When you acquire a capital gains tax (CGT) asset, you should establish your acquisition date and share of ownership, and start keeping records.
This will help you work out your capital gain or loss correctly, so you pay the correct amount of CGT when you dispose of the asset.
Generally, the acquisition date is when you become the owner of the asset – for example, when you purchase it.
However, there are 2 common situations where your acquisition date might differ from the date you become the owner:
- When you buy an asset under contract and do not take immediate possession. This commonly happens with real estate. In this case, your acquisition date is the date on the contract, not when you settle.
- When you inherit a CGT asset. In this case, the acquisition date is the date of death of the former owner.
You should establish the date of acquisition because you will need it to work out your CGT when you dispose of the asset.
It is important because:
- CGT does not apply if you owned the asset before CGT started on 20 September 1985 (but major improvements to a property since 20 September 1985 may be subject to CGT)
- the rules for working out a capital gain or loss have changed over time
- to qualify for the CGT discount you need to own the asset for at least 12 months.
If you share ownership of an asset with others, each person makes a capital gain or loss.
There are 2 types of shared ownership:
- tenants in common
- joint tenants.
Tenants in common are 2 or more people who co-own an asset in defined shares. The shares may be unequal.
When a CGT event occurs (such as selling the asset), the individuals split the capital gain or loss between them according to their share of ownership.
Example: tenants in common
Lui and Monica own a rental property as tenants in common.
Lui has a 20% share and Monica has an 80% share.
Lui and Monica decide to sell their rental property. They make a capital gain of $200,000.
Lui and Monica split the capital gain according to their share of ownership:
- Lui has a capital gain of $40,000 (20%)
- Monica has a capital gain of $160,000 (80%).
Joint tenants have equal shares in the asset. Therefore, each person has an equal share of any capital gain or loss from a CGT event.
When one joint tenant dies, their share in the asset is acquired in equal shares by the surviving joint tenants.
Example: joint tenants
Carmen and Joe own a rental property as joint tenants.
They decide to sell their rental property. They make a capital gain of $68,000.
Carmen and Joe each has a capital gain of $34,000 (50%).End of example
For CGT purposes, a partnership does not own an asset. Instead, each partner owns a proportion of the asset.
When a CGT event occurs, the partners use their proportion to work out their capital gain or loss.
You must keep records of all transactions or events that are relevant to working out your capital gain or loss.
Your records must be in English or be translatable to English.
Keep the following records:
- receipts of purchase or transfer
- details of interest on money you borrowed relating to the asset
- records of agent, accountant, legal and advertising costs
- receipts of insurance costs, rates and land taxes
- market valuations
- receipts of maintenance, repair and modification costs
- bank accounts showing brokerage fees on shares.
You should also keep records to establish whether you have claimed an income tax deduction for an item of expenditure. If you have claimed a deduction, you cannot include the amount in the cost base of the asset.
How long to keep records
Keep records for 5 years after the year that the CGT event occurs.
Example: keeping records for 5 years
Liz sold some shares in September 2022 and made a capital gain.
This means the CGT event happened in the 2022–23 financial year.
Liz needs to keep purchase and sale records of the shares until the end of the 2027–28 financial year (30 June 2028).End of example
Net capital loss
If you have a net capital loss for the year, you should keep records of the loss. You can use the loss to offset a capital gain in a later year.
There is no time limit on how long you can carry forward a net capital loss.
Once you have offset the loss against a capital gain, you should keep records of the CGT event that resulted in the loss.
Keep records for a further:
- 2 years for individuals and small and medium businesses
- 4 years for other taxpayers.
Missing or destroyed records
If you do not have records for your CGT assets, there are ways you can get the information you need. If you:
- bought a property, ask your solicitor or estate agent to give you copies of the records
- made improvements to an investment property, ask the builder for a copy of the receipt for payment
- bought shares in a company or units in a managed fund, ask your stockbroker or investment adviser to give you the relevant information
- received an asset as a gift, ask a professional valuer to tell you what the market value would have been
- lost your records in a natural disaster, we can help you reconstruct them.