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Hoping someone could help with this, I don’t understand the relevant index part, and can’t find it in my books…
Entity purchased asset for $90000, exclusive of acquistion expenses of $3000 on 1 January 2005.
Asset was sold on 31 December 2008 for $125,500, net of disposal costs.
Asset qualified for indexation, relevant index increased by 20% between 1 Jan X5 and 31 Dec X8.
Assume Capital Gains tax at 25%.
How much capital gains tax is payable on disposal of the asset?
Just trying my little calculations,equally looking forward to attempt f1 in march 2018.
proceeds or rather sale =125,500
less cost of an asset =(90,000)
less acquisition expense=(3000)
Equals =32,500less indexation allowance =(18,000) (20% by cost of an asset 90,000)
chargeable gain =14,500
therefore, chargeable gain tax which is 25% by 14,500=3625Indexation means an increase in price/wage…so in the above question it says an asset qualified for indexation by 20%. The principle behind the rule of tax on chargeable gain or allowance we less that increase in price on the original cost of the asset.
Thanks just learning as well.
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