This is the simplest of the three methods. You must use the 'other' method to calculate your capital gain if you have bought and sold your asset within 12 months or generally for CGT events that do not involve an asset. In these cases, the indexation and discount methods do not apply.
Generally, to use the 'other' method, you simply subtract your cost base (what the asset cost you) from your capital proceeds (how much you sold it for). The amount of proceeds left is your capital gain. For some types of CGT events, a cost base is not relevant. See appendix 1 for the amounts to use.
Example 9: Calculating a capital gain using the 'other' method
Marie-Anne bought a property for $250,000 under a contract dated 23 June 2014. The contract provided for the payment of a deposit of $25,000 on that date, with the balance of $225,000 to be paid on settlement on 4 August 2014.
Marie-Anne paid stamp duty of $5,000 on 20 July 2014. On 4 August 2014, she received an account for solicitors fees of $2,000 which she paid as part of the settlement process.
Marie-Anne sold the property on 16 October 2014 (the day the contracts were exchanged) for $315,000. She incurred costs of $1,500 in solicitors 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 |
Solicitors fees for purchase of property |
$2,000 |
Solicitors fees for sale of property |
$1,500 |
Agents 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 has not made any other capital losses or capital gains in the 2014–15 income year, and does not have any unapplied net capital losses from earlier years, the net capital gain to be included at item 18 on her Tax return for individuals (supplementary section) 2015 (NAT 2679) is $52,500.
End of exampleThe indexation method
Use the indexation method to calculate your capital gain if:
- a CGT event happened to an asset you acquired before 11.45am (by legal time in the ACT) on 21 September 1999, and
- you owned the asset for 12 months or more.
If you are not a company and you meet the two 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 conditions listed above, you must use the indexation method to calculate the capital gain. Specific rules affect certain assets of a life insurance 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) at appendix 2.
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 September 1999 (68.7) |
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 |
Work out the indexation factor to three decimal places, rounding up if the fourth decimal place is five or more.
For most assets, you index expenditure from the date you incur it, even if you do not pay some of the expenditure until a later time. However, there is an exception for partly paid shares or units acquired on or after 16 August 1989. If the company or trust later makes a call on the shares or units, you use the CPI for the quarter in which you made that later payment.
There are some exceptions to the requirement that you must have owned an asset for at least 12 months for indexation to apply. For example, you can use the indexation method if:
- you acquire a CGT asset as a legal personal representative or a beneficiary of a deceased estate. The 12-month requirement is satisfied if the deceased acquired the asset 12 months or more before you disposed of it, or
- you acquired an asset as the result of a marriage or relationship breakdown. You will satisfy the 12-month requirement if the combined period your spouse and you owned the asset is more than 12 months.