If the deceased person died before 11.45am (by legal time in the ACT) on 21 September 1999 and you dispose of the asset (as legal personal representative or beneficiary) after that date, there are two ways of calculating your capital gain. You can use either the indexation method or the discount method, whichever gives you the better result. However, the CGT discount is only available if you are an individual, a trust or a complying superannuation entity.
Elements of an asset’s cost base can be indexed only if you own the asset for at least 12 months before disposing of it. For the purposes of this 12-month ownership test you are taken to have acquired the asset when the deceased acquired it, not from the date of their death.
For the CGT discount to apply, you must have acquired the asset at least 12 months before disposing of it. For the purposes of this 12-month ownership test, you are taken to have acquired the asset at one of the following times:
- for pre-CGT assets, the date the deceased died
- for post-CGT assets, the date the deceased acquired it.
Example 105: Indexation and CGT discount
Leonard acquired a property on 14 November 1998 for $126,000. He died on 6 August 1999 and left the property to Gladys. She sold the property on 6 July 2018 for $240,000. The property was not the main residence of either Leonard or Gladys.
Although Gladys acquired the property on 6 August 1999, for the purpose of determining whether she had owned the property for at least 12 months, she was taken to have acquired it on 14 November 1998 (the day Leonard acquired it).
At the time of disposal, Gladys had owned the property for more than 12 months. As she is taken to have acquired it before 11.45am (by legal time in the ACT) on 21 September 1999 and disposed of it after that date, Gladys could choose to index the cost base. However, if the discount method would give her a better result, she could choose to claim the CGT discount.
If Gladys chooses the discount method she would have to exclude from the first element of her cost base the amount that represented the indexation that had accrued to Leonard up until the time he died.
End of exampleThere are changes to the CGT discount after 8 May 2012.
See also:
Collectables and personal use assets
A post-CGT collectable or personal use asset is still treated as such when you receive it as a beneficiary or the legal personal representative of the estate.