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The cost base of an asset is indexed for inflation and only the amount of the consideration that is more than the indexed cost base is treated as a capital gain. Generally, an asset must be held for 12 months before indexation applies.
The indexation factor used is the same as that normally used under the capital gains tax provisions - the consumer price index. This index is published in the Guide to capital gains tax, appendix 2. You can obtain it from the Australian Bureau of Statistics in your capital city or from any tax office.
Adjustment to the cost base
In some cases, the cost base of an asset will need to be adjusted. This would occur where, for example, there was a return of capital on shares or a tax free distribution from a unit trust. For further information, contact the tax office where you lodge your return.
Last modified: 05 Dec 2006QC 18000