• Elements of the reduced cost base

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    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 of a CGT asset has the same five elements as the cost base, except for the third element:

    1. money or property given for the asset
    2. incidental costs of the CGT event or of acquiring the CGT asset
    3. balancing adjustment amount - 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
    4. capital costs associated with increasing the value of your asset, and
    5. capital costs of preserving or defending your title or rights to your asset.

    These elements are not indexed.

    You need to work out the amount for each element then add the amounts together to find out your reduced cost base for the relevant CGT asset.

    Refer to What's new for information about proposed changes that will reduce all elements of the reduced cost base by the amount of any GST net input tax credits.

    The reduced cost base does not include any costs you have incurred that have been (or can be) claimed as deductions - for example, capital works deductions for capital expenditure.

    Example - Capital works deduction: effect on reduced cost base

    Danuta acquired a new income-producing asset on 28 September 1994 for $100,000. She sold it for $90,000 in November 2003. During the period she owned it she claimed capital works deductions of $7,500 for expenditure she incurred. Her capital loss is worked out as follows:

    Cost base

    $100,000

    less capital works deductions

    $7,500

    Reduced cost base

    $92,500

    less capital proceeds

    $90,000

    Capital loss

    $2,500

     

    End of example
    Last modified: 04 Mar 2016QC 27527