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Edited version of private ruling
Authorisation Number: 1011745399525
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Ruling
Subject: Capital gains tax - cost base
Question
Can you include the purchase costs of communication devices when calculating the cost base of your investment properties?
Answer
No.
This ruling applies for the following period:
Year ending 30 June 2010
The scheme commences on:
1 July 2009
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You joined a business venture sometime after September 1985.
You then purchased communication equipment to facilitate communication in connection with your business venture.
You subsequently purchased three rental properties.
You also used the communication equipment in the management of the rental properties.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 102-5
Income Tax Assessment Act 1997 Subsection 108-5(1)
Income Tax Assessment Act 1997 Section 110-25
Reasons for decision
A capital gain or loss is calculated for tax purposes by deducting the cost base of your asset from the proceeds received on sale. The cost base of a capital gains tax asset is generally the cost of the asset when you bought it. However, it also includes certain other costs associated with acquiring, holding and disposing of the asset.
The cost base of a CGT asset is made up of five elements:
· Money or property given for the asset
· Incidental costs of acquiring the CGT asset or that relate to that event
· Costs of owning the asset
· Capital costs to increase or preserve the value of your asset or to install or move it
· Capital costs of preserving or defending your ownership of rights to your asset
You need to work out the amount for each element, then add them together to work out the cost base of your CGT asset.
In your case your purchases of communications equipment do not fit into any of the five elements that make up a cost base.
Therefore these costs cannot be included when working out your cost base.