The new law removes the indexation component for CGT assets acquired after
21 September 1999 (the start time) and replaces it with a CGT discount. Where
a CGT asset is acquired at or before the start time, an eligible taxpayer may
choose to claim:
the indexation component frozen at 30 September 1999; or
the CGT discount.
Particulars:
After September 1999 an individual, trust or complying superannuation entity
that acquires a CGT asset and makes a capital gain from a CGT event happening
to that CGT asset, will receive a discount on the capital gain. The CGT asset
must be owned for at least 12 months for a taxpayer to obtain this discount. The
CGT discount is a reduction of the nominal gain (i.e. without indexation) by 50%
for individuals and trusts, and 33.3% for complying superannuation entities.
Indexation of the cost base is not available for assets acquired after 21 September
1999.
For CGT events happening after 21 September 1999 to CGT assets acquired at or before
that time, an individual, trust, or complying supperannuation entity may choose to
claim either indexation of the cost base in calculating the capital gain or the
CGT discount.
If a capital gain for any taxpayer is calculated using indexation, that indexation is
frozen at 30 September 1999.
Where a trust claims the CGT discount in calculating its net income and distributes this
discounted capital gain, the beneficiary grosses up the gain by the discount, applies
any losses and then applies the appropriate CGT discount to any remaining discount capital
gains, providing the beneficiary is an individual, trust or complying superannuation
entity.
As from 21 September 1999 averaging of capital gains has been abolished.