• The 'other' method of calculating your capital gain

    The ‘other’ method is the simplest of the three methods for calculating a capital gain. You must use this method to calculate your capital gain if you have bought and sold your asset within 12 months or, generally, for capital gains tax (CGT) events that do not involve an asset. In these cases, the indexation and discount methods do not apply.

    Generally, to use the 'other' method, you simply subtract your cost base (what the asset cost you) from your capital proceeds (how much you sold it for). The amount of proceeds left is your capital gain. For some types of CGT event, a cost base is not relevant. In these cases, the rules of the particular CGT event explain the amounts to use.

    Example: Property purchased and sold within 12 months

    Marie-Anne bought a property for $250,000 under a contract dated 24 June 2015. The contract provided for the payment of a deposit of $25,000 on that date, with the balance of $225,000 to be paid on settlement on 4 August 2015.

    Marie-Anne paid stamp duty of $5,000 on 20 July 2015. On 4 August 2015, she received an account for solicitor’s fees of $2,000 which she paid as part of the settlement process.

    Marie-Anne sold the property on 16 October 2015 (the day the contracts were exchanged) for $315,000. She incurred costs of $1,500 in solicitor’s fees and $4,000 in agent’s commission.

    As she bought and sold her property within 12 months, Marie-Anne must use the 'other' method to calculate her capital gain.

    Deposit

    $25,000

    Balance

    $225,000

    Stamp duty

    $5,000

    Solicitor’s fees for purchase of property

    $2,000

    Solicitor’s fees for sale of property

    $1,500

    Agent’s commission

    $4,000

    Cost base (total)

    $262,500

    Marie-Anne works out her capital gain as follows:

    Capital proceeds

    $315,000

    less cost base

    $262,500

    Capital gain calculated using the ‘other’ method

    $52,500

    Assuming Marie-Anne has not made any other capital losses or capital gains in the 2015-16 income year, and does not have any unapplied net capital losses from earlier years, the net capital gain to be included on her tax return is $52,500.

    End of example

     

    Example: Shares purchased and sold within 12 months

    In August 2015, Sonya bought 1,000 shares in Tulip Ltd for $1,500 (including broker’s fees) and sold them in June 2016 for $2,350. She paid $50 brokerage on the sale. A CGT event happens when Sonya makes the sale. As the capital proceeds of the parcel of shares is greater than their cost base, Sonya has made a capital gain.

    As Sonya bought and sold the shares within 12 months, she must use the 'other' method to calculate her capital gain as she cannot use the indexation or discount method. So her capital gain is:

    $2,350 – ($1,500 + $50) = $800.

    End of example

     

    Example: Units purchased and redeemed within 12 months

    In October 2015, Colin bought 500 units in Equity Trust for $3,500. In June 2016, he transferred his units from a share fund to a property fund. A CGT event happens when Colin makes the transfer. At the time of this CGT event, the units were worth $5,000. As the market value of the units, at the time of the CGT event, is greater than their cost base, Colin has made a capital gain.

    As Colin owned the units for less than 12 months, he must use the 'other' method to calculate his capital gain. Colin works out his capital gain as follows:

    Capital proceeds

    $5,000

    less Cost base

    $3,500

    Capital gain

    $1,500

    Note

    If, during the period of owning the units, Colin had received a non-assessable payment from the fund, his cost base may have been reduced and the capital gain may have been greater. For more information, see Non-assessable payments from a trust.

    End of example

    See also:

    For details of different ways of calculating a capital gain, see:

    For help applying this to your own situation, phone 13 28 61

      Last modified: 21 Jun 2016QC 17164