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If a balancing adjustment event occurs to an item of plant that was acquired before 11.45 am (by legal time in the ACT) on 21 September 1999 or any other depreciating asset acquired before 1 July 2001, any assessable balancing adjustment amount or capital gain (if the plant was used for non-taxable purposes) can be reduced to take account of the amount by which the capital gains tax cost base of the asset exceeds its cost. One reason that the cost base might exceed the cost is indexation of the cost base.
The purpose of this reduction is to preserve cost base advantages for assets acquired before the dates mentioned (for example, indexation benefits).
The reduction is worked out having regard to the capital gains tax concepts of cost base and indexation.
See the Guide to capital gains tax for more information about indexation of a cost base and the impact of indexation on discount capital gains.
Last modified: 01 Jun 2005QC 27399