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INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART IIIA - CAPITAL GAINS AND CAPITAL LOSSES  

Division 3 - Determination of capital gains and capital losses  

SECTION 160ZH  COST BASE, INDEXED COST BASE AND REDUCED COST BASE  

160ZH(1)  [Determination of cost base]  


Subject to the following provisions of this section, for the purposes of this Part, the cost base to a taxpayer of an asset is the sum of:


(a) the amount of any consideration in respect of the acquisition of the asset;


(b) the amount of the incidental costs to the taxpayer of the acquisition of the asset;


(ba) except where the asset is a personal-use asset of the taxpayer - the amount of the non-capital costs to the taxpayer of the ownership of the asset;


(c) the amount of any expenditure of a capital nature incurred by the taxpayer to the extent to which it was incurred for the purpose of enhancing the value of the asset and is reflected in the state or nature of the asset at the time of disposal of the asset;


(d) the amount of any expenditure of a capital nature incurred by the taxpayer to the extent to which it was incurred in establishing, preserving or defending the taxpayer's title to, or a right over, the asset; and


(e) the amount of the incidental costs to the taxpayer of the disposal of the asset.

Note:

Section 160ZJA affects the meaning of the amount of any consideration or the amount of any expenditure.

160ZH(2)  [Determination of indexed cost base]  


Subject to the following provisions of this section, for the purposes of this Part, the indexed cost base to a taxpayer of an asset is the sum of:


(a) the indexed amount of any consideration in respect of the acquisition of the asset;


(b) the indexed amount of the incidental costs to the taxpayer of the acquisition of the asset;


(ba) except where the asset is a personal-use asset of the taxpayer - the amount of the non-capital costs to the taxpayer of the ownership of the asset;


(c) the indexed amount of any expenditure of a capital nature incurred by the taxpayer to the extent to which it was incurred for the purpose of enhancing the value of the asset and is reflected in the state or nature of the asset at the time of disposal of the asset;


(d) the indexed amount of any expenditure of a capital nature incurred by the taxpayer to the extent to which it was incurred in establishing, preserving or defending the taxpayer's title to, or a right over, the asset; and


(e) the indexed amount of the incidental costs to the taxpayer of the disposal of the asset.

Note:

Section 160ZJB affects the meaning of the amount of any consideration or the amount of any expenditure.

160ZH(3)  [Determination of reduced cost base]  


Subject to the following provisions of this section, for the purposes of this Part, the reduced cost base to a taxpayer of an asset is the sum of:


(a) the reduced amount of any consideration in respect of the acquisition of the asset;


(b) the reduced amount of the incidental costs to the taxpayer of the acquisition of the asset;


(c) the reduced amount of any expenditure of a capital nature incurred by the taxpayer to the extent to which it was incurred for the purpose of enhancing the value of the asset and is reflected in the state or nature of the asset at the time of disposal of the asset;


(d) the reduced amount of any expenditure of a capital nature incurred by the taxpayer to the extent to which it was incurred in establishing, preserving or defending the taxpayer's title to, or a right over, the asset; and


(e) the reduced amount of the incidental costs to the taxpayer of the disposal of the asset.

Note:

Section 160ZK affects the meaning of the reduced amount of any consideration, the reduced amount of incidental costs, or the reduced amount of any expenditure.

160ZH(3A)  [Reduced cost base under commercial debt forgiveness provisions]  


If the relevant cost base of an asset is taken to be reduced under Subdivision 245-E of Schedule 2C in its application to the year of income in which the disposal of the asset occurs or a previous year of income, the reference in subsection (1), (2) or (3) to the sum of the amounts referred to in that subsection is to be treated as a reference to that sum as so taken to be reduced.

160ZH(4)  [Consideration for acquisition]  


Subject to the following provisions of this section, for the purposes of this Part, the consideration in respect of the acquisition of an asset is:


(a) if the taxpayer has paid or is required to pay an amount or amounts of money in respect of the acquisition - that amount or the sum of those amounts;


(b) if the taxpayer has given or is required to give property other than money in respect of the acquisition - the market value of that property at the time of the acquisition; or


(c) if the taxpayer has given or is required to give both an amount or amounts of money and property other than money in respect of the acquisition - the sum of that amount or those amounts and the market value of that property at the time of the acquisition.

