What CGT records do you need to keep?

You must keep records of everything that may be relevant to working out whether you have made a capital gain or capital loss from an asset.

This means you need records to substantiate the purchase and disposal of any asset, as well as other costs relating to the asset. Records can include contracts, valuations, and details of commissions and legal fees you paid.

The records must:

• show the nature of the act, transaction, event or circumstance, and the date it happened
• be in English, or in a form that can be readily translated into English
• be kept for five years after you sell or otherwise dispose of an asset, unless you keep a CGT asset register (see below).

If you do not keep proper CGT records you might have to pay:

• extra expenses to establish the cost of an asset when you dispose of it
• more tax.

CGT asset register

You might find that a simpler way to keep records of assets is to keep a 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).

For most assets this information includes:

• the date you acquired the asset
• the cost of the asset
• a description, amount and date for each cost associated with purchasing the asset (for example, stamp duty and legal fees)
• the date the asset was disposed of
• the amount you received when you disposed of the asset
• any other information relevant to working out your CGT obligation.

You can discard your CGT records five years after having an asset register entry certified if you meet all of the following:

• you enter all the necessary information about an asset in your CGT asset register
• the entry is in English and is certified in writing by an approved person (for example, a registered tax agent)
• the asset register entry is certified after 31 December 1997 (although you may have acquired the asset before this date).

If you do not keep an asset register, you generally have to keep CGT records for at least five years after you dispose of an asset. For example, if you hold an asset for 10 years and then sell it, you would have to keep the records for 15 years.

Changes to concessions

Changes to the CGT concessions for small business over recent years have improved access and made it easier for you to work out whether you are eligible for the concessions. The most recent amendments are contained in Tax Laws Amendment (2009 Measures No.2) Act 2009External Link which received Royal Assent on 23 June 2009.

The changes apply to:

• payments and CGT events happening on or after 23 June 2009
• CGT events happening in 2006–07, 2007–08 and later income years.

We have incorporated these changes into this publication, where relevant.

The amendments that apply to payments and CGT events happening on or after 23 June 2009 involve changes to:

• enable certain liabilities to reduce an entity's net asset value in applying the $6 million maximum net asset value test
• ensure that you consider all uses of an asset (except certain personal uses and certain uses from which passive income is derived) to work out what its main use is
• the way the retirement exemption works to remove unintended consequences by
  • making sure the retirement exemption caters for CGT-exempt payments flowing through small business structures involving interposed entities
  • excluding small business retirement exemption payments you made to CGT concession stakeholders from the deemed dividend provisions of section 109 and Division 7A section 109C of the Income Tax Assessment Act 1936.
   

Other amendments were announced in the 2008 Budget that apply to CGT events happening in 2007–08 and later income years. The changes increase access to the CGT concessions for businesses with turnover of less than $2 million using the small business entity test, for:

• taxpayers owning a CGT asset used in a business by an affiliate or connected entity (passively-held assets)
• partners who own a CGT asset used in the partnership business (partner's assets).

Other minor changes improve the way the concessions work by:

• increasing the circumstances and purposes for which a spouse or child under 18 years is taken to be an individual's affiliate
• removing unintended consequences for the retirement exemption by correcting the treatment of capital proceeds received in instalments.

Other changes introduced in the June 2009 amendments apply retrospectively for CGT events happening in 2006–07 and later income years, and mean:

• if you are a joint tenant or a trustee of a testamentary trust, you may be able to access the concessions where
  • a gain arises from an asset within two years of the individual's death, and
  • the deceased would have been entitled to the concessions
   
• you do not have to meet the basic conditions for the retirement exemption where you have not met the replacement asset conditions for the small business rollover (CGT events J5 and J6).

As the 2006–07 and 2007–08 changes are retrospective, you have additional time to make your choice to use the concessions where you become eligible as a result of the June 2009 amendments. The extra time to make a choice applies to CGT events happening before 23 June 2009.

You have until the later of:

• the day you lodge your tax return for the income year in which the relevant CGT event happened
• a later day allowed by the Commissioner.

Find out more:

• Capital gains tax (CGT) concessions for small business - more changes for the 2007–09 years.

Changes to tax laws

Certain consequential amendments have also been made to the retirement exemption by the Superannuation Legislation Amendment (Simplification) Act 2007. These apply to the 2007–08 and later income years.

The effect of these changes on the retirement exemption mean that:

• a payment you make under the retirement exemption is no longer an eligible termination payment (ETP) or taken to be an ETP
• you do not have to report the payment for reasonable benefit limit (RBL) purposes.

ETPs and RBLs were abolished from 1 July 2007.

The government also made changes to the law in the Tax Laws Amendment (Small Business) Act 2007 to make it easier for you to claim tax concessions from 1 July 2007.

If your aggregated turnover is less than $2 million a year, you are eligible to claim a range of tax concessions. This includes the capital gains tax concessions for small business.

The changes also mean that if your turnover is $2 million or more, you can access the capital gains tax concessions for small business if you meet the net asset test. The threshold for this test has increased to $6 million. However, you must meet certain conditions.

These changes:

• became law in June 2007
• apply to CGT events in the 2007–2008 and later income years
• are included in this guide.

Find out more:

• eligibility and the concessions available to small business entities, visit ato.gov.au/sbconcessions
• how the changes specifically affect the CGT concessions, see Advanced guide to CGT concessions for small business 2007-08.