Capital Gains Tax (CGT) events occur when an individual or company makes a capital gain or capital loss by selling or disposing of an asset they own. The timing of a CGT event is quite important, as it determines which income year an individual will report the capital gain or capital loss, and may affect how their tax liability is calculated.
When a CGT asset is disposed of, the CGT event usually takes place when a contract for disposal is entered into. When there is no contract, the CGT event happens when an individual is no longer the owner of the asset.
Cases where a CGT asset is lost or destroyed, the CGT event will happen when the owner of the asset receives compensation for the loss or destruction. If no compensation is received, the CGT event takes place when the loss is discovered or when the destruction happened.
For some CGT events, such as exchanging an asset for a replacement asset, the law permits individuals to defer or rollover any capital gain they make until another CGT event takes place. If more than one CGT event happens, individuals must apply the rules for the one that is most specific to their situation.
CGT events can happen when:
- Selling or giving away an asset.
- The destruction or loss (voluntary or involuntary) of a CGT asset.
- Receiving compensation for the loss, destruction or compulsory acquisition of a CGT asset.
- The disposal of a depreciating asset used for non-taxable (private) purposes.
- Capital distributions to company shareholders or unitholders in a unit trust or managed fund.
- Shares or units being cancelled, surrendered, redeemed or declared worthless.
- You stop being an Australian tax resident.
- You enter into an agreement not to work in a particular industry for a set period of time
- A trustee makes a non-assessable payment to you from a managed fund or other unit trusts.
- A company makes a payment (not a dividend) to you as a shareholder.