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Definitions

See definitions of capital gains tax (CGT) terms.

Last updated 10 August 2021

Active asset
A CGT asset is an active asset if you own it and it is:

  • used or held ready for use in the course of carrying on a business (whether alone or in partnership) by any of the following
    • you
    • your affiliate
    • your spouse
    • your child under 18
    • an entity connected with you
     
  • an intangible asset inherently connected with a business carried on (whether alone or in partnership) by
    • you
    • your affiliate
    • your spouse
    • your child under 18
    • an entity connected with you.
     

Goodwill is an example of an intangible asset.

Active asset test
This test requires the CGT asset to be an active asset for half a particular period. It is one of the tests you must pass to meet the basic conditions for the small business CGT concessions.

Affiliate
An affiliate is any person who, in relation to their own business affairs, acts or could reasonably be expected to act in either of the following ways:

  • according to your directions or wishes
  • in concert with you.

Aggregated turnover
Aggregated turnover is your annual turnover plus the annual turnovers of any entities you are connected with or that are your affiliates. We call these 'relevant' entities.

Assessable income
This is all the income you have received that you must include in your income tax return. Generally, it does not include non-assessable payments from a unit trust, including a managed fund.

Capital gain
You may make a capital gain (or profit) as a result of a CGT event – for example, when you sell an asset for more than you paid for it. You can also make a capital gain if a managed fund or other unit trust distributes a capital gain to you.

Capital gains tax
Capital gains tax (CGT) is the tax you pay on any capital gain you make and include in your annual income tax return. For example, when you sell (or otherwise dispose of) an asset, you may be subject to CGT.

Capital loss
Generally, you make a capital loss because of a CGT event if you sell an asset for less than you paid for it (including incidental costs).

Capital proceeds
Capital proceeds is the term used to describe the amount of money or the value of any property you receive or are entitled to receive as a result of a CGT event. For shares or units, capital proceeds may be any of the following:

  • the amount you receive from the purchaser
  • the amount you receive from a liquidator
  • the amount you receive on a merger or takeover
  • their market value if you give them away.

CGT asset
CGT assets include shares, units in a unit trust, collectables (such as jewellery), assets for personal use (such as furniture or a boat) and other assets (such as an investment property).

CGT asset register
This is a register of information about your CGT assets that you have transferred from your CGT records (for example, invoices, receipts and contracts).

CGT concession stakeholder
A CGT concession stakeholder of a company or trust means either of the following:

  • a significant individual of the company or trust
  • the spouse of a significant individual where the spouse has a small business participation percentage in the company or trust.

CGT discount
The CGT discount allows eligible individuals (including partners in partnerships) and trusts to reduce their capital gain by 50%. There are more rules for beneficiaries who are entitled to a share of a trust capital gain. Companies cannot use the CGT discount.

CGT event
A CGT event happens when a transaction takes place, such as the sale or purchase of a CGT asset. The result is usually a capital gain or capital loss.

Connected with
A business is connected with you if either of the following apply:

  • you control or are controlled by that entity
  • both you and that entity are controlled by a third entity.

Depreciating asset
A depreciating asset is an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used. Depreciating assets include computers, electric tools, furniture and motor vehicles.

Maximum net asset value test
To pass this test, you and certain other entities must not own assets with a total net value of more than $6 million just before the CGT event that results in the capital gain. It is one of the tests you must pass to meet the basic conditions for the small business CGT concessions.

NAT number
Most of our publications have a NAT number (our catalogue number), which we generally show in brackets after the title of the publication – for example, Tax basics for small business (NAT 1908).

Net capital gain
The net capital gain is the difference between your total capital gains for the year and your total capital losses (including net capital losses from prior years), less any CGT discount or other concessions you are entitled to.

Net value
The net value of the CGT assets of an entity is the total market value of its assets (whether positive, negative or nil), less any liabilities relating to those assets.

Relevant entity
Relevant entities include any:

  • of your affiliates
  • entities connected with you.

Replacement asset period
This period starts one year before and ends two years after the last CGT event that occurs in the income year for which you choose the rollover.

Significant individual
An individual is a significant individual in a company or trust if they have a small business participation percentage in the company or trust of at least 20%.

Small business
You are a small business entity if you are a sole trader, partnership, company or trust that meets both of the following:

  • is carrying on a business
  • has an aggregated turnover of less than $2 million.

Small business 15-year exemption
This is one of the CGT concessions available to small business. Generally, it allows you to disregard the capital gain you made on an asset you have owned for 15 years if you meet all the conditions.

Small business 50% reduction
This is one of the CGT concessions available to small business. Generally, it allows you to reduce your capital gain by 50% if you meet the basic conditions.

Small business retirement exemption
This is one of the CGT concessions available to small business. Generally, it provides an exemption of capital gains up to a lifetime limit of $500,000 if you meet all the conditions. If you are under 55 when you choose the exemption, you must pay the amount into a superannuation (or similar) fund.

Small business rollover
This is one of the CGT concessions available to small business. Generally, it allows you to defer all or part of a capital gain from a CGT event that happens in relation to a small business asset for two years or longer if you do one of the following:

  • acquire a replacement asset
  • make an improvement to an existing asset and meet certain conditions.

More information

Internet

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Phone

Phone us on:

  • 13 28 66 – general business enquiries, for information about most small business tax matters, including
    • GST
    • ABN
    • pay as you go (PAYG) instalments
    • amounts withheld from wages
    • business deductions
    • lodging and paying activity statements
    • activity statement accounts
    • wine equalisation tax
    • luxury car tax
    • fringe benefits tax
    • matters for non-profit organisations
     
  • 13 10 20 – superannuation enquiries, for information about
    • superannuation guarantee
    • choice of superannuation fund
    • superannuation co-contribution
     
  • 13 28 61 – general personal tax enquiries, for information about individual income tax

Publications

For more publications about how capital gains tax works, refer to:

Free seminars

We run small business seminars on a range of topics, including GST, PAYG, activity statements and record keeping.

To find a seminar near you or to make a booking:

  • phone 1300 661 104.

Alternatively, you may also want to discuss your capital gains tax situation with your tax advisor.

Other services

If you do not speak English well and need help from us, phone the Translating and Interpreting Service on 13 14 50.

If you are deaf, or have a hearing or speech impairment, phone us through the National Relay Service (NRS) on the numbers listed below:

  • TTY users, phone 13 36 77 and ask for the ATO number you need
  • Speak and Listen (speech-to-speech relay) users, phone 1300 555 727 and ask for the ATO number you need

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