CHAPTER 3
-
SPECIALIST LIABILITY RULES
PART 3-1
-
CAPITAL GAINS AND LOSSES: GENERAL TOPICS
History
Pt 3-1 inserted by No 46 of 1998.
Division 110
-
Cost base and reduced cost base
History
Div 110 inserted by No 46 of 1998.
Subdivision 110-A
-
Cost base
SECTION 110-25
General rules about
cost base
110-25(1)
The
cost base
of a
*
CGT asset consists of 5 elements.
Note 1:
You need to keep records of each element: see Division
121
.
Note 2:
The cost base is reduced by net input tax credits: see section
103-30
.
Note 3:
An amount that makes up all or part of an element of the cost base of an asset may be determined under section
230-505
, if the amount is provided for acquiring a thing, and you start or cease to have a Division
230
financial arrangement as consideration for the acquisition of the thing.
History
S 110-25(1) amended by
No 15 of 2009
, s 3 and Sch 1 item 71, by inserting note 3 at the end, effective 26 March 2009. For application and transitional provisions see note under Div
230
heading.
S 110-25(1) amended by No 32 of 2006, s 3 and Sch 2 item 33, by omitting
"
, subject to subsections (7), (8) and (9)
"
after
"
5 elements
"
, applicable to CGT events happening on or after 1 July 2005.
S 110-25(1) amended by No 95 of 2004, No 89 of 2000 and substituted by No 169 of 1999.
5 elements of the cost base
110-25(2)
The first element is the total of:
(a)
the money you paid, or are required to pay, in respect of
*
acquiring it; and
(b)
the
*
market value of any other property you gave, or are required to give, in respect of acquiring it (worked out as at the time of the acquisition).
Note 1:
There are special rules for working out when you are required to pay money or give other property: see section
103-15
.
Note 2:
This element is replaced with another amount in many situations: see Division
112
.
110-25(3)
The second element is the
*
incidental costs you incurred. These costs can include giving property: see section
103-5
.
Note:
There is one situation to do with options in which the incidental costs relating to the CGT event are modified: see section
112-85
.
History
S 110-25(3) (not including the note) substituted by No 32 of 2006, s 3 and Sch 2 item 34, applicable to CGT events happening on or after 1 July 2005. S 110-25(3) (not including the note) formerly read:
110-25(3)
The second element is the
*
incidental costs you incurred:
(a)
to
*
acquire the
*
CGT asset; or
(b)
that relate to a
*
CGT event that happens in relation to the asset.
These costs can include giving property: see section
103-5
.
S 110-25(3) amended by No 94 of 1999.
110-25(4)
The third element is the costs of owning the
*
CGT asset you incurred (but only if you
*
acquired the asset after 20 August 1991). These costs include:
(a)
interest on money you borrowed to acquire the asset; and
(b)
costs of maintaining, repairing or insuring it; and
(c)
rates or land tax, if the asset is land; and
(d)
interest on money you borrowed to refinance the money you borrowed to acquire the asset; and
(e)
interest on money you borrowed to finance the capital expenditure you incurred to increase the asset
'
s value.
These costs can include giving property: see section
103-5
.
Note:
This element does not apply to personal use assets or collectables: see sections
108-17
and
108-30
.
History
S 110-25(4) amended by No 32 of 2006, s 3 and Sch 2 item 35, by substituting
"
costs of owning
"
for
"
non-capital costs of ownership of
"
, applicable to CGT events happening on or after 1 July 2005.
110-25(5)
The fourth element is capital expenditure you incurred:
(a)
the purpose or the expected effect of which is to increase or preserve the asset
'
s value; or
(b)
that relates to installing or moving the asset.
The expenditure can include giving property: see section
103-5
.
Note:
There are 3 situations involving leases in which this element is modified: see section
112-80
.
History
S 110-25(5) and (5A) substituted for s 110-25(5) by No 32 of 2006, s 3 and Sch 2 item 36, applicable to CGT events happening on or after 1 July 2005. S 110-25(5) formerly read:
110-25(5)
The fourth element is capital expenditure you incurred to increase the asset
'
s value. However, the expenditure must be reflected in the state or nature of the asset at the time of the
*
CGT event. (The expenditure can include giving property: see section
103-5
.)
Note:
There are 3 situations involving leases in which this element is modified: see section
112-80
.
110-25(5A)
Subsection (5) does not apply to capital expenditure incurred in relation to goodwill.
History
S 110-25(5) and (5A) substituted for s 110-25(5) by No 32 of 2006, s 3 and Sch 2 item 36, applicable to CGT events happening on or after 1 July 2005.
110-25(6)
The fifth element is capital expenditure that you incurred to establish, preserve or defend your title to the asset, or a right over the asset. (The expenditure can include giving property: see section
103-5
.)
