Although the Government removed the 50% discount for foreign resident individuals on discount capital gains accrued after 8 May 2012, the full CGT discount of 50% is available for capital gains accrued up until that time.
The change to the law requires an apportionment calculation, as well as a decision about which method to use where part of the gain accrued up to the cut-off date of 8th May 2012. This change was enacted by Tax Laws Amendment (2013 Measures No.2) Act 2013 which received royal assent on 29 June 2013 for CGT events occurring after 8th May 2012.
The Capital gains worksheet (g) will calculate the CGT discount percentage (expressed as a %), and where the taxpayer has no capital losses to be offset, the CGT discount amount and the capital gain amount (after discount) for CGT events occurring from 1 July 2012.
The special rules impact Individuals including beneficiaries of trusts, and partners in partnerships, who:
Are foreign and temporary residents after the 8 May 2012, or
Are Australian residents with a period of foreign residency after 8 May 2012, and
Have a discount capital gain from a CGT event that occurred after 8 May 2012.
The calculations are quite complex and the following information outlines the conditions that are considered in the calculation of the CGT discount percentage and how the discount is apportioned.
Tax requires the following information to be entered in the Capital gains worksheet (g).
Discount testing period
The discount testing period is the number of days from the date the asset was acquired, to the date it was disposed of and is auto-calculated from the details you enter for the asset.
If you have a discount capital gain as a beneficiary of a fixed trust:
Use the date you became a beneficiary of the trust as the date the asset was acquired. The end date will be the date you received the gain.
If you have a discount capital gain as a beneficiary for a trust that is not fixed:
If the gain was received because a CGT event occurred to an asset acquired by the trustee of the trust, use the date the CGT asset was acquired. This includes gains received directly or indirectly through any interposed trusts that are not fixed. The end date will be the date you received the gain.
If the gain was received directly or indirectly through one or more interposed trusts and is linked to a capital gain made by a fixed trust, use the most recent date the trust directly linked to the trust that made the capital gain, became the beneficiary of that trust. The end date will be the date you received the gain.
Tax will discern whether the asset was acquired on or before or after 8 May 2012 from the acquisition date entered.
If the Asset was purchased after 8 May 2012, Tax needs to know:
- the residency status of the taxpayer on 8 May 2012.
- the number of days in the period from 8 May 2012 (within the testing period) that the individual spent as an Australian resident.
The preparer will enter this in the relevant field in the Status at 8 May 2012 dialog.
If the asset was purchased on or before 8 May 2012, Tax needs to know:
If the residency status of the taxpayer on 8 May 2012 is Australian i.e. the number of days in the period from 8 May 2012 (within the testing period) of foreign or temporary residency.
If the residency status of the taxpayer on 8 May 2012 is Foreign or temporary i.e. the number of days in the period from 8 May 2012 (within the testing period) of Australian residency.
Alternatively, individuals may choose to calculate their CGT discount percentage using the apportioning method or the Market Value Method.
Entering the CGT Status details
To be able to collect the details described above, a new button 'Residency status at 8/5/2012…' is provided on the General tab:
When you open the Residency Status dialog, Tax will have calculated the number of days from 8 May 2012 to the end date (the disposal date) and that figure will be shown in one or other of the Number of days field in accordance with the selection you make of Australian or Foreign or temporary resident at 8 May 2012.
The default is Foreign or temporary resident at 8 May 2012 and if this is not correct, you should select the Australian radio button.
The only things that you are responsible for are:
Selecting the relevant 8 May 2012 residency status if it is not Foreign or temporary
Based on the residency status calculating the number of days after 8 May 2012 in all periods of residency and entering that number in the relevant field
If residency status is Foreign or temporary choose whether you want to use the Apportioning method or the Market value method, and
If you choose the Market Value Method then you are responsible for entering both the Market value of the asset on 8 May 2012 and the Unindexed cost base on 8 May 2012.
Whatever the taxpayer's residency on 8 May 2012, you will be required to calculate and enter the number of days' residency whether that be Australian residency or Foreign or temporary residency.
Refer to Market value method below.
If the total of non-resident and resident days doesn't add up to the total days from
9/5/12 to date of disposal, then the program will recalculate as follows:
If the purchase date is after 8 May, then the Australian residency days = (Total days less Non-Residency days). You will need to calculate and enter the number of days from 8 May 2012 to the disposal date that the individual was an Australian resident (the program presumes you have done this).
If purchase date is on or before 8 May then:
If the individual is an Australian resident on 8 May 2012: then the Non-residency days = (Total days less Residency Days). You will need to calculate and enter the number of days the individual was a non-resident (the program presumes you have done this).
If the individual is a Non-Resident on 8 May 2012: then the Australian Residency days = (Total Days less Non-Residency Days). You will need to calculate and enter the number of days the individual was an Australian resident (the program presumes you have done this).
A manual worksheet the 'CGT Discount Worksheet' is available on the ATO website.
Market value method
If the taxpayer was not a resident on 8th May and chooses to use the market value method, the calculator will need to work out:
The excess - the amount by which the CGT asset's market value on 8 May 2012 exceeds the amount that was its unindexed cost base at the end of that day
The shortfall - means the amount that the excess falls short of the amount of the discount capital gain.
Where the taxpayer is not a resident on 8th May you will be prompted to supply the asset's market value and unindexed cost base on 8th May so Tax can calculate the discount % using the market value method.