160ZH(5)  [Incidental costs - acquisition of assets]  


Subject to subsection (6), a reference in subsection (1), (2) or (3) to the incidental costs to a taxpayer of the acquisition of an asset is a reference to any expenditure incurred by the taxpayer to the extent to which it was incurred in connection with the acquisition, being:


(a) fees, commission or remuneration for the professional services of a surveyor, valuer, auctioneer, accountant, broker, agent, consultant or legal adviser;


(b) costs of transfer, including stamp duty or other similar duty;


(c) costs of advertising to find a seller; or


(d) costs in relation to the making of any valuation or apportionment under or for the purposes of this Part in respect of the acquisition;

but excluding any expenditure incurred by way of fees or commission for professional advice that:


(e) concerns the operation of this Act; and


(f) was not provided by a recognised tax adviser (as defined by section 995-1 of the Income Tax Assessment Act 1997).

160ZH(6)  [Incidental costs do not include deductible amounts]  


The incidental costs to a taxpayer of the acquisition of an asset do not include any amount referred to in paragraph (5)(a), (b), (c) or (d) that has been allowed or is allowable as a deduction to the taxpayer in respect of any year of income.

160ZH(6A)  [Non-capital costs]  


Subject to subsection (6B), a reference in subsection (1) or (2) to the non-capital costs to a taxpayer of the ownership of an asset is a reference to any expenditure of a non-capital nature incurred by the taxpayer to the extent to which it was incurred:


(a) by way of interest on a loan taken out to finance the acquisition of the asset; or


(b) in connection with the continuing ownership of the asset, for example:


(i) expenditure on repairs to, or maintenance of, the asset; or

(ii) premiums to insure the asset; or

(iii) if the asset is land - rates or land tax.

160ZH(6B)  [Non-capital costs do not include deductible amounts]  


The non-capital costs to a taxpayer of the ownership of an asset do not include any amount that has been allowed or is allowable as a deduction to the taxpayer in respect of any year of income.

160ZH(7)  [Incidental costs - disposal of asset]  


Subject to subsections (7A) and (8), a reference in subsection (1), (2) or (3) to the incidental costs to a taxpayer of the disposal of an asset is a reference to any expenditure incurred by the taxpayer to the extent to which it was incurred in connection with the disposal, being:


(a) fees, commission or remuneration for the professional services of a surveyor, valuer, auctioneer, accountant, broker, agent, consultant or legal adviser;


(b) costs of transfer, including stamp duty or other similar duty;


(c) costs of advertising to find a buyer; or


(d) costs in relation to the making of any valuation or apportionment under or for the purposes of this Part in respect of the disposal;

but excluding any expenditure incurred by way of fees or commission for professional advice that:


(e) concerns the operation of this Act; and


(f) was not provided by a recognised tax adviser (as defined by section 995-1 of the Income Tax Assessment Act 1997).

160ZH(7A)  [Reference to incidental costs of disposal]  


Subject to subsection (8), if the disposal of an asset is taken to have occurred under paragraph 160M(6A)(b) or subsection 160M(6BB) because of the application of subsection 160M(6) or (6BA) in relation to the creation of the asset, a reference in subsection (1), (2) or (3) of this section to the incidental costs to a taxpayer of the disposal of the asset is a reference to expenditure described in subsection (7B).

160ZH(7B)  [Expenditure in creation of assets]  


For the purposes of subsection (7A), the expenditure is any expenditure incurred by the taxpayer to the extent to which it was incurred in connection with the creation of the asset, being:


(a) fees, commission or remuneration for the professional services of a surveyor, valuer, auctioneer, accountant, broker, agent, consultant or legal adviser; or


(b) costs of registration of any instrument, including stamp duty or other similar duty; or


(c) costs of advertising to find a buyer; or


(d) costs in relation to the making of any valuation or apportionment under or for the purposes of this Part in respect of the creation of the asset;

but excluding any expenditure incurred by way of fees or commission for professional advice that:


(e) concerns the operation of this Act; and


(f) was not provided by a recognised tax adviser (as defined by section 995-1 of the Income Tax Assessment Act 1997).

160ZH(8)  [Incidental costs do not include deductible amounts]  


The incidental costs to a taxpayer of the disposal of an asset do not include any amount referred to in paragraph (7)(a), (b), (c) or (d), or (7B)(a), (b), (c) or (d), that has been allowed or is allowable as a deduction to the taxpayer in respect of any year of income.

