A CGT event happens generally where a CGT asset ends or is disposed of. Typically, an investor will derive a capital gain or capital loss being the difference between the capital proceeds received in respect of the disposal and the cost incurred to acquire the asset (including most incidental costs).
There are some cases however, where a taxpayer will continue to hold an asset but will derive a capital gain.
CGT events E4 and G1 generally occur in the following circumstances:
CGT event E4
- a trust makes a payment in respect of a unit in the trust; and
- some or all of the payment is not included in your assessable income.
Typically, the trust will distribute tax deferred or return of capital amounts.
CGT event G1
- a company makes a payment in respect of a share in a company; and
- some or all of the payment is not a dividend or a liquidator’s distribution taken to be a dividend; and
- the payment is not included in the investor’s assessable income.
Typically, the amount is a return of capital in the hands of the investor.
Payments from the trust or the company can be made in cash or in-specie (ie as a distribution of shares or other property).
CGT event E4
- Just before the end of the income year in which the trustee makes the payment or
- If another CGT event (except CGT event E4) happens in relation to the investors’ unit or part of it after the trust makes the payment but before the end of that income year— just before the time of that other CGT event.
CGT event G1
- When the company makes the payment.
A non-assessable payment reduces an investor’s cost base. An investor does not have to pay tax upon the non-assessable distribution as the amount is not considered to be a capital gain or assessable income.
Where the non-assessable payments reduce the cost base to nil, any further distributions of such amounts will give rise to a capital gain. These capital gains are known as E4 or G1 capital gains.
You cannot make a capital loss as a result of an E4 or G1 capital gain.
The cost base and reduced cost base will continue to be nil.
||CGT event E4 or G1
|Prior to 19 September 1985
|From 19 September 1985 and Prior to 11.45 am 21 Sept 1999
||Net capital gain calculated using:
- indexed method (indexation frozen at Sept 1999)
- discount method (see below)
|From 11.45 am 21 Sept 1999
||For assets held less than 12 months, the gain is calculated by deducting cost base from proceeds. For assets held longer than 12 months, any capital gain may be discounted by 50% (individuals) or or 33⅓% (complying super funds).
We report E4 and G1 gains resulting in the Tax Report – Detailed in the Excess Assessable Gains (X) section. We will also apply the appropriate CGT discount, if applicable, to any such gains.
The Tax Report – Summary reports any CGT E4 or G1 capital gains in the Capital gains from trust distributions section as discounted, indexed or other capital gain, as appropriate.