• Reduced cost base

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    This is the amount taken into account in determining whether you have made a capital loss when a CGT event happens to a CGT asset and, if so, the amount of the loss. Remember that a capital loss can only be used to reduce a capital gain. It cannot be used to reduce other income.

    The reduced cost base of a CGT asset has 5 elements. These elements are not indexed. Except for the third element, all of the elements of the reduced cost base are the same as those for the cost base. The third element is any amount that is assessable because of a balancing adjustment for the asset or would be assessable if certain balancing adjustment relief was not available.

    The reduced cost base does not include any of those costs that have been allowed or are allowable as deductions - for example, write-off deductions for capital expenditure, and expenditure incurred after 12 November 1998 that qualifies for the heritage conservation rebate or the landcare and water facility rebate.

    The elements of the reduced cost base do not include your GST input tax credits (if any) applicable to those costs.

    The reduced cost base does not include any expenditure that you have recouped - for example, a claim on an insurance policy - except for any amount of the recoupment included in your assessable income.

    Important:

    You cannot index the reduced cost base.

    Example

    Reduced cost base - write-off deduction

    Debra acquired a new income-producing asset on 28 September 1994 for $100,000. She sold it for $90,000 in November 1999. During the period she owned it she was allowed write-off deductions of $7,500. Her capital loss is worked out as follows.

     

    $

    $

    Capital proceeds

     

    90,000

    Cost base

    100,000

     

    Less write-off deduction

    7,500

     

    Reduced cost base

     

    92,500

    Capital loss

     

    2,500

    Last modified: 18 Sep 2009QC 18323