CGT Events

IN THIS ARTICLE

  • What is a CGT event?
  • Sale or disposal of asset
  • Loss, theft or destruction of asset
  • All CGT events

What is a CGT event?

When you sell an asset that is subject to capital gains tax (CGT), it is called a CGT event. This is the point at which you make a capital gain or loss.

There are other CGT events, such as the loss or destruction of an asset, or creating contractual or other rights.

The type of CGT event that applies to your situation may affect:

  • the time when the CGT event happens
  • how to calculate your capital gain or loss.

Sale or disposal of asset

If there is a contract of sale, the CGT event happens when you enter into the contract. For example, if you sell a house, the CGT event happens on the date of the contract, not when you settle.

If there is no contract of sale, the CGT event is usually when you stop being the asset’s owner. For example, if you sell shares, the CGT event happens on the date of sale.

Your capital gain or loss for an asset is usually the selling price less the original cost and certain other costs associated with acquiring, holding and disposing of the asset. Find out how to calculate your CGT.

Loss, theft or destruction of asset

If your CGT asset is lost, stolen or destroyed:

the CGT event happens when you first receive compensation for the loss, theft or destruction
your capital gain is the amount of compensation less the asset’s original cost.
If you do not receive any compensation, the CGT event happens when the loss is discovered or the destruction occurred.

If you replace the asset with a similar asset, you may be able to defer (or ‘roll over’) your capital gain until another CGT event happens, such as selling the replacement asset. See Involuntary disposal of a CGT asset.

A roadstrip between towering pine trees, representing the concept of CGT events.

All CGT events

All CGT events are listed below.

If more than one CGT event happens, you apply the rules for the one that best matches your situation.

For more information about the CGT events listed below see Division 104 of the Income Tax Assessment Act 1997.

DISPOSAL (A)

CGT eventTime of eventCapital gain Capital loss
A1 – Disposal of a CGT assetWhen the disposal contract is entered into or, if none, when the entity stops being the asset’s ownerThe capital proceeds from disposal less the asset’s cost base.The asset’s reduced cost base less the capital proceeds.

HIRE PURCHASE AND SIMILAR AGREEMENTS (B)

CGT eventTime of eventCapital gain Capital loss
B1 – Use and enjoyment before title passesWhen use of the CGT asset passesThe capital proceeds less the asset’s cost baseThe asset’s reduced cost base less the capital proceeds

END OF A CGT ASSET (C) - INCLUDES LOSS OR DESTRUCTION

CGT eventTime of eventCapital gain Capital loss
C1 – Loss or destruction of a CGT assetWhen compensation is first received or, if none, when the loss is discovered or destruction occurredThe capital proceeds less the asset’s cost baseThe asset’s reduced cost base less the capital proceeds
C2 – Cancellation, surrender and similar endingsWhen the contract ending an asset is entered into or, if none, when an asset endsThe capital proceeds from the ending less the asset’s cost baseThe asset’s reduced cost base less the capital proceeds
C3 – End of an option to acquire shares etcWhen the option endsThe capital proceeds from granting the option less the expenditure in granting itThe expenditure in granting the option less the capital proceeds

BRINGING A CGT ASSET INTO EXISTENCE (D)

CGT eventTime of eventCapital gain Capital loss
D1 – Creating contractual or other rightsWhen the contract is entered into or the right is createdThe capital proceeds from creating the right less the incidental costs of creating the rightThe incidental costs of creating the right less the capital proceeds
D2 – Granting an optionWhen the option is grantedThe capital proceeds from the grant less the expenditure to grant itThe expenditure to grant the option less the capital proceeds
D3 – Granting a right to income from miningWhen the contract is entered into or, if none, when the right is grantedThe capital proceeds from the grant of right less the expenditure to grant itThe expenditure to grant the option less the capital proceeds
D4 – Entering into a conservation covenantWhen covenant is entered intoThe capital proceeds from covenant less the cost base apportioned to the covenantThe reduced cost base apportioned to the covenant less the capital proceeds from covenant

TRUSTS (E)

