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The time a CGT asset is acquired is important for 3 main reasons.
- Capital gains tax generally does not apply to pre-CGT assets that is, assets acquired before 20 September 1985.
- It determines whether the cost base of a CGT asset is indexed to take account of inflation and the extent of that indexation. Indexation is only available for assets owned for at least 12 months. Changes to the rules for indexation apply from 11.45 am on 21 September 1999. Indexation is not available for assets acquired after 11.45 am on 21 September 1999 or for expenditure incurred after that time.
- It also determines whether you are eligible for the CGT discount. To be eligible for this discount, one requirement is that you need to have owned a CGT asset for at least 12 months. See The CGT discount for more information.
Generally, you acquire a CGT asset when you become its owner.
If you acquire a CGT asset as a result of a CGT event, specific rules determine when you acquire the asset. These rules depend on which CGT event is involved. For example, if you enter into a contract to purchase a CGT asset from an entity, the time of acquisition is when you enter into the contract. If someone disposes of an asset to you without entering into a contract, you acquire the asset when they stop being the asset's owner. If a CGT asset passes to you as beneficiary in the estate of a deceased person, you acquire the asset on the date the person dies.
If you acquire a CGT asset without a CGT event happening, different rules apply to determine when you acquire the asset. If, for example, a company issues or allots shares to you, you acquire the shares when you enter into a contract to acquire them or, if there is no contract, at the time of their issue or allotment.
Last modified: 18 Sep 2009QC 18323