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.
Generally, to use the 'other' method, you simply subtract your cost base from your capital proceeds. The amount of proceeds left is your capital gain.
Example: Property purchased and sold within 12 months
Marie-Anne bought a property for $250,000 under a contract dated 24 June 2017. The contract provided for payment of a deposit of $25,000 on that date, with the balance of $225,000 to be paid on settlement on 4 August 2017.
Marie-Anne paid stamp duty of $5,000 on 20 July 2017. On 4 August 2017, 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 2017 (the day 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 hasn't made any other capital losses or capital gains in the 2017–18 income year, and doesn't 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