Capital gains tax sits squarely in the accountant's domain when it comes to calculating and lodging — but bookkeepers are often the first to see the transactions that trigger CGT events. A client who sold an investment property, disposed of shares, or transferred assets from their business to a trust may not think to mention it if they don't understand the implications. Spotting these events early, flagging them to the accountant, and recording them correctly is a genuinely valuable contribution.
This guide covers the CGT fundamentals every bookkeeper should understand, the events most likely to appear in client records, and what to record and what to refer.
What Is a CGT Event?
A CGT event occurs when a capital asset is disposed of, which typically means sold — but also includes gifting, transferring, destroying, abandoning, or cancelling an asset. The gain (or loss) is calculated as the sale proceeds minus the asset's cost base.
The cost base is not simply the original purchase price. It includes:
- The purchase price
- Incidental costs of acquisition (stamp duty, legal fees, agent commissions)
- Costs of ownership (capital improvements, not repairs)
- Incidental costs of disposal (agent commissions, legal fees on sale)
Getting the cost base right is critical and is often where errors occur. Clients who haven't kept purchase records or improvement receipts over many years may struggle to reconstruct an accurate cost base.
Common CGT Events in Client Records
Sale of real property. The most common CGT event for individual and small business clients. The main residence exemption applies for a client's home, but investment properties are fully subject to CGT. Watch for settlement deposits in bank accounts — a large unusual credit followed by a mortgage repayment is a signal.
Disposal of shares and managed fund units. Any client with a brokerage account or managed fund may have CGT events from sales or redemptions. These often appear as credits from brokerage platforms and may be accompanied by cost base information on an annual tax statement.
Scrip-for-scrip rollovers. When a company a client holds shares in is acquired and the client receives shares in the acquiring company, this is generally a CGT event — though a rollover exemption may apply. Flag it; the accountant needs to assess.
Transfer of business assets. If a client restructures from a sole trader to a company, or transfers assets into or out of a trust, CGT events may be triggered on the transferred assets — even if no cash changes hands. The market value substitution rules mean the ATO treats it as a disposal at market value regardless of what was actually paid.
Goodwill and business sales. When a client sells their business, the goodwill component is a capital asset with CGT implications. Small business CGT concessions may apply (15-year exemption, 50% active asset reduction, retirement exemption) — but only if the client and their accountant plan the sale structure carefully in advance.
The 50% CGT Discount
Australian resident individuals and trusts who hold a CGT asset for more than 12 months before disposal are entitled to reduce the taxable capital gain by 50%. Companies are not entitled to the discount.
This means a client who sells an asset held for 13 months will pay tax on half the gain; a client who sells an asset held for 11 months will pay tax on the full gain. The 12-month threshold is calculated from the date of acquisition to the date of the CGT event (usually the date of the contract, not settlement).
When you see asset disposal transactions near the 12-month mark from acquisition, flag this timing for the accountant — it may significantly affect the client's tax outcome.
What to Record in the Books
Your role is to capture the financial facts of the transaction accurately. For a property sale:
- Record the gross proceeds (before agent commission deduction) as the disposal amount
- Record selling costs (agent commission, legal fees, settlement costs) as separate line items under selling expenses
- Do NOT net the costs against the proceeds — the accountant needs both figures separately
For share sales:
- Record the proceeds received (from the brokerage statement)
- Keep the contract notes or brokerage statements as supporting documents
- The cost base calculation happens in the tax return, not in the bookkeeping records
One common coding error: booking the entire net proceeds of a property sale as income. This is incorrect — the capital gain is a tax-return item, not an operating income item. The proceeds should be coded against the asset account being disposed of.
When to Refer to the Accountant
Refer immediately when you see:
- Sale of any property (other than obviously the client's family home, and even then — check if it was ever rented)
- Large share sales or fund redemptions
- Business assets being transferred, gifted, or sold
- Any business sale or partial sale
- The client mentions "restructuring" or "succession planning"
You don't need to be able to calculate the CGT liability. Your job is to recognise the event, document it accurately, and ensure the accountant has everything they need before the tax return is due.
A Practical Checklist for EOFY
Before finalising a client's end-of-year position, ask:
- Did the client sell any assets this year (property, shares, business assets)?
- Were any assets transferred to family members, trusts, or companies?
- Did the client receive a settlement or compensation payment?
- Were there any assets lost, destroyed, or abandoned?
A brief conversation at EOFY can surface CGT events that would otherwise be missed — and missing a CGT event isn't just a problem for the client, it's a professional risk for the bookkeeper who failed to flag it.