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  • Types of CGT events

    Capital gains tax (CGT) events are the different types of transactions or events that may result in a capital gain or loss. Many CGT events involve a CGT asset – for example, a sale of shares. Some relate directly to capital receipts (capital proceeds).

    You need to know which type of CGT event you’re dealing with, because it affects how you work out your capital gain or loss and may determine its timing. If more than one CGT event happens, you apply the rules for the one most specific to your situation.

    Events are grouped into the following categories:

    Legislative references below are to the Income Tax Assessment Act 1997.

    Disposal (A)

    CGT event

    Time of event

    Capital gain

    Capital loss

    A1 - Disposal of a CGT asset

    When the disposal contract is entered into or, if none, when the entity stops being the asset's owner

    The 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 event

    Time of event

    Capital gain

    Capital loss

    B1 - Use and enjoyment before title passes

    When use of the CGT asset passes

    The capital proceeds less the asset's cost base

    The asset's reduced cost base less the capital proceeds

    End of a CGT asset (C)

    CGT event

    Time of event

    Capital gain

    Capital loss

    C1 - Loss or destruction of a CGT asset

    When compensation is first received or, if none, when the loss is discovered or destruction occurred

    The capital proceeds less the asset's cost base

    The asset's reduced cost base less the capital proceeds

    C2 - Cancellation, surrender and similar endings

    When the contract ending an asset is entered into or, if none, when an asset ends

    The capital proceeds from the ending less the asset's cost base

    The asset's reduced cost base less the capital proceeds

    C3 - End of an option to acquire shares etc

    When the option ends

    The capital proceeds from granting the option less the expenditure in granting it

    The expenditure in granting the option less the capital proceeds

    Bringing a CGT asset into existence (D)

    CGT event

    Time of event

    Capital gain

    Capital loss

    D1 - Creating contractual or other rights

    When the contract is entered into or the right is created

    The capital proceeds from creating the right less the incidental costs of creating the right

    The incidental costs of creating the right less the capital proceeds

    D2 - Granting an option

    When the option is granted

    The capital proceeds from the grant less the expenditure to grant it

    The expenditure to grant the option less the capital proceeds

    D3 - Granting a right to income from mining

    When the contract is entered into or, if none, when the right is granted

    The capital proceeds from the grant of right less the expenditure to grant it

    The expenditure to grant the right less the capital proceeds

    D4 - Entering into a conservation covenant

    When covenant is entered into

    The capital proceeds from covenant less the cost base apportioned to the covenant

    The reduced cost base apportioned to the covenant less the capital proceeds from covenant

    Trusts (E)

    CGT event

    Time of event

    Capital gain

    Capital loss

    E1 - Creating a trust over a CGT asset

    When the trust is created

    Capital proceeds from creating the trust less the asset's cost base

    The asset's reduced cost base less the capital proceeds

    E2 - Transferring a CGT asset to a trust

    When the asset is transferred

    Capital proceeds from the transfer less the asset's cost base

    The asset's reduced cost base less the capital proceeds

    E3 - Converting a trust to a unit trust

    When the trust is converted

    Market value of the asset at that time less its cost base

    The asset's reduced cost base less that market value

    E4 - Capital payment for trust interest

    When the trustee makes the payment

    Non-assessable part of the payment less the cost base of the trust interest

    No capital loss

    E5 - Beneficiary becoming entitled to a trust asset

    When the beneficiary becomes absolutely entitled

    For 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 right

    The time of the disposal

    For 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 interest

    The time of the disposal

    For 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 interest

    When the disposal contract is entered into or, if none, when the beneficiary ceases to own the CGT asset

    Capital proceeds less the appropriate proportion of the trust's net assets

    The appropriate proportion of the trust's net assets less the capital proceeds

    E9 - Creating a trust over future property

    When the entity makes an agreement

    Market value of the property (as if it existed when the agreement was made) less incidental costs in making the agreement

    The 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 trust (AMIT)

    When the reduction happens

    Excess of cost base reduction over cost base

    No capital loss

    Leases (F)

    CGT event

    Time of event

    Capital gain

    Capital loss

    F1 - Granting a lease

    For 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 extension

    Expenditure on grant, renewal or extension less the capital proceeds

    F2 - Granting a long-term lease

    For 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 property

    Reduced cost base of the leased property less the capital proceeds from the grant, renewal or extension

    F3 - Lessor pays lessee to get lease changed

    When the lease term is varied or waived

    No capital gain

    Amount of expenditure to get lessee's agreement

    F4 - Lessee receives payment for changing a lease

    When the lease term is varied or waived

    Capital proceeds less the cost base of lease

    No capital loss

    F5 - Lessor receives payment for changing a lease

    When the lease term is varied or waived

    Capital proceeds less expenditure in relation to variation or waiver

    Expenditure in relation to variation or waiver less the capital proceeds

    Shares (G)

    CGT event

    Time of event

    Capital gain

    Capital loss

    G1 - Capital payment for shares

    When the company pays a non-assessable amount

    Payment less the cost base of shares

    No capital loss

    G3 - Liquidator or administrator declares shares or financial instruments worthless

