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INCOME TAX ASSESSMENT ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-1 - CAPITAL GAINS AND LOSSES: GENERAL TOPICS  

Division 110 - Cost base and reduced cost base  

Subdivision 110-A - Cost base  

SECTION 110-25  General rules about cost base  

110-25(1)  

 View history reference ITAA 36
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.

5 elements of the cost base

110-25(2)  

 ITAA 36
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).
 View history reference

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)  

 View history reference ITAA 36
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.

110-25(4)  

 View history reference ITAA 36
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.

110-25(5)  

 View history reference ITAA 36
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.

110-25(5A)  

 View history reference
Subsection (5) does not apply to capital expenditure incurred in relation to goodwill.

110-25(6)  

 ITAA 36
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)

110-25(8)  

(Repealed by No 32 of 2006)

110-25(9)  

(Repealed by No 32 of 2006)

110-25(10)  

(Repealed by No 32 of 2006)

110-25(11)  

(Repealed by No 32 of 2006)

Assume a CGT event for purposes of working out cost base at a particular time

110-25(12)  

 View history reference
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.


 



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