Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-1 - CAPITAL GAINS AND LOSSES: GENERAL TOPICS  

Division 110 - Cost base and reduced cost base  

Subdivision 110-A - Cost base  

SECTION 110-36   Indexation  

Indexation for working out capital gains of Australian resident individuals or trusts for CGT events happening on or after 1 July 2027

110-36(1A)    
The cost base of a * CGT asset also includes indexation of the elements of the cost base (except the third element) for the purposes of working out the * capital gain of an individual or a trust from a * CGT event happening in relation to the CGT asset if:

(a)    the CGT event happens on or after 1 July 2027; and

(b)    the requirements of Division 114 are met.

Note 1:

This subsection does not extend to foreign residents or temporary residents (see section 114-25 ).

Note 2:

This subsection is mainly relevant for a trust to the extent that the trust ' s beneficiaries are individuals who are Australian residents (see Subdivision 115-C and section 114-25 ).

Note 3:

This subsection extends to the capital gain of an individual that is attributable to a partnership of which the individual is a partner.

Note 4:

If an asset (including a pre-CGT asset) was held on 30 June 2027, it may be taken to have been sold just before, and reacquired on, 1 July 2027 (see subsections 112-155(2) , 112-165(2) and 112-175(2) ). For such an asset, indexation because of this subsection will happen only for the period the asset is held on or after 1 July 2027 (see subsection 960-275(1B) ).

Indexation for working out capital gains in other circumstances

110-36(1)    
The cost base of a * CGT asset also includes indexation of the elements of the cost base (except the third element) for the purposes of working out the * capital gain of an entity from a * CGT event happening in relation to the CGT asset if:

(a) the most recent * acquisition of the CGT asset is at or before 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999; and

(b) for an entity that is an individual or a trust - the CGT event happens before 1 July 2027, and not because of subsection 112-155(2) or 112-165(2) ; and

(c) the requirements of Division 114 are met.

Note:

For paragraph (b), indexation is not applicable for working out a capital gain arising:

(a) directly from a CGT event taken to have happened under subsection 112-155(2) ; or

(b) directly or indirectly from a CGT event taken to have happened under subsection 112-165(2) .

Instead, capital gains from such CGT events may be discount capital gains.

110-36(2)    
However, for the purposes of working out the * capital gain of an entity mentioned in an item of the table from a * CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999, the cost base includes indexation because of subsection (1) only if the entity mentioned in the item chooses that the cost base includes indexation.

Choice of indexation
Item	For the purposes of working out the capital gain of this entity:	The cost base includes indexation only if this entity chooses so:
1	An individual	The individual
2	A * complying superannuation entity	The trustee of the complying superannuation entity
3	A trust	The trustee of the trust
4	A listed investment company	The company

Note 1:

Section 103-25 specifies when you must make the choice and provides that the way you prepare your income tax return is evidence of your choice.

Note 2:

For each CGT asset whose cost base you need to work out, you may either choose to index the expenditure included in the asset ' s cost base or not make that choice. If you do not choose to index the expenditure, your net capital gain includes only part of your capital gain on the CGT asset as worked out on the basis of the cost base not including indexation and reduced by your capital losses.

Note 3:

This subsection only applies for an individual or a trust for a CGT event happening before 1 July 2027 (see paragraph (1)(b) ).

110-36(3)    

Also, for the purpose of working out the * capital gain of a * life insurance company from a * CGT event happening after 30 June 2000 in respect of a * CGT asset that is a * complying superannuation asset, the cost base includes indexation because of subsection (1) only if the life insurance company chooses that the cost base includes indexation.

Note:

Section 110-25 of the Income Tax (Transitional Provisions) Act 1997 provides that, in working out the capital gain from a CGT event after 11.45 am on 21 September 1999 and before 1 July 2000 in respect of an asset of a life insurance company or registered organisation, the cost base includes indexation only if the company or organisation chooses it.