    When declaration was made

    No capital gain

    Reduced cost base of shares or financial instruments’

    Special capital receipts (H)

    CGT event

    Time of event

    Capital gain

    Capital loss

    H1 - Forfeiture of a deposit

    When the deposit is forfeited

    Deposit less expenditure in connection with the prospective sale

    Expenditure in connection with the prospective sale less deposit

    H2 - Receipt for an event relating to a CGT asset

    When the act, transaction or event occurred

    Capital proceeds less the incidental costs

    Incidental costs less the capital proceeds

    Cessation of residency (I)

    CGT event

    Time of event

    Capital gain

    Capital loss

    I1 - Individual or company stops being an Australian resident

    When the individual or company stops being an Australian resident

    For each CGT asset the individual or company owns, its market value less its cost base

    For each CGT asset the individual or company owns, its reduced cost base less its market value

    I2 - Trust stops being a resident trust

    When the trust ceases to be a resident trust for CGT purposes

    For each CGT asset the trustee owns, its market value less its cost base

    For each CGT asset the trustee owns, its reduced cost base less its market value

    Rollovers (J)

    CGT event

    Time of event

    Capital gain

    Capital loss

    J1 - Company stops being a member of a wholly owned group after a rollover

    When the company stops being a member of a wholly owned group after a rollover

    Market value of the asset at the time of the event less its cost base

    Reduced 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-E

    When the change happens

    The amount mentioned in subsection 104-185(5)

    No capital loss

    J4 - Trust failing to cease to exist after rollover under Subdivision 124-N

    When the failure to cease to exist happens

    For 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 152­E

    At the end of the replacement asset period

    The amount of the capital gain that you disregarded under Subdivision 152­E

    No capital loss

    J6 - Cost of acquisition of replacement asset or amount of fourth element expenditure, or both, not sufficient to cover disregarded capital gain

    At the end of the replacement asset period

    The amount mentioned in subsection 104-198(3)

    No capital loss

    Other CGT events (K)

    CGT event

    Time of event

    Capital gain

    Capital loss

    K2 - Bankrupt pays an amount in relation to debt

    When payment is made

    No capital gain

    That part of the payment that relates to the denied part of a net capital loss

    K3 - Asset passing to a tax-advantaged entity

    When an individual dies

    Market value of the asset at death less its cost base

    Reduced cost base of the asset less that market value

    K4 - CGT asset starts being trading stock

    When the asset starts being trading stock

    Market value of asset less its cost base

    Reduced cost base of the asset less that market value

    K5 - Special capital loss from a collectable that has fallen in market value

    When CGT event A1, C2 or E8 happens to shares in the company, or an interest in the trust, that owns the collectable

    No capital gain

    Market 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 interest

    When another CGT event involving the shares or interest happens

    Capital proceeds from the shares or trust interest that are attributable to post-CGT assets owned by the company or trust, less the assets' cost bases

    No capital loss

    K7 - Balancing adjustment occurs for a depreciating asset that you used for purposes other than taxable purposes

    When the balancing adjustment event occurs

    Termination value less cost times fraction

    Cost less termination value times fraction

    K8 - Direct value shifts affecting your equity or loan interests in a company or trust

    The decrease time for the interests

    Capital gain worked out under section 725-365

    No capital loss

    K9 - Entitlement to receive payment of a carried interest

    When you become entitled to receive the payment

    Capital proceeds from the entitlement

    No 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) applies

    When the forex realisation event happens

    Equal to the forex realisation gain

    No 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) applies

    When the forex realisation event happens

    No capital gain

    Equal to the forex realisation loss

    K12 - Foreign hybrid loss exposure adjustment

    Just before the end of the income year

    No capital gain

    The amount stated in subsection 104-270(3)

    Consolidations (L)

    CGT event

    Time of event

    Capital 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 (MEC) group

    Just after entity becomes subsidiary member

    No capital gain

    Amount of reduction

    L2 - Amount remaining after step 3A (of the table in section 705-60) of joining ‘allocable cost amount’ is negative

    Just after entity becomes subsidiary member

    Amount remaining

    No capital loss

    L3 - Tax cost setting amounts for retained cost base assets exceed joining ‘allocable cost amount’

    Just after entity becomes subsidiary member

    Amount of excess

    No capital loss

    L4 - No reset cost base assets against which to apply excess of net ‘allocable cost amount’ on joining

    Just after entity becomes subsidiary member

    No capital gain

    Amount of excess

    L5 - Amount remaining after step 4 (of the table in section 711-20) of leaving ‘allocable cost amount’ is negative

    When entity ceases to be subsidiary member

    Amount remaining

    No capital loss

    L6 - Error in calculation of tax cost setting amount for joining entity’s assets

    Start of the income year when the Commissioner becomes aware of the errors

    The net overstated amount resulting from the errors, or a portion of that amount

    The 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 allocated

    Just after entity becomes a subsidiary member

    No capital gain

    Amount of reduction that cannot be allocated

    See also:

    Last modified: 29 Jun 2018QC 22154