ATO Interpretative Decision

ATO ID 2003/336 (Withdrawn)

Income Tax

Capital Gains Tax: Cost base for share investor - incidental costs
FOI status: may be released

This ATOID is withdrawn as it is a simple restatement of the law and does not contain an interpretative decision.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.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

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.

Note 1: This ATO ID does not consider the general application of section 8-1 of the ITAA 1997 to the expenses.

Note 2: This note has been added to explain the legislative changes made to certain capital gains provisions, as a result of Act No 32 of 2006, which received Royal Assent on 6 April 2006.

For CGT events happening on or after 1 July 2005, section 110-35 of the ITAA 1997 has been amended to increase the range of incidental costs incurred to acquire or dispose of a CGT asset.

However, these changes do not affect the decision in this interpretative decision.

[HISTORY: This ID has been amended to explain the legislative changes made to certain elements of the CGT cost base, where the relevant CGT event happens on or after 1 July 2005.]

Date of decision: 17 February 2003

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

history

	Date:	Version:
	17 February 2003	Original statement
You are here	12 March 2010	Archived

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