ATO Interpretative Decision

ATO ID 2003/336 (Withdrawn)

Income Tax

• This ATOID is withdrawn as it is a simple restatement of the law and does not contain an interpretative decision.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Can costs incurred by an investor in attending investment seminars or purchasing computer software and investment books and journals be included in the cost base or reduced cost base of shares or units under Division 110 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

No. The costs of attending investment seminars or purchasing computer software and investment books and journals cannot be included in the cost base or reduced cost base of the shares or units under Division 110 of the ITAA 1997.

Facts

The taxpayer invests in shares and units. The taxpayer does not carry on a business as an investor.

In order to develop their investment knowledge, the taxpayer attended an investment portfolio seminar and purchased computer software and investment books and journals.

The taxpayer sold some of the shares that they acquired after incurring the expenditure and included the expenditure in the cost base of the shares when calculating their capital gain.

Reasons for Decision

The cost base of a CGT asset has five elements (section 110-25 of the ITAA 1997). These elements are:

(1)

money paid, or the market value of the property given, to acquire the asset

(2)

incidental costs of acquiring the asset or that relate to the CGT event that happens in relation to the asset

(3)

certain non-capital costs of ownership

(4)

capital expenditure on improvements and

(5)

capital expenditure in respect of title or right to the asset.

The reduced cost base of an asset has the same five elements as the cost base, except for the third: section 110-55 of the ITAA 1997.

The only element that may be relevant in relation to the expenditure incurred by the taxpayer is the second element, being incidental costs.

Section 110-35 of the ITAA sets out the five categories of incidental costs. They are:

(1)

remuneration for the services of a surveyor, valuer, auctioneer, accountant, broker, agent, consultant or legal adviser (remuneration for professional tax advice, however, is not included unless it is provided by a recognised tax adviser)

(2)

costs of transfer

(3)

stamp duty or other similar duty

(4)

costs of advertising for a buyer or seller or

(5)

valuation or apportionment costs.

The costs of attending investment seminars or purchasing computer software, investment books and journals do not fall within any category.

Accordingly, these expenses do not form part of the cost base or reduced cost base of the shares or units and cannot be taken into account in the calculation of a capital gain or capital loss from a CGT event happening to the shares or units.

Year of income:  Year ended 30 June 2002

Legislative References:
Income Tax Assessment Act 1997
   section 104-10
   Division 110
   section 110-25
   section 110-35
   subsection 110-55

Related Public Rulings (including Determinations)
Taxation Ruling IT 39
Taxation Determination TD 95/60

Keywords
Acquisition of assets
Acquisition of shares
Acquisition of unit trust units
Call options
Capital gains tax
CGT cost base
Disposal of assets
Disposal of shares
Put options

Business Line:  Losses and Capital Gains Tax Centre of Expertise

Date of publication:  15 May 2003

ISSN: 1445-2782