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  • Elements of the reduced cost base
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    Warning:

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

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    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 five elements as the cost base, except for the third element. The third 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 were not available. These elements are not indexed. Also, if you are registered for GST, the elements do not include the amount of any 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 asset.

    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.

    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 2002. 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: 25 Feb 2020QC 27448