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  • Cost base of assets

    The cost base of a capital gains tax (CGT) asset is generally what it cost you to buy it, plus other costs you incur to hold and dispose of it.

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    Work out the cost base for a capital gain

    Work out your cost base using our online calculator and record keeping tool. You can also access the tool and save your data through your myGov accountExternal Link.

    CGT calculator and record keeping tool

    To work out the cost base of a CGT asset yourself, add these 5 elements:

    1. Money paid or property given for the CGT asset
    2. Incidental costs of acquiring the CGT asset or that relate to the CGT event
    3. Costs of owning the CGT asset
    4. Capital costs to increase or preserve the value of your asset or to install or move it
    5. Capital costs of preserving or defending your title or rights to your CGT asset

    Generally you do not include any costs for which you can claim a tax deduction. For example, you do not include the cost of capital works for which you can claim a deduction.

    First element: money paid or property given for the CGT asset

    This is 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.

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

    There are 10 incidental costs you may have incurred when you acquired the asset or when the CGT event (such as selling the asset) occurred.

    They are:

    • Remuneration for the services of a surveyor, valuer, auctioneer, accountant, broker, agent, consultant or legal adviser. You can include the cost of tax advice as an incidental cost if the advice was provided by a recognised tax adviser and you incurred it after 30 June 1989.
    • Costs of transfer.
    • Stamp duty or other similar duty.
    • Costs of advertising or marketing (but not entertainment) to find a seller or buyer.
    • Costs of making a valuation or apportionment to calculate your capital gain or loss.
    • Search fees for an asset. This includes fees to check land titles but not travel costs to find an asset suitable for purchase.
    • Cost of a conveyancing kit (or a similar cost).
    • Borrowing expenses, such as loan application fees and mortgage discharge fees.
    • Expenditure incurred as a direct result of your ownership of a CGT asset ending. This includes termination and exit fees.
    • Expenditure by the head company of a consolidated group where the expenditure:
      • is to an entity that is not a member of the group
      • reasonably relates to a CGT asset held by the head company
      • is incurred because of a transaction between members of the group.
       

    Third element: costs of owning the CGT asset

    The costs of owning an asset include:

    • rates
    • land taxes
    • repairs
    • insurance premiums
    • any non-deductible interest on loans used to finance
      • the acquisition of a CGT asset
      • capital expenditure to increase an asset’s value.
       

    These expenses can be included in the cost base only if they are not deductible. This would happen if, for example, they were incurred for vacant land.

    You cannot:

    • include costs for which you can claim an income tax deduction
    • include these costs in the cost base of collectables or personal use assets
    • index these costs
    • use these costs to work out a capital loss
    • include these costs if you acquired the asset before 21 August 1991.

    Fourth element: capital costs to increase or preserve the value of your asset or to install or move it

    This is capital costs you incurred:

    • for the purpose of increasing or preserving the asset’s value – for example, the costs of applying (successfully or unsuccessfully) for zoning changes
    • to install or move an asset.

    The fourth element does not include capital expenditure for goodwill. This may be deductible as a business-related cost.

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

    This is your capital expenditure to preserve or defend your ownership of, or rights to, the asset – for example, if you paid a call on shares.

    Work out the reduced cost base for a capital loss

    The reduced cost base of a CGT asset has the same 5 elements as the cost base, except that the third element is different.

    Use the Capital gains tax calculator

    To work out the reduced cost base of a CGT asset yourself, add these 5 elements:

    1. Money paid or property given for the CGT asset
    2. Incidental costs of acquiring the CGT asset or that relate to the CGT event
    3. Balancing adjustment amount for the asset. This is any amount that is assessable because of a balancing adjustment for the asset. It includes amounts that would be assessable if certain balancing adjustment relief were not available.
    4. Capital costs to increase or preserve the value of your asset or to install or move it
    5. Capital costs of preserving or defending your title or rights to your CGT asset.

    You do not index these elements because you cannot use indexation for capital losses.

    Generally you do not include any costs for which you can claim a tax deduction, such as the cost of capital works.

    Foreign currency amounts

    If the cost base or reduced cost base includes an amount paid in a foreign currency, you must convert it to Australian currency.

    You use the exchange rate at the time of the relevant transaction or event – for example, when the money was paid for the asset.

    Amounts not included

    The following amounts are not included in the cost base or the reduced cost base.

    Deductible costs

    The cost base and reduced cost base do not include any costs you can claim as a tax deduction.

    Example: effect of capital works deduction on reduced cost base

    Danuta acquired a new income-producing asset on 28 September 2005 for $100,000.

    She sold it for $90,000 in November 2017.

    While 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

    In some cases, a deduction you have claimed on a CGT asset can be partly or wholly 'reversed'. This happens if the value of part or all of the deduction may be declared as income in the year the CGT event happens.

    In this case, the cost base of the CGT asset is increased by the amount you have to include in your assessable income.

    GST for registered businesses

    If you are:

    • registered for GST, you reduce each element by the amount of any GST net input tax credits included in the cost
    • not registered for GST, you do not make any adjustment. The GST is included in the cost base.

    Expenditure on heritage conservation, land care and water facilities

    If you acquired a CGT asset after 13 May 1997, the cost base and reduced cost base do not include:

    • heritage conservation expenditure
    • land care and water facilities expenditure incurred after 12 November 1998 that gave rise to a tax offset.

    Recouped expenditure

    Recouped expenditure includes insurance payouts you receive or an amount paid for by someone else.

    You do not include expenditure you subsequently recoup in the cost base and reduced cost of a CGT asset, except to the extent you include the recouped amount in your assessable income.

    Example: recouped expenditure

    John bought a building in 2000 for $200,000 and incurred $10,000 in legal costs associated with the purchase.

    As part of the settlement, the vendor agreed to pay $4,000 of the legal costs. John did not claim any part of the $6,000 he paid in legal costs as a tax deduction.

    John later sells the building. As he received reimbursement of $4,000 of the legal costs, he includes only the $6,000 he incurred in the cost base in working out his capital gain.

    End of example

    Expenditure not attributable to asset

    If only part of your expenditure can be reasonably attributed to acquiring a CGT asset, only that part can be included in the asset’s cost base or reduced cost base.

    The same applies to other elements of the cost base and reduced cost base.

    Similarly, if a CGT event happens to only part of a CGT asset, you apportion the cost base or reduced cost base of the asset to work out your capital gain or loss.

    CGT events where cost base is not used

    For some CGT events the cost base and reduced cost base are not relevant. For example, if you enter into an agreement not to work in a particular industry for a period of time, you calculate your capital gain or loss by comparing the capital proceeds with the incidental costs, which is only one element of the cost base.

    For depreciating assets there are special rules for calculating capital gains – the cost base is not relevant.

    Interaction with other rules

    There are other CGT rules that may affect the cost base or reduced cost base of an asset. You should check these rules if:

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    Last modified: 04 Aug 2021QC 66022