There are 3 ways of calculating your capital gain from the sale of your shares or units: the indexation method, the discount method and the 'other' method. The 'other' method applies when the indexation and discount methods do not apply.
The indexation method allows you to increase the value of what your asset has cost (the cost base) by applying an indexation factor that is based on increases in the Consumer Price Index (CPI) up to September 1999.
If you use the discount method, you do not apply the indexation factor to the cost base but you can reduce your capital gain by the CGT discount of 50 per cent.
Generally, if you have held your shares or units for 12 months or more, you can choose either the discount method or the indexation method to calculate your capital gain, whichever gives you the better result.
However, you cannot use the indexation method for any assets you acquired after 21 September 1999. You do not have to choose the same method for all your shares or units even if they are in the same company or fund.
You must use the 'other' method for any shares or units you have bought and sold within 12 months (that is, when the indexation and discount methods do not apply).
To calculate your capital gain using the 'other' method, you simply subtract your cost base from what you have received-your capital proceeds.
If you sold your asset for less than you paid for it, you have made a capital loss. This happens when your reduced cost base is greater than your capital proceeds. The excess is the amount of your capital loss.
If you received a distribution of a capital gain from a managed fund, part C of this guide explains how you calculate the amount of that capital gain. You must use the same method as that chosen by the fund.
The following table explains and compares the 3 methods of calculating your capital gain.