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Three methods of calculating capital gain

Last updated 24 February 2020

The three methods of calculating capital gains are summarised and compared in the following table. They are explained in more detail in the following pages. In some cases you may be able to choose either the discount method or the indexation method to calculate your capital gain. In this case you use the method that gives you the better result.

Capital gain calculation methods

Method type

Indexation method

Discount method

'Other' method

Description of method

Allows you to increase the cost base by applying an indexation factor based on CPI up to September 1999

Allows you to discount your capital gain

Basic method of subtracting the cost base from the capital proceeds

When to use the method

Use for an asset held for 12 months or more if it produces a better result than the discount method. Use only for assets acquired before 21 September 1999.

Use for an asset held for 12 months or more if it produces a better result than the indexation method.

Use when the indexation and discount methods do not apply (for example, if you have bought and sold an asset within 12 months).

How to calculate your capital gain using the method

Apply the relevant indexation factor (see CPI table at appendix 2), then subtract the indexed cost base from the capital proceeds (see worked example for Val).

Subtract the cost base from the capital proceeds, deduct any capital losses, then reduce by the relevant discount percentage (see worked example for Val).

Subtract the cost base (or the amount specified by the relevant CGT event) from the capital proceeds (see worked example for Marie-Anne).

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