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  • Working out your capital gain

    For most CGT events, your capital gain is the difference between your capital proceeds and the cost base of your CGT asset. (The cost base of a CGT asset is largely what you paid for it, together with some other costs associated with acquiring, holding and disposing of it.)

    There are three methods for working out your capital gain. You can choose the method that gives you the best result – that is, the smallest capital gain.

    CGT discount method

    • Eligibility: For assets held for 12 months or more before the relevant CGT event.
      • Not available to companies.
      • For foreign resident individuals, the 50% discount is removed or reduced on capital gains made after 8 May 2012.
       
    • Description: Allows you to reduce your capital gain by
      • 50% for resident individuals (including partners in partnerships) and trusts
      • 33.33% for complying super funds.
       
    • How to do it: Subtract the cost base from the capital proceeds, deduct any capital losses, then reduce by the relevant discount percentage.
    • See: The discount method.

    Indexation method

    • Eligibility – For assets
      • acquired before 11.45am (by legal time in the ACT) on 21 September 1999
      • held for 12 months or more before the relevant CGT event.
       
    • Description: Allows you to increase the cost base by applying an indexation factor based on the consumer price index (CPI) up to September 1999.
    • How to do it: Apply the relevant indexation factor, then subtract the indexed cost base from the capital proceeds.
    • See: The indexation method.

    Other method

    • Eligibility: For assets held for less than 12 months before the relevant CGT event.
    • Description: Basic method of subtracting the cost base from the capital proceeds.
    • How to do it: Subtract the cost base (or the amount specified by the relevant CGT event) from the capital proceeds.
    • See: The 'other' method.

    CGT methods and 12-month ownership period

    For each of the three methods, in determining whether you acquired the asset at least 12 months before the CGT event:

    • exclude both the day of acquisition and the day of the CGT event
    • in some situations you include the asset's previous ownership – for example, if you acquired the asset through a deceased estate, or as a result of a relationship breakdown.

    Example: 12-month ownership period

    Sally bought a CGT asset on 2 February. Her 12-month ownership period started on 3 February (the day after she bought the asset) and ends 365 days later (366 in a leap year), at the end of 2 February the following year.

    If Sally sells the asset before 3 February the following year, she can't claim the discount or use indexation because she hasn't owned the asset for at least 12 months.

    End of example

    Next steps:

    See also:

    Last modified: 17 Jul 2017QC 22159