• Step 2 Work out the cost base of your asset

    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

    Indexing your cost base

    In certain circumstances a cost base may be indexed up to 30 September 1999 in line with changes in the CPI; this is called the indexation method and the cost base would then become an 'indexed' cost base. For more information, see part A or the worked examples in chapter B2.

    The cost base of your asset is the total of:

    • what your asset cost you
    • certain incidental costs of buying and selling it - brokerage or agent's fees, legal fees, stamp duty and investment advisers' fees (but not investment seminar costs)
    • the costs of owning the asset, such as interest on monies borrowed to acquire the asset (generally, this will not apply to shares or units because you will usually have claimed or be entitled to claim these costs as tax deductions), and
    • any costs you incurred in establishing, maintaining and defending your ownership of it.

    You may also need to reduce the cost base for an asset such as a share or unit by the amount of any non-assessable payment you received from the company or fund during the time you owned the share or unit.

    For more information on how to determine your cost base and reduced cost base, see the Guide to capital gains tax 2007.

    Example 2: Calculating the cost base

    Fred bought the 1,000 shares that he sold in example 1 for $5 each ($5,000). When he bought them he was charged $50 brokerage and paid stamp duty of $25. When he sold the shares he paid $50 brokerage.

    The cost base of his shares is:

    $5,000 + $50 + $25 + $50 = $5,125.

    End of example
    Last modified: 04 Mar 2016QC 19437