The amount of the capital works deductions you claimed or were entitled to claim for a building, other structure or improvement is excluded from the reduced cost base.
Start of example
Example
The Keilys purchased a rental property on 1 July 2000 for $150,000. The property was built in March 1992 for $65,000. Therefore the Keilys can claim a capital works deduction at the rate of 2.5% per annum from the date of purchase.
The property was sold on 30 June 2003 and the cost base (before any adjustment for the capital works deductions) was $160,000. The adjusted cost base is calculated as follows:
$160,000 − [($65,000 × 2.5%) × 3]
= $160,000 − $4,875 (equates to 3 years' capital works deductions)
= $155,125
End of exampleSee also Capital gains tax in this publication.