ato

 
 
Show download pdf controls
Show print controls
  • 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

    The reduced cost base is the amount you take into account when you are working out whether you have made a capital loss when a CGT event happens to a CGT asset. 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 the same 5 elements as the cost base, except for the 3rd element. The 3rd element of the reduced cost base of an asset is any amount that is assessable because of a balancing adjustment for the asset or that would be assessable if certain balancing adjustment relief was not available. These elements are not indexed and do not include any relevant GST input tax credits. You need to add together all these elements for a CGT asset to find out your reduced cost base for the relevant CGT event.

    The reduced cost base does not include any of those costs that have been (or can be) allowed as deductions-for example, write-off deductions for capital expenditure. It also does not include any expenditure that you have recouped-for example, a claim on an insurance policy (except for any recouped amount included in your assessable income).

    Example: Write-off deduction

    Danuta acquired a new income-producing asset on 28 September 1994 for $100,000. She sold it for $90,000 in November 2001. During the period she owned it she was allowed write-off deductions of $7,500. Her capital loss is worked out as follows:

    Cost base

    $100,000

    less write-off deduction

    $7,500

    Reduced cost base

    $92,500

    less capital proceeds

    $90,000

    Capital loss

    $2,500

     

    End of example
    Last modified: 06 Oct 2009QC 27417