CGT - Consumer Price Indexation Factors

Capital gains tax (CGT) generally does not apply to assets acquired before 20 September 1985 (pre CGT assets).

 

However in particular it should be remembered that CGT event K6 can result in capital gains (but not capital losses) if certain CGT events happen to pre-CGT shares in a ‘private’ company or pre-CGT interests in a ‘private’ trust where the market value of its post-CGT property is at least 75% of its net value (‘the 75% test’). 

 

Refer to TR 2004/18 below in the links.

 

 

Use the indexation method to calculate your capital gain if:

 

> a CGT event happens to an asset you acquired before 11.45am (AEST) on 21 September 1999, and

 

> you owned the asset for 12 months or more (excluding day of purchase and day of sale).

 

If you are not a company and you meet the 2 conditions above and you wish to use the indexation method, you must choose to do so, otherwise the discount method will apply. If you are a company (other than a listed investment company) and the capital gain meets the above conditions, you must use the indexation method to calculate the capital gain.  The discount method does not apply to a company.

 

Under the indexation method, you increase each amount included in an element of the cost base, (other than those in the third element - costs of owning the asset) by an indexation factor.

 

The indexation factor is worked out using the consumer price index (CPI).

 

If the CGT event happened on or after 11.45am (by legal time in the ACT) on 21 September 1999 you can only index the elements of your cost base up to 30 September 1999. You use this formula:

 

Indexation factor =	CPI for quarter ending 30.9.99 (123.4)
	CPI for quarter in which expenditure was incurred

 

If the CGT event happened before 11.45am (by legal time in the ACT) on 21 September 1999, you use this formula:

 

Indexation factor =	CPI for quarter when CGT event happened
	CPI for quarter in which expenditure was incurred

 

Work out the indexation factor to three decimal places, rounding up if the fourth decimal place is five or more.

 

 

 

 

 

Year	Qtr ending  31 March	Qtr ending  30 June	Qtr ending 30 September	Qtr ending 31 December
1999	121.8	122.3	123.4	End
1998	120.3	121.0	121.3	121.9
1997	120.5	120.2	119.7	120.0
1996	119.0	119.8	120.1	120.3
1995	114.7	116.2	117.6	118.5
1994	110.4	111.2	111.9	112.8
1993	108.9	109.3	109.8	110.0
1992	107.6	107.3	107.4	107.9
1991	105.8	106.0	106.6	107.6
1990	100.9	102.5	103.3	106.0
1989	92.9	95.2	97.4	99.2
1988	87.0	88.5	90.2	92.0
1987	81.4	82.6	84.0	85.5
1986	74.4	75.6	77.6	79.8
1985	Pre CGT	Pre CGT	71.3	72.7

 

 ABS data used with permission from the Australian Bureau of Statistics.  See ABS catalogue number 6401.0 Consumer Price Index Australia, CPI all Groups Weighted Average of Eight Capital Cities.

 

 

Capital gains indexation

 

Indexation is only relevant in working out the cost base of an asset acquired before 21 September 1999.  If the indexation method (rather than the discount method) is used to work out a capital gain from such an asset, some of the cost base expenditure of the asset may be indexed to account for inflation up to the September 1999 quarter.  Changes to the law mean that indexation is frozen at that time.