Record Keeping for Capital Gains Tax

There are many types of Capital Gain Tax (CGT) events - the business owner should check with their accountant if in doubt about any possible events throughout the year. There are certain concessions available for small businesses

A Capital Gain or Loss is the difference between what it cost to purchase the asset, and what was received when it was disposed of. Capital gains tax is applied to ‘profit’ made on the disposal of an asset, although it is considered to be part of income tax.

All assets (including any held overseas), acquired since 20 September 1985 are subject to CGT unless specifically excluded or otherwise included.

A business owner must keep records of every transaction or event that may be relevant to the accountant working out whether the owner has made a capital gain or loss.

Records relating to CGT events must be kept for five years after the relevant event. Noting that the records relating to the purchase of a capital asset are required to be retained until 5 years after the lodgment of the tax return relating to the sale of that asset.

Usual record keeping obligations apply:

• Keeping business records is a legal requirement for the statutory period of up to 7 years
• All records of all transactions must be kept, including:
  • Payroll records
  • Purchases and expenses
  • Sales and income
  • Investment records
  • Banking records
  • Business and other registrations
  • Stock adjustments
  • Director dividends or other payments
  • Sale or purchase of any assets
  • Records relating to personal use of business assets
• Records must be in English and legible
• Records can be in paper or electronic form, but must be easily accessible
• Records must be secure and maintain integrity, completeness and accuracy

Types of  CGT Events
For businesses, CGT most commonly applies to the sale of buildings, shares and goodwill. CGT does NOT apply to depreciable assets used solely for taxable purposes, for example, business equipment.
However, if you use a business asset partly for personal use, then any gain or loss from the disposal of that asset may be subject to CGT for the personal use portion.

Note that although intellectual property is defined as a depreciable asset, it is treated differently for the purpose of CGT. If the business owner has assigned any intellectual property to another entity, the accountant should be notified.

Record keeping for Capital Gains Events

A capital loss may be carried forward to offset against a capital gain in future years. There is no time limit on how long you can carry forward a capital loss; however, you will need the records to prove the loss and to enable the accountant to calculate and offset the amount correctly. If there has been any loss event, you may need to keep the records for longer than the statutory five years, until the loss has been applied to a future gain.


What you must keep:

• Date of the event—related to any purchase, sale, transfer, assigning of rights or gifts
• Details of the nature of the event
• Details of the entities or parties related to the event

The records can specifically include:

• Receipts of purchase, sale or transfer
• Any details of money borrowed relating to the asset
• Records of agent, accountant, legal and advertising costs relating to the event
• Receipts for insurance costs, rates and taxes related to the asset, for example land tax for property
• Market valuations of the asset
• Receipts for costs associated with repairs, maintenance and improvements to the asset
• Broker fee details
• Tax records showing if and when the item was claimed as an expense

Related References

• ATO - Capital Gains Tax
• ATO - Record Keeping for Small Business