History
Capital gains tax was introduced in Australia on 20 September 1985, one of a number of tax reforms by the Hawke/Keating government. The tax applies only to assets acquired on or after that date. Gains (or losses) on earlier assets, called pre-CGT assets are ignored.
The rules introduced initially allowed the cost of assets held for 1 year to be indexed by the consumer price index (CPI) before calculating a gain (calculation of a loss used only the unindexed cost though). This meant the part of a price rise due only to inflation was not taxed. This rule was only current between 1985 and 1999 when it was then frozen.
Also, initially an averaging process was used to calculate the tax on gains. 20% of one's net capital gain was included as income, and the amount of extra tax it caused was multiplied by 5. So instead of a big capital gain pushing the taxpayer into higher tax brackets immediately, the brackets were stretched out, allowing more to be taxed at one's existing marginal rate.
From 20 September 1999 indexing of the cost base was discontinued, and instead the present 50% discount on the plain gain above the cost base was introduced. For assets acquired before that date the taxpayer can choose between indexing (up to the CPI at 30 September 1999) or discount.
Also from 21 September 1999, small business CGT concessions were introduced (below), reducing tax on small business owners retiring, and on active assets being sold, and allowing a rollover when selling one active asset to buy another
Read more about this topic: Capital Gains Tax In Australia
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