For assets acquired prior to implementation, and held for at least one year, individual taxpayers will have the choice of including in their assessable income either:
1. Half the realised nominal gain, or
2. The whole of the difference between the disposal price and the frozen indexed cost base.
For assets acquired on or after 1st October 1999, and held for at least one year, capital gains will be taxed at half the difference between the disposal price and the original cost.
Assume for the long term investor the purchase of a house in June 1991 for $200,000, and its sale in June 1999 for $280,000, and a short term investor a house for $260,000 in 1998 and its sale in June 1999 for $280,000.
The new capital gains tax regime disadvantages long term investors and rewards short term investors. Given the fact that the majority of residential property investors are long term investors these investors will be disadvantaged by the taxation reforms.