What is a CGT event?
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CGT events are the different types of transactions or events which attract capital gains tax. As a general rule, if there is no CGT event, you cannot make a capital gain or loss. You make the capital gain or loss at the time of the event. For most CGT events, you make a capital gain if you receive an amount from the CGT event which exceeds your 'cost base'. You make a capital loss if your 'reduced cost base' exceeds the amount you receive from the CGT event.
Australian residents make a capital gain or loss if a CGT event happens to any of their assets anywhere in the world. As a general rule, a non-resident makes a capital gain or loss only if a CGT event happens to a CGT asset that has a necessary connection with Australia or certain CGT events apply - that is, those that create:
- contractual or other rights (CGT event D1) or
- a trust over future property (CGT event E9) .
There is a wide range of CGT events. Some happen often and affect many different taxpayers. Others are rare and affect only a few taxpayers. CGT events are listed in appendix B.
Most CGT events involve a CGT asset. However, some CGT events are concerned directly with capital receipts.
The most common CGT event happens if you dispose of an asset to someone else - for example, you sell or give away an asset.
Listed below are some of the other CGT events from which you may make a capital gain or loss.
- An asset you own is lost or destroyed. The destruction may be voluntary or involuntary.
- Shares you own are cancelled, surrendered or redeemed.
- You enter into an agreement not to work in a particular industry for a set period of time.
- A trustee makes a non-assessable distribution to you from a unit trust.
- A company makes a payment (not a dividend) to you as a shareholder.
- A liquidator declares that shares you own are worthless.
- You receive an amount from a local council for disruption to your business assets by roadworks.
- You stop being an Australian resident.
To work out your capital gain or loss you need to know which CGT event applies. There may be different rules for when you include the capital gain in your assessable income and for calculating the capital gain or loss, depending on the CGT event.
Last modified: 18 Sep 2009QC 18323