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INCOME TAX ASSESSMENT ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

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

Division 114 - Indexation of cost base  

SECTION 114-1  

114-1  Indexing elements of cost base  

 View history reference ITAA 36
In working out the *cost base of a *CGT asset *acquired at or before 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999, index expenditure incurred at or before that time in each element. (The expenditure can include giving property: see section 103-5).

Note 1:

Subdivision 960-M shows you how to index amounts. The indexation does not take account of inflation after 30 September 1999.

Note 2:

You have to work out the cost base of a CGT asset if a CGT event happens in relation to it or if there is a cost base modification.

Note 3:

You cannot index expenditure in the third element (costs of ownership): see subsection 960-275(4).

Note 4:

Indexation is not relevant to expenditure incurred after 11.45 am on 21 September 1999 or any expenditure relating to a CGT asset acquired after that time.

Example:

Peter purchases a building as an investment on 1 January 1994 for $250,000. This amount forms the first element of his cost base.

He sold the building on 1 February 1996.

The index number for the quarter in which he sold the building (the March quarter 1996) is 119.0. The index number for the quarter in which he purchased the building (the March quarter 1994) is 110.4.

Applying section 960-275, work out the indexation factor as follows:
119.0
110.4
=1.078

The indexed first element of Peter's cost base is:
$250,000 × 1.078 = $269,500


 



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