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Keeping adequate records of all expenditure will help you correctly work out the amount of capital gain or capital loss you have made when a CGT event happens. It will also help to make sure you do not pay more CGT than is necessary.
You must keep records of everything that affects your capital gains and capital losses. Penalties can apply if you do not keep the records for at least five years after the relevant CGT event. If you use information from those records in a later tax return, you may have to keep records for longer. If you have applied a net capital loss, you should generally keep your records of the CGT event that resulted in the loss until the end of any period of review for the income year in which the net capital loss is fully applied.
For more information, see Taxation Determination TD 2007/2– Income tax: should a taxpayer who has incurred a tax loss or made a net capital loss for an income year retain records relevant to the ascertainment of that loss only for the record retention period prescribed under income tax law?
Keeping good records can help your beneficiaries reduce the impact of CGT after you die. If you leave an asset to another person, the asset may be subject to CGT when a CGT event happens to that asset in the future, for example, if your daughter (the beneficiary) sells the shares (the asset) you have left her in your will.
What records do you need to keep?
You must keep records of every act, transaction, event or circumstance that may be relevant to working out whether you have made a capital gain or capital loss from a CGT event. It does not matter whether the CGT event has already happened or whether it may happen.
The records must be in English (or be readily accessible or translatable into English) and must show:
- the nature of the act, transaction, event or circumstance
- the day it happened
- who did the act or who were the parties to the transaction
- how the act, transaction, event or circumstance is relevant to working out the capital gain or capital loss.
The following are examples of records you may need to keep:
- receipts of purchase or transfer
- details of interest on money you borrowed relating to this asset
- records of agent, accountant, legal and advertising costs
- receipts for insurance costs, rates and land taxes
- any market valuations
- receipts for the cost of maintenance, repairs and modifications
- accounts showing brokerage on shares.
You should also keep records to establish whether you have claimed an income tax deduction for an item of expenditure. In many cases, if you have claimed a deduction for an amount, the expenditure may not be included in the cost base or reduced cost base of a CGT asset.
Records relating to real estate
Real estate can include the family home, vacant blocks of land, business premises, rental properties, holiday houses and hobby farms.
Even though your family home is usually exempt, if you acquired it on or after 20 September 1985, try to keep all records relating to the home, just as you would for other items of real estate. If the home ceases to be fully exempt at some time in the future, you will need to know the full cost of the home so that you do not pay more CGT than necessary. If you do not have sufficient records, reconstructing them later could be difficult. For details of when your home may not be fully exempt, see Real estate and main residence.
Keep a copy of the purchase contract and all receipts for expenses relating to the purchase of the property, for example, stamp duty, legal fees, survey and valuation fees. Also keep all records relating to the CGT event and all relevant expenses, for example, the sale contract and records of legal fees and stamp duty.
Keep a record of capital expenditure on improvements, costs of owning the property and capital expenditure on maintaining title or right to it that you incurred during your period of ownership. These costs may form part of the cost base in working out whether you have made a capital gain or capital loss at the time the CGT event happens.
Capital expenditure on improvements may include building an extension, addition or improvement, including initial repairs.
Examples of costs of owning real estate include interest, rates and land taxes, insurance premiums and cost of repairs or replacing broken items. You only include such costs if you acquired the CGT asset on or after 21 August 1991 and if you have not claimed, and cannot claim, a tax deduction for them.
If the property is your home and you use it to produce income (for example, by renting out part or all of it), you will need to keep records of the period the home is producing income and the proportion of the home you have used to produce income.
If, after 20 August 1996, you use your home for income-producing purposes for the first time, you will be taken to have acquired your home at that time for its market value. You will use this as your acquisition cost for the purpose of calculating a capital gain or capital loss at the time the CGT event happens. You will still need to keep details of expenses relating to your home after the date that it started producing income.
Marriage or relationship breakdown has some information about records you may need to obtain from your spouse if your marriage or relationship has broken down and a CGT rollover applies on the transfer of real estate.
Records relating to shares in companies and units in unit trusts
Most of the records you need to keep regarding your disposal of shares in companies or units in unit trusts (including managed funds), will be given to you by the company, the unit trust manager or your stockbroker. It is important for you to keep everything they give you on your shares and units.
