Australia’s CGT system in the past utilized indexation to ensure that only after-inflation gains were subject to CGT. Currently, newly acquired assets are generally subject to discounting rather than indexation.
In the context of an emerging higher inflation rate, should consideration be given to replacing the 50% discount with indexation?
Discuss what would be the advantages or disadvantages of such a policy change. Include in your discussions the impact of such a change on
• the simplicity of the tax system;
• economic efficiency;
• equity/fairness.
Your answer should briefly include a discussion of the history and operation of CGT indexation and discounting.

Answer rating: 100% (QA)

The Australian Capital Gains Tax CGT system has undergone a number of changes over the years Currently new assets are normally subject to discounting rather than indexation However with inflation risi... View the full answer