Generally, you acquire a CGT asset when you become its owner. You may acquire a CGT asset for the following reasons:
- Someone else has a CGT event (for example, the transfer of land to you under a contract of sale). If you acquired an asset because of a CGT event, you are generally taken to have acquired the asset at the time of the CGT event. For example, if you enter into a contract to purchase a CGT asset, the time of acquisition is when you enter into the contract. However, if you obtain an asset without entering into a contract, the time of acquisition is when you start being the asset’s owner.
- Other events or transactions happen that are not the result of someone else having a CGT event. For example, if a company issues or allots shares to you (which is not a CGT event), 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.
- Other special CGT rules apply. For example, if a CGT asset passes to you as a beneficiary of someone who has died, you are taken to have acquired the asset on the date of the person’s death. Also, if you start using your main residence to produce income for the first time after 20 August 1996, you are taken to have acquired it at its market value at the time it is first used to produce income.
Time of acquisition
The time a CGT asset is acquired is important for four reasons:
- CGT generally does not apply to assets acquired before 20 September 1985 (pre-CGT assets)
- different cost base rules apply to assets acquired at different times. For example, the costs of owning an asset (see Third element: costs of owning the asset) are not included in the cost base if you acquired it before 21 August 1991
- it determines whether the cost base can be indexed for inflation and the extent of that indexation (see How to work out your capital gain or capital loss)
- it determines whether you are eligible for the CGT discount. For example, one requirement is that you need to have owned the CGT asset for at least 12 months (see How to work out your capital gain or capital loss).