A CGT event occurs when an individual or company makes a capital gain or capital loss by selling or disposing of an asset they own. Determining the timing of a CGT event is quite important, as it determines which income year an individual will report the capital gain or capital loss, and may affect how their tax liability is calculated.
When a CGT asset is disposed of, the CGT event usually takes place when a contract for disposal is entered into. When there is no contract, the CGT event happens when an individual is no longer the owner of the asset.
When a CGT asset is lost or destroyed, the CGT event happens when the owner of the asset receives compensation for the loss or destruction. If no compensation is received, the CGT event takes place when the loss is discovered or when the destruction happened.
For some CGT events, such as exchanging an asset for a replacement asset, the law permits individuals to defer or roll over any capital gain they make until another CGT event takes place.
If more than one CGT event happens, individuals must apply the rules for the one that is most specific to their situation.
Some CGT events include:
- selling or giving an asset away
- the loss or destruction (voluntary or involuntary) of a CGT asset
- receiving compensation for the loss, destruction or compulsory acquisition of a CGT asset
- the disposal of a depreciating asset used for non-taxable (private) purposes
- capital distributions to company shareholders or unit holders in a unit trust or managed fund
- shares or units being cancelled, surrendered, redeemed or declared worthless
- when you stop being an Australian tax resident