Many CGT assets are easily recognisable, for example, land, shares in a company, and units in a unit trust. Other CGT assets are not so well understood such as contractual rights, options, foreign currency, cryptocurrency and goodwill. All assets are subject to the CGT rules unless they are specifically excluded.
One example of cryptocurrency is bitcoin. Our view is that bitcoin is neither money nor Australian or foreign currency. Rather, it is property and is an asset for CGT purposes. Other cryptocurrencies that have the same characteristics as bitcoin will also be assets for CGT purposes and will be treated similarly for tax purposes. For more information, see Tax treatment of cryptocurrencies.
CGT assets fall into one of three categories:
- collectables
- personal use assets
- other assets.
Collectables
Collectables include the following items that you use or keep mainly for the personal use or enjoyment of yourself or your associates:
- paintings, sculptures, drawings, engravings or photographs, reproductions of these items or property of a similar description or use
- jewellery
- antiques
- coins or medallions
- rare folios, manuscripts or books
- postage stamps or first day covers.
A collectable is also:
- an interest in any of the items listed above
- a debt that arises from any of those items
- an option or right to acquire any of those items.
You can only use capital losses from collectables to reduce capital gains (including future capital gains) from collectables. You disregard any capital gain or capital loss you make from a collectable if any of the following apply:
- you acquired the collectable for $500 or less
- you acquired an interest in the collectable for $500 or less before 16 December 1995
- you acquired an interest in the collectable when it had a market value of $500 or less.
If you dispose of a number of collectables individually that you would usually dispose of as a set, you are exempt from paying CGT only if you acquired the set for $500 or less. This does not apply to an individual collectable you acquired before 16 December 1995, which is exempt from CGT if you acquired it for less than $500. This is irrespective of whether or not it would usually be disposed of as part of a set.
Personal use assets
A personal use asset is:
- a CGT asset, other than a collectable, that you use or keep mainly for the personal use or enjoyment of yourself or your associates
- an option or a right to acquire a personal use asset
- a debt resulting from a CGT event involving a CGT asset kept mainly for your personal use and enjoyment
- a debt resulting from you doing something other than gaining or producing your assessable income or carrying on a business.
Personal use assets may include such items as:
- boats
- furniture
- electrical goods
- household items
- cryptocurrency (if it is kept or used mainly to purchase items for personal use or consumption).
Land and buildings are not personal use assets. Any capital loss you make from a personal use asset is disregarded.
If a CGT event happened to a personal use asset, disregard any capital gain you make if you acquired the asset for $10,000 or less. If you disposed of personal use assets individually that would usually be sold as a set, you get the exemption only if you acquired the set for $10,000 or less.
Other assets
Assets that are not collectables or personal use assets include:
- land
- shares in a company
- rights and options
- leases
- units in a unit trust
- cryptocurrency (if it is not kept or used mainly to purchase items for personal use or consumption)
- goodwill
- licences
- convertible notes
- your home (see Exemptions)
- contractual rights
- foreign currency
- any major capital improvement made to certain land or pre-CGT assets.
Partnerships
It is the individual partners who make a capital gain or capital loss from a CGT event, not the partnership itself. For CGT purposes, each partner owns a proportion of each CGT asset. Each partner calculates a capital gain or capital loss on their share of each asset and claims their share of a credit for foreign resident capital gains withholding amounts.
Tenants in common
Individuals who own an asset as tenants in common may hold unequal interests in the asset. Each tenant in common makes a capital gain or capital loss from a CGT event in line with their interest in the asset. For example, a couple could own a rental property as tenants in common with one having a 20% interest and the other having an 80% interest. The capital gain or capital loss made when the rental property they dispose of (or another CGT event happens) is split between the individuals according to their legal interest in the property.
Joint tenants
For CGT purposes, individuals who own an asset as joint tenants are each treated as if they own an equal interest in the asset as a tenant in common. Each joint tenant makes a capital gain or capital loss from a CGT event in line with their interest in the asset. For example, a couple owning a rental property as joint tenants split the capital gain or capital loss equally between them.
When a joint tenant dies, their interest in the asset is taken to have been acquired in equal shares by the surviving joint tenants on the date of death.
Separate assets
For CGT purposes, there are exceptions to the rule that what is attached to the land is part of the land. In some circumstances, a building or structure is considered to be a CGT asset separate from the land.
Improvements to an asset (including land) acquired before 20 September 1985 may also be treated as a separate CGT asset.
Buildings, structures and other capital improvements to land you acquired on or after 20 September 1985
A building, structure or other capital improvement on land that you acquired on or after 20 September 1985 is a separate CGT asset, not part of the land, if a balancing adjustment provision applies to it. For example, a timber mill building is subject to a balancing adjustment if it is sold or destroyed, so it is treated as an asset separate from the land it is on.
Buildings and structures on land acquired before 20 September 1985
A building or structure on land that you acquired before 20 September 1985 is a separate asset if:
- you entered into a contract for the construction of the building or structure on or after that date, or
- there was no contract for its construction, and construction began on or after that date.
Other capital improvements to pre-CGT assets
If you make a capital improvement to a CGT asset you acquired before 20 September 1985, this improvement is treated as a separate asset. It is subject to CGT if, at the time a CGT event happens to the original asset, the cost base of the capital improvement is:
- more than the improvement threshold for the year in which the event happens (see table 1)
- more than 5% of the amount of money and property you receive from the event.
If there is more than one capital improvement and they are related, they are treated as one separate CGT asset if the total of their cost bases is more than the threshold.
The improvement threshold is adjusted to take account of inflation. The thresholds for 1985–86 to 2019–20 are shown in table 1.
Example 3: Adjacent land
On 1 April 1984 Dani bought a block of land. On 1 June 2020, she bought an adjacent block. Dani amalgamated the titles to the two blocks into one title.
The second block is treated as a separate CGT asset distinct from the first block. Since the second block was acquired on or after 20 September 1985 it is subject to CGT provisions. Therefore, Dani can make a capital gain or loss from the second block when the whole area of land is sold.
End of example