But Can a Post-CGT Asset be Treated as a Pre-CGT Asset?
April 2003
There can be situations where so-called "post-CGT" assets might nevertheless attract the CGT tax exemption of a pre-CGT asset, such as:
- Post-CGT dispute settlement sum relating to a pre-CGT asset: Where payments are applied to satisfy damages for breach of contract, a capital gain normally arises because CGT event H2 or D1 happens (TR 94/29), but this may not be the case in relation to the dispute settlement involving a "pre-CGT" asset.
- Goodwill developed post-CGT can sometimes be clumped in a pre-CGT business: Depending on the nature of the goodwill and its origin, it may not necessarily be regarded as a separate post-CGT asset in relation to a business that has existed since prior to 20 September 1985.
- Post-CGT shares might be regarded as pre-CGT shares if they are a replacement asset under a "replacement asset" roll-over: Any of the replacement rollover provisions may have operated previously so that what appears to be a post-capital gain asset may in fact have retained the characteristics of the original asset. E.g. of the original shareholding which may have had pre-CGT status.
- Bonus shares: Some bonus shares issued after 20 September 1985 were capable of being ‘grandfathered’ by the pre-CGT shares originally held by the same shareholders.
- Inheritance on death of life tenant: If the testator died before 20 September 1985, then notwithstanding that the life tenant did not die until some time later, the capital asset inherited by the capital beneficiary (remainderman) by virtue of the Will of the first deceased may be tax exempt as a pre-CGT asset in some cases - depending on when the inherited asset was acquired by the estate and the type of asset.
For further information, contact Joe Lederman at BALDWINS, Australian Lawyers & Consultants.
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