The most significant aspect of CGT legislation is that the first 50% of any Capital Gain is exempt from taxation, provided that you have held the asset for more than 12 months.

With CGT levied at the same rate as personal and company income tax, even investors paying the highest personal tax bracket of 48.5%, will now be liable for no more than 24.25% CGT under CGT legislation.

The loss of indexing is the inevitable flip side to the reduction in CGT liability. Where actual gains have previously been taxed at 100% and then adjusted for inflation, the new 50% rate does not take inflation into account. In short, this means that the effects of inflation cannot be used to offset your capital gain tax burden.

For properties purchased before September 21, 1999, investors can choose whether to assess their tax liability at either half of the nominal gain, or under the guidelines of the previous CGT system (with the indexed cost of the asset frozen as at 30 September 1999).

Predictably, the impact of current CGT legislation compared to the previous indexed based legislation it replaced, is varied. In periods of low inflation, when capital gains are not penalised too significantly by inflationary adjustment, you’ll walk away with a windfall under the current system.

When inflation is tending to spiral, your tax liability will rise under the new system and you could find yourself out of pocket in comparison to the CGT of old.