CGT eventTime of eventCapital gain Capital loss
E1 – Creating a trust over a CGT assetWhen the trust is createdCapital proceeds from creating the trust less the asset’s cost baseThe asset’s reduced cost base less the capital proceeds
E2 – Transferring a CGT asset to a trustWhen the asset is transferredCapital proceeds from the transfer less the asset’s cost baseThe asset’s reduced cost base less the capital proceeds
E3 – Converting a trust to a unit trustWhen the trust is convertedMarket value of the asset at that time less its cost baseThe asset’s reduced cost base less that market value
E4 – Capital payment for trust interestWhen the trustee makes the paymentNon-assessable part of the payment less the cost base of the trust interestNo capital loss
E5 – Beneficiary becoming entitled to a trust assetWhen the beneficiary becomes absolutely entitledFor a trustee: market value of the CGT asset at that time less its cost base
For a beneficiary: that market value less the cost base of the beneficiary’s capital interest
For a trustee: the reduced cost base of the CGT asset at that time less that market value
For a beneficiary: the reduced cost base of the beneficiary’s capital interest less that market value
E6 – Disposal to a beneficiary to end an income rightThe time of the disposalFor a trustee: market value of the CGT asset at that time less its cost base
For a beneficiary: that market value less the cost base of the beneficiary’s right to income
For a trustee: the reduced cost base of the CGT asset at that time less that market value
For a beneficiary: the reduced cost base of the beneficiary’s right to income less that market value
E7 – Disposal to a beneficiary to end capital interestThe time of the disposalFor a trustee: market value of the CGT asset at that time less its cost base
For a beneficiary: that market value less the cost base of the beneficiary’s capital interest
For a trustee: the reduced cost base of the CGT asset at that time less that market value
For a beneficiary: the reduced cost base of the beneficiary’s capital interest less that market value
E8 – Disposal by a beneficiary of capital interestWhen the disposal contract is entered into or, if none, when the beneficiary ceases to own the CGT assetCapital proceeds less the appropriate proportion of the trust’s net assetsThe appropriate proportion of the trust’s net assets less the capital proceeds
E9 – Creating a trust over future propertyWhen the entity makes an agreementMarket value of the property (as if it existed when the agreement was made) less incidental costs in making the agreementThe incidental costs in making the agreement less the market value of the property (as if it existed when the agreement was made)
E10 – Annual cost base reduction exceeds cost base of interest in attribution managed investment trustWhen the reduction happensExcess of cost base reduction over cost baseNo capital loss

LEASES (F)

CGT eventTime of eventCapital gain Capital loss
F1 – Granting a leaseFor granting a lease: when the entity enters into the lease contract or, if none, at the start of the lease
For a lease renewal or extension: at the start of the renewal or extension
Capital proceeds less the expenditure on grant, renewal or extensionExpenditure on grant, renewal or extension less the capital proceeds
F2 – Granting a long-term leaseFor granting a lease: when the lessor grants the lease
For a lease renewal or extension: at the start of the renewal or extension
Capital proceeds from the grant, renewal or extension less the cost base of the leased propertyReduced cost base of the leased property less the capital proceeds from the grant, renewal or extension
F3 – Lessor pays lessee to get lease changedWhen the lease term is varied or waivedNo capital gainAmount of expenditure to get lessee’s agreement
F4 – Lessee receives payment for changing a leaseWhen the lease term is varied or waivedCapital proceeds less the cost base of leaseNo capital loss
F5 – Lessor receives payment for changing a leaseWhen the lease term is varied or waivedCapital proceeds less expenditure in relation to variation or waiverExpenditure in relation to variation or waiver less the capital proceeds

SHARES (G)

CGT eventTime of eventCapital gain Capital loss
G1 – Capital payment for sharesWhen the company pays a non-assessable amountPayment less the cost base of sharesNo capital loss
G3 – Liquidator or administrator declares shares or financial instruments worthlessWhen declaration was madeNo capital gainReduced cost base of shares or financial instruments

SPECIAL CAPITAL RECEIPTS (H)

CGT eventTime of eventCapital gain Capital loss
H1 – Forfeiture of a depositWhen the deposit is forfeitedDeposit less expenditure in connection with the prospective saleExpenditure in connection with the prospective sale less deposit
H2 – Receipt for an event relating to a CGT assetWhen the act, transaction or event occurredCapital proceeds less the incidental costsIncidental costs less the capital proceeds

CESSATION OF RESIDENCY (I)

CGT eventTime of eventCapital gain Capital loss
I1 – Individual or company stops being an Australian residentWhen the individual or company stops being an Australian residentFor each CGT asset the individual or company owns, its market value less its cost baseFor each CGT asset the individual or company owns, its reduced cost base less its market value
I2 – Trust stops being a resident trustWhen the trust ceases to be a resident trust for CGT purposesFor each CGT asset the trustee owns, its market value less its cost baseFor each CGT asset the trustee owns, its reduced cost base less its market value

ROLLOVERS (J)