These records will generally provide the following important information:
- the date of purchase of the shares or units
- the amount paid to purchase the shares or units
- details of any non-assessable payments made to you during the time you owned the shares or units
- the date and amount of any calls if shares were partly paid
- the sale price if you sell them
- any commissions paid to brokers when you buy or sell them.
There are special CGT rules for certain shares and units, which may affect the records you keep, for example, bonus shares and units, rights and options, and employee shares. See Investments in shares and units for more information.
Records relating to bonus shares
To be safe, if you have received any bonus shares on or after 20 September 1985, keep all the documents the company gives you.
For any bonus shares issued before 1 July 1987, you need to know when the original shares were acquired. If you acquired them on or after 20 September 1985, you will also need to know what they cost. Flowchart 3.1 in appendix 3 summarises the different rules applying to the treatment of bonus shares.
Keep a record of any amounts you paid to acquire the bonus shares and any amounts taxed as a dividend when they were issued.
Records relating to inheriting an asset
If you inherited an asset as a beneficiary of the estate of a person who died on or after 20 September 1985, you may need to obtain information from the executor or trustee.
If the deceased person acquired the asset before 20 September 1985, or an asset passes to you as the trustee of a Special Disability Trust (irrespective of the date the deceased acquired the asset), you need to know:
- the market value of the asset at the date of the person’s death, and
- the amount of any relevant costs incurred by the executor or trustee.
This is the amount that the asset is taken to have cost you. If the executor or trustee has a valuation of the asset, get a copy of that valuation report. Otherwise, you will need to get your own valuation.
If the asset you inherit was acquired by the deceased person on or after 20 September 1985, you need to know full details of all relevant costs incurred by the deceased person and by the executor or trustee. Get those details from the executor or trustee.
Inheriting a main residence
If you inherit a house that was the deceased’s main residence, any capital gain on its subsequent disposal may be exempt. However, until the exemption is certain, you should keep records of relevant costs incurred by you, the deceased or their trustee or executor.
You will not need to keep records of the deceased’s costs if:
- you inherited the house after 20 August 1996
- the house was the deceased’s main residence just before they died
- the house was not being used to produce income at the time of death.
In these circumstances, you will be taken to have acquired the house at its market value at the date of death. If the executor or trustee has a valuation of the asset, get a copy of that valuation report. Otherwise you will need to get your own valuation.
Records relating to foreign resident capital gains withholding
When the foreign resident capital gains withholding amount has been paid, then we will issue confirmation to both the vendor and the purchaser. The vendor will be able to use this confirmation to help them complete their tax return to claim a credit for the foreign resident capital gains withholding amount.
You can choose to enter information from your CGT records into an asset register. If you keep an asset register, you may be able to discard records that you might otherwise need to keep for a long time.
If you choose to keep an asset register, transfer the following information to it from the records you generally need to keep for CGT purposes:
- the date the asset was acquired
- the cost of the asset
- a description, amount and date for each cost associated with the purchase of the asset, for example, stamp duty and legal fees
- the date the CGT event happened to the asset
- the capital proceeds received when the CGT event happened.
This information must be certified by a registered tax agent or a person approved by the Commissioner.
If you use an asset register, you must keep the documents from which you have transferred the information for five years from the date the relevant asset register entry is certified. You must keep the asset register entries for five years from the date the related CGT event happens. Keep the asset register for a longer period if you need to substantiate any carried forward net capital losses, for five years after any CGT event where you have applied any capital loss against capital gains.
For more information about asset registers and who can certify them, see Taxation Ruling TR 2002/10– Income tax: capital gains tax: asset register.
You do not need to keep records if, for any CGT event, a capital gain or capital loss is disregarded. For example, you do not need to keep records for exempt assets such as cars and motorcycles as the capital gain or loss is disregarded.
It is never too late
If you acquired assets on or after 20 September 1985 and did not keep records, or your records have inadvertently been destroyed, you can still do something about it.
If you bought real estate, your solicitor or real estate agent may have copies of most of the records you need. You should be able to get copies if you ask for them.
If you made improvements to an investment property, for example, if you built an extension, then ask for a copy of the builder’s receipt for payment.
If you bought shares in a company or units in a unit trust, your stockbroker or investment adviser may be able to give you the information you need.
If you received an asset as a gift and you did not get a market valuation at the time, a professional valuer can tell you what its market value was at the relevant date.
The main thing is to get as many details as possible so you can reconstruct your records. Make sure you keep sufficient records in the future.