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Edited version of your private ruling
Authorisation Number: 1012568225825
Ruling
Subject: Cost base of CGT asset
Question
Can the listed expenses be included in the third element of the cost base of the property?
Answer
Yes.
This ruling applies for the following periods:
Year ending 30 June 2014
The scheme commences on:
1 July 2013
Relevant facts and circumstances
You purchased an investment property (the property) jointly with your former spouse.
Your former spouse CGT liability was rolled over to you in full.
You have since remarried, moved into the property with your spouse and at that time it became your main residence.
You will make a capital gain when changing the title of the property to include your spouse.
The expenses you have listed are;
· interest on borrowings,
· rates,
· land taxes,
· repairs and
· insurance premiums.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 110-25,
Income Tax Assessment Act 1997 section 110-35 and
Income Tax Assessment Act 1997 section 110-45
Reasons for decision
Summary
You can include the interest on borrowings, rates, land taxes, repairs and insurance premiums in the third element of your property's cost base.
Detailed reasoning
Under section 110-25 of the ITAA 1997, the cost base of a CGT asset is made up of five elements:
1. money or property given for the asset
2. incidental costs of acquiring the CGT asset or that relate to the CGT event
3. costs of owning the 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 ownership of or rights to the asset.
Element 3
The costs of owning an asset consists of any expenditure incurred by a taxpayer to the extent to which it is incurred in connection with the continuing ownership of the asset.
These costs include interest on money borrowed to acquire an asset, costs of maintaining, repairing and insuring an asset, rates and land tax, interest on money borrowed to refinance the money borrowed to acquire an asset, and interest on any money borrowed to finance capital expenditure incurred to increase an asset's value.
Subsection 110-45(1B) of the ITAA 1997 states that you do not include such costs if you acquired the asset before 21 August 1991. Nor do you include them if you:
· have claimed a tax deduction for them in any income year, or
· omitted to claim a deduction but can still claim it because the period for amending the relevant income tax assessment has not expired.
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.
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