110-25(7)
(Repealed by No 32 of 2006)
History
S 110-25(7) repealed by No 32 of 2006, s 3 and Sch 2 item 37, applicable to CGT events happening on or after 1 July 2005. S 110-25(7) formerly read:
Including indexation in cost base
110-25(7)
The
cost base
of a
*
CGT asset
*
acquired at or before 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 also includes indexation of the elements of the cost base (except the third element) if the requirements of Division
114
are met.
S 110-25(7) inserted by No 169 of 1999.
Former s 110-25(7) repealed by No 16 of 1999.
110-25(8)
(Repealed by No 32 of 2006)
History
S 110-25(8) repealed by No 32 of 2006, s 3 and Sch 2 item 37, applicable to CGT events happening on or after 1 July 2005. S 110-25(8) formerly read:
110-25(8)
However, for the purposes of working out the
*
capital gain of an entity mentioned in an item of the table from a
*
CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999, the
cost base
includes indexation only if the entity mentioned in the item chooses that the cost base includes indexation:
|
Choice of indexation
|
|
Item
|
For the purposes of working out the capital gain of this entity:
|
The cost base includes indexation only if this entity chooses so:
|
| 1 |
An individual |
The individual |
|
. |
| 2 |
A
*
complying superannuation entity |
The trustee of the complying superannuation entity |
|
. |
| 3 |
A trust |
The trustee of the trust |
|
. |
| 4 |
A listed investment company |
The company |
Note 1:
Section 103-25 specifies when you must make the choice and provides that the way you prepare your income tax return is evidence of your choice.
Note 2:
For each CGT asset whose cost base you need to work out, you may either choose to index the expenditure included in the asset
'
s cost base or not make that choice. If you do not choose to index the expenditure, your net capital gain includes only part of your capital gain on the CGT asset as worked out on the basis of the cost base not including indexation and reduced by your capital losses.
S 110-25(8) amended by No 169 of 2001 and inserted by No 169 of 1999.
Former s 110-25(8) repealed by No 16 of 1998.
110-25(9)
(Repealed by No 32 of 2006)
History
S 110-25(9) repealed by No 32 of 2006, s 3 and Sch 2 item 37, applicable to CGT events happening on or after 1 July 2005. S 110-25(9) formerly read:
110-25(9)
Expenditure does not form part of the
cost base
to the extent that it is a
*
bribe to a foreign public official.
S 110-25(9) inserted by No 58 of 2000.
110-25(10)
(Repealed by No 32 of 2006)
History
S 110-25(10) repealed by No 32 of 2006, s 3 and Sch 2 item 37, applicable to CGT events happening on or after 1 July 2005. S 110-25(10) formerly read:
110-25(10)
Expenditure does not form part of the
cost base
to the extent that it is a
*
bribe to a public official.
S 110-25(10) inserted by No 58 of 2000.
110-25(11)
(Repealed by No 32 of 2006)
History
S 110-25(11) repealed by No 32 of 2006, s 3 and Sch 2 item 37, applicable to CGT events happening on or after 1 July 2005. S 110-25(11) formerly read:
110-25(11)
Also, for the purpose of working out the
*
capital gain of a
*
life insurance company from a
*
CGT event happening after 30 June 2000 in respect of a
*
CGT asset that is a
*
virtual PST asset, the cost base includes indexation only if the life insurance company chooses that the cost base includes indexation.
Note:
Section
110-25
of the
Income Tax (Transitional Provisions) Act 1997
provides that, in working out the capital gain from a CGT event after 11.45 am on 21 September 1999 and before 1 July 2000 in respect of an asset of a life insurance company or registered organisation, the cost base includes indexation only if the company or organisation chooses it.
S 110-25(11) renumbered from s 110-25(9) (second occurring) by No 101 of 2003 and inserted by No 89 of 2000.
Assume a CGT event for purposes of working out cost base at a particular time
110-25(12)
If:
(a)
it is necessary to work out the
*
cost base at a particular time; and
(b)
a
*
CGT event does not happen in relation to the asset at or just after that time;
assume, for the purpose only of working out the cost base at the particular time, that such an event does happen in relation to the asset at or just after that time.
Note 1:
For example, in order to apply subsection
110-37(1)
, it is necessary for there to be a CGT event.
Note 2:
The assumption that a CGT event happens does not have any consequence beyond that stated. For example, it does
not
mean that the asset is afterwards to be treated as having been acquired at the particular time with a first element of cost base equal to all of its former cost base elements.
History
S 110-25(12) amended by No 32 of 2006, s 3 and Sch 2 item 38, by omitting
"
subsection (5) of this section or
"
after
"
in order to apply
"
in note 1, applicable to CGT events happening on or after 1 July 2005.
S 110-25(12) inserted by No 83 of 2004, s 3 and Sch 2 item 62, applicable to assessments for the 1998-99 income year and later income years.
S 110-25 inserted by No 46 of 1998.
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