CGT eventTime of eventCapital gain Capital loss
J1 – Company stops being a member of a wholly owned group after a rolloverWhen the company stops being a member of a wholly owned group after a rolloverMarket value of the asset at the time of the event less its cost baseReduced cost base of the asset less that market value
J2 – Change in relation to a replacement asset or improved asset after a rollover under Subdivision 152-EWhen the change happensThe amount mentioned in subsection 104-185(5)No capital loss
J4 – Trust failing to cease to exist after rollover under Subdivision 124-NWhen the failure to cease to exist happensFor a company: market value of the asset at the time the company acquired it less its cost base at that time
For a shareholder: market value of the share at the time the shareholder acquired it less its cost base at that time
For a company: reduced cost base of the asset at the time the company acquired it less its market value at that time
For a shareholder: reduced cost base of the share at the time the shareholder acquired it less its market value at that time
J5 – Failure to acquire a replacement asset and to incur fourth element expenditure after a rollover under Subdivision 152­EAt the end of the replacement asset periodThe amount of the capital gain that you disregarded under Subdivision 152­ENo capital loss
J6 – Cost of acquisition of replacement asset or amount of fourth element expenditure, or both, not sufficient to cover disregarded capital gainAt the end of the replacement asset periodThe amount mentioned in subsection 104-198(3)No capital loss

OTHERS CGT EVENTS (K)

CGT eventTime of eventCapital gain Capital loss
K1 – As the result of an incoming international transfer of a Kyoto unit or an Australian carbon credit unit from your foreign account or your nominee’s foreign account, you start to hold the unit as a registered emissions unitWhen you start to hold the unit as a registered emissions unitMarket value of unit less its cost baseReduced cost base of the unit less its market value
K2 – Bankrupt pays an amount in relation to debtWhen payment is madeNo capital gainThat part of the payment that relates to the denied part of a net capital loss
K3 – Asset passing to a tax-advantaged entityWhen an individual diesMarket value of the asset at death less its cost baseReduced cost base of the asset less that market value
K4 – CGT asset starts being trading stockWhen the asset starts being trading stockMarket value of asset less its cost baseReduced cost base of the asset less that market value
K5 – Special capital loss from a collectable that has fallen in market valueWhen CGT event A1, C2 or E8 happens to shares in the company, or an interest in the trust, that owns the collectableNo capital gainMarket value of the shares or interest (as if the collectable had not fallen in market value) less the capital proceeds from CGT event A1, C2 or E8
K6 – Pre-CGT shares or trust interestWhen another CGT event involving the shares or interest happensCapital proceeds from the shares or trust interest that are attributable to post-CGT assets owned by the company or trust, less the assets’ cost basesNo capital loss
K7 – Balancing adjustment occurs for a depreciating asset that you used for purposes other than taxable purposesWhen the balancing adjustment event occursTermination value less cost times fractionCost less termination value times fraction
K8 – Direct value shifts affecting your equity or loan interests in a company or trustThe decrease time for the interestsCapital gain worked out under section 725-365No capital loss
K9 – Entitlement to receive payment of a carried interestWhen you become entitled to receive the paymentCapital proceeds from the entitlementNo capital loss
K10 – You make a forex realisation gain as a result of forex realisation event 2 and item 1 of the table in subsection 775-70(1) appliesWhen the forex realisation event happensEqual to the forex realisation gainNo capital loss
K11 – You make a forex realisation loss as a result of forex realisation event 2 and item 1 of the table in subsection 775-75(1) appliesWhen the forex realisation event happensNo capital gainEqual to the forex realisation loss
K12 – Foreign hybrid loss exposure adjustmentJust before the end of the income yearNo capital gainEqual to the forex realisation loss

CONSOLIDATIONS (L)

CGT eventTime of eventCapital gain Capital loss
L1 – Reduction under section 705-57 in tax cost setting amount of assets of entity becoming subsidiary member of consolidated group or multiple entry consolidated groupJust after entity becomes subsidiary memberNo capital gainAmount of reduction
L2 – Amount remaining after step 3A (of the table in section 705-60) of joining ‘allocable cost amount’ is negativeJust after entity becomes subsidiary memberAmount remainingNo capital loss
L3 – Tax cost setting amounts for retained cost base assets exceed joining ‘allocable cost amount’Just after entity becomes subsidiary memberAmount of excessNo capital loss
L4 – No reset cost base assets against which to apply excess of net ‘allocable cost amount’ on joiningJust after entity becomes subsidiary memberNo capital gainAmount of excess
L5 – Amount remaining after step 4 (of the table in section 711-20) of leaving ‘allocable cost amount’ is negativeWhen entity ceases to be subsidiary memberAmount remainingNo capital loss
L6 – Error in calculation of tax cost setting amount for joining entity’s assetsStart of the income year when the Commissioner becomes aware of the errorsThe net overstated amount resulting from the errors, or a portion of that amountThe net understated amount resulting from the errors, or a portion of that amount
L8 – Reduction in tax cost setting amount for reset cost base assets on joining cannot be allocatedJust after entity becomes a subsidiary memberNo capital gainAmount of reduction that cannot be allocated

This article is for general information only. It does not make recommendations nor does it provide advice to address your personal circumstances. To make an informed decision, always contact a registered tax professional.

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