the asset on 29 September 1985 for a cost of $100,000
and disposed of the asset on 29 September 1991 for $300,000.  The cost base is
$100,000.  The indexed cost base is calculated as follows:
                                      215.7 (index number for
  $149,600           $100,000               September 1991 quarter)
  (indexed       =   (cost       X    _____________________________
  cost base)        base)
                                      144.2 (index number for
                                            September 1985 quarter)
(The fraction on the right is rounded up to 1.496.)
(Capital gain on disposal)
  "(2) There is a capital gain on disposal of the asset.
            Consideration
            in respect of        Indexed cost
            disposal         -   base of asset    =  Capital gain
            $300,000             $149,600            $150,400
(Calculation of net capital gain)
  "(3) Assuming that the taxpayer has no capital losses, the net capital gain
is $150,400.
(Inclusion of net capital gain in assessable income under section 160ZO)
  "(4) The taxpayer's assessable income includes $150,400.
Index of key concepts
  "160AZA. The following is an index of the key concepts relevant to the
operation of this Part.
    Main Index
    Acquisition