Capital gains tax

Concepts

There are defined terms and terms of art that must be understood in order to understand the taxation of capital gains.

CGT events affecting trusts

The ITAA 1997 sets out nine CGT Events that specifically relate to trusts. These are:

• • creating a trust over a CGT asset —CGT Event E1;
• • transferring a CGT asset to a trust — CGT Event E2;
• • converting a trust to a unit trust — CGT Event E3;
• • capital payment for trust interest — CGT Event E4;
• • beneficiary becoming entitled to a trust asset — CGT Event E5;
• • disposal to beneficiary to end income right — CGT Event E6;
• • disposal to beneficiary to end capital right — CGT Event E7;
• • disposal by beneficiary of capital interest — CGT Event E8; and
• • creating a trust over future property — CGT Event E9.

Trusts and small business — CGT concessions

Various CGT tax concessions are available to small businesses that satisfy the definition of “small business entity”. The threshold test is a $2 million aggregated turnover test.

Trusts that carry on business are entitled to the CGT concessions subject to satisfying some additional tests relating to ownership and control.