ato logo

Elements of the cost base

Last updated 3 March 2016

The cost base of a CGT asset is made up of five elements. You need to work out the amount for each element then add the amounts together to work out the cost base of each of your CGT assets.

If you are registered for GST, the first, second and third elements of the cost base of an asset you acquired after 13 May 1997 are reduced by the amount of any GST input tax credits included in the cost. Refer to What's new for information about proposed changes that will reduce all elements of the cost base by the amount of any GST net input tax credits.

First element: money or property given for the asset

The money paid (or required to be paid) for the asset and the market value of property given (or required to be given) to acquire the asset are included in the first element.

Second element: incidental costs of the CGT event or of acquiring the CGT asset

There are five incidental costs you may have incurred. They are:

  • remuneration for the services of a surveyor, valuer, auctioneer, accountant, broker, agent, consultant or legal adviser (you can only include the cost of advice concerning the operation of the tax law as an incidental cost if the advice was provided by a recognised tax adviser and you incurred the cost after 30 June 1989)
  • costs of transfer
  • stamp duty or other similar duty
  • costs of advertising to find a seller or buyer, and
  • costs relating to the making of any valuation or apportionment for the purposes of determining your capital gain or capital loss. Do not include expenditure for which you have or may have a deduction for income tax purposes in any year.

Third element: non-capital costs associated with owning the asset

Non-capital costs associated with owning an asset include rates, land taxes, repairs and insurance premiums. Non-deductible interest on borrowings to finance a loan used to acquire a CGT asset and on loans used to finance capital expenditure you incur to increase an asset's value are also third element costs.

You can only include non-capital costs of ownership in the cost base if you cannot claim a tax deduction for them and if you acquired the asset on or after 21 August 1991. You cannot include them at all in the cost base of collectables or personal use assets.

You cannot index these costs or use them to work out a capital loss. See Indexation of the cost base.

Fourth element: capital costs associated with increasing the value of your asset

This element is relevant only if the expenditure was incurred to increase the asset's value and is reflected in the state or nature of the asset at the time of the CGT event – for example, if you paid for a carport to be built on your rental investment property.

Fifth element: capital costs of preserving or defending your ownership of or rights to your asset

Capital expenses you incur to preserve or defend your ownership of or rights to the asset – for example, if you paid a call on shares - come under this element.