160ZH(9)  [No consideration, excessive or inadequate consideration]  


For the purposes of the application of subsection (1), (2) or (3) in determining the cost base, the indexed cost base or the reduced cost base to a taxpayer of an asset, if:


(a) the taxpayer acquired the asset from another person (not being an acquisition resulting from the doing by that other person of an act or thing that did not constitute a disposal of the asset by that other person for the purposes of this Part) and did not pay or give any consideration in respect of the acquisition; or


(b) the whole or a part of the consideration paid or given by the taxpayer in respect of the acquisition cannot be valued; or


(c) both of the following subparagraphs apply:


(i) the amount that would, but for this paragraph, be taken to be the consideration paid or given by the taxpayer in respect of the acquisition was:

(A) if the taxpayer acquired the asset as a result of the disposal of the asset by another person - greater or less than the market value of the asset at the time of the acquisition; or

(B) if the taxpayer acquired the asset as a result of the doing by another person of an act or thing that did not constitute a disposal of the asset by that other person for the purposes of this Part - greater than the market value of the asset at the time of the acquisition;

(ii) the taxpayer and the person from whom the taxpayer acquired the asset were not dealing with each other at arm's length in connection with the acquisition;

the taxpayer shall be deemed to have paid or given as consideration in respect of the acquisition of the asset an amount equal to the market value of the asset at the time of the acquisition.

160ZH(10)  [Where another provision deems no consideration]  


Subsection (9) does not apply by virtue of paragraph (a) of that subsection in relation to an acquisition by a taxpayer where another provision of this Part (however expressed) deems no consideration to have been paid or given by the taxpayer in respect of the acquisition.

160ZH(11)  [Recouped expenditure]  


In determining the cost base, the indexed cost base or the reduced cost base to a taxpayer of an asset, account shall not be taken of the amount or value of any part of the consideration paid or given by the taxpayer, or of the amount of any costs or expenditure incurred by the taxpayer, in respect of which the taxpayer has been recouped, or is entitled to be recouped, by any person.

160ZH(12)  [Merged assets, split assets, changed assets]  


If, in the case of the happening of any of the following events without any change in the beneficial ownership of the asset or assets concerned, that is to say-


(a) two or more assets having been merged or an asset having been divided into two or more assets; or


(b) an asset having been changed in whole or in part into an asset of a different nature,

the value of an asset as it existed after the happening of the relevant event (in subsections (13) and (14) referred to as the ``relevant asset'') is in whole or in part derived from or otherwise attributable to an asset as it existed immediately before the happening of the relevant event (in subsections (13) and (14) referred to as the ``original asset''), then subsections (13) and (14) have effect.

160ZH(13)  [Cost base etc includes part of cost base of original asset]  


For the purpose of determining the cost base, the indexed cost base or the reduced cost base to a taxpayer of the relevant asset on the disposal of that asset, any amount that would have been included in the cost base, the indexed cost base or the reduced cost base, as the case may be, to the taxpayer of the original asset if-


(a) the relevant event had not happened;


(b) the original asset had been disposed of at the time of the relevant event; and


(c) this Part had been in force and applied in relation to the disposal,

shall, to such extent as is reasonable, be included in the cost base, the indexed cost base or the reduced cost base, as the case may be, to the taxpayer of the relevant asset.

160ZH(14)  [Original asset continues in existence]  


If the original asset continued in existence to any extent after the happening of the relevant event-


(a) for the purpose of determining the cost base, the indexed cost base or the reduced cost base to the taxpayer of the original asset as so continuing in existence in the event of the disposal of that asset, the amount that would, if the relevant event had not happened, be that cost base, indexed cost base or reduced cost base, as the case may be, shall be reduced by any amount that, by virtue of the application of subsection (13) in relation to the original asset, is included in the cost base, indexed cost base or reduced cost base, as the case may be, to the taxpayer of the relevant asset; and


(b) to the extent (if any) to which it is necessary to apply this paragraph for the purpose of determining the cost base, the indexed cost base or the reduced cost base to the taxpayer of the original asset as so continuing in existence in the event of the disposal of that asset before the disposal of the relevant asset, the amount that would, if the relevant event had not happened, be that cost base, indexed cost base or reduced cost base shall be reduced by any amount that would have been included in the cost base, the indexed cost base or the reduced cost base, as the case may be, to the taxpayer of the relevant asset by virtue of subsection (13) if the relevant asset had been disposed of immediately before the disposal of the original asset.


 



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