Reduced cost base


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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).


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


less write-off deduction


Reduced cost base

$92 500

less capital proceeds


Capital loss


Last modified: 06 Oct 2009QC 27417