You can use the discount method to calculate your capital gain if:
- you are an individual, a trust or a complying superannuation entity
- a CGT event happens in relation to an asset you own
- the CGT event happened after 11.45am (by legal time in the ACT) on 21 September 1999
- you acquired the asset at least 12 months before the CGT event, and
- you did not choose to use the indexation method.
Generally the discount method does not apply to companies, although it can apply in relation to a limited number of capital gains made by life insurance companies.
In determining whether you acquired the CGT asset at least 12 months before the CGT event, both the day of acquisition and the day of the CGT event are excluded.
Example – CGT discount method
Sally acquired a CGT asset on 2 February 2003. Sally is entitled to apply the CGT discount if a CGT event happens in relation to that asset on or after 3 February 2004.
In certain circumstances, you may be eligible for the CGT discount even if you have not owned the asset for at least 12 months. For example:
- if you acquire a CGT asset as a legal personal representative or as a beneficiary of a deceased estate. The 12-month requirement is satisfied if the asset was acquired by the deceased
- before 20 September 1985 and you disposed of it 12 months or more after they died, or
- on or after 20 September 1985 and you disposed of it 12 months or more after they acquired it
- if you acquired an asset as the result of a marriage breakdown. You will satisfy the 12-month requirement if the combined period your spouse and you owned the asset is more than 12 months, or
- if a CGT asset is compulsorily acquired, lost or destroyed and you acquire a rollover replacement asset, you will satisfy the 12-month requirement for the replacement asset if the period of ownership of the original asset and the replacement asset is at least 12 months.