Modifications To Capital Proceeds

In the simplest determination, a capital gain is the calculated difference between the amount paid for a CGT asset, and the amount receivable on its disposal (capital proceeds).

As with the concept of “cost base” and “reduced cost base”, the capital proceeds amount is modified according to rules.

There are 6 rules which apply in particular circumstances. These circumstances are summarised in Section 116.10 ITAA 1997.  They include:

  1. Market value subsitution rule – applicable when there are no capital proceeds, or the proceeds cannot be valued or in non-arms-length situations
  2. Apportionment rule – dealing with proceeds applicable to more than one CGT event
  3. Non-receipt rule – for capital proceeds amounts which are unpaid
  4. Repaid rule – reduction of capital proceeds by the amount of non-deductible repayments
  5. Assumption of liability rule – the value of capital proceeds is increased by liabilities secured over the asset
  6. Misappropriation rule – capital proceeds amount is reduced by misappropriations

Not all rules apply to all CGT events.

Section 116-25 ITAA 1997 sets out a table showing which rules can apply to each CGT event.
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This page was last modified on 14 July 2015