Document ID: chunk:federal_register_of_legislation:C2025C00029:section:7:p1
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 7 (pt 1/40)
Character Range: 1828556–1831129

7                                  Any entity receiving the payment where the trust making the payment, or another trust that is part of the same *chain of trusts, has a *capital loss or *net capital loss to reduce its *capital gain described in subsection 115‑215(3)  The proportion of the capital loss or net capital loss reflected in the payment

Example: Claude is paid $100 by the trustee of a unit trust. The trustee advises that the amount comprises $50 CGT discount, $25 small business 50% reduction and $25 net income from a capital gain made by the trust.
 In applying the rules in Subdivision 115‑C of the Income Tax Assessment Act 1997, Claude reduces his capital gain of $100 by a $20 net capital loss from an earlier year. He then reduces the remaining $80 gain by $40 (CGT discount) and $20 (small business 50% reduction) leaving a net capital gain of $20.
 In applying the rules in CGT event E4, the $100 payment is reduced by $25 (being the amount assessed under section 97 of the Income Tax Assessment Act 1936). It is further reduced by $50 under item 1 of the table and $5 under item 3. Claude's non‑assessable part is $20.
 Effectively, CGT event E4 applies to the $20 small business 50% reduction allowed to Claude in applying Subdivision 115‑C of the Income Tax Assessment Act 1997.
Note 1: Step 3 of the method statement in subsection 102‑5(1) (see table item 1) reduces by 50% the trust's discount capital gains remaining after applying capital losses and earlier net capital losses. That 50% is excluded from the trust's net capital gain.
Note 2: Subdivision 152‑C (small business 50% reduction—see table items 2, 3, 4, 5, 6 and 7) reduces by 50% the trust's capital gains or discount capital gains remaining after applying step 3 of the method statement in subsection 102‑5(1). That 50% is also excluded from the trust's net capital gain.
Note 3: Paragraph 115‑215(3)(b) or (c) (see table items 2, 3, 4, 5 and 6) treats a beneficiary as having an extra capital gain if an amount of the trust's net income that is included in the beneficiary's assessable income is attributable to trust gains that were reduced by step 3 of the method statement in subsection 102‑5(1) and/or the small business 50% reduction.
 (5) A chain of trusts consists of 2 or more trusts where at least one of these conditions is satisfied for each of the trusts:
 (a) the trustee of the trust owns units or interests in another of the trusts; or
 (b) the trustee of another of the trusts owns units or interests in the trust.
 (6) Item 7 of the table in subsection (4) does