Division 110—Cost base and reduced cost base
Guide to Division 110
110-A Cost base
110-B Reduced cost base
110-1 What this Division is about
This Division tells you how to work out the cost base and reduced cost base of a CGT asset. You need to know these to work out if you make a capital gain or loss from most CGT events.
110-5 Modifications to general rules
After you have read the general rules, you need to know if there are any modifications to them. Division 112 lists each situation that may result in a modification and tells you where you can find the detailed provisions for each situation.
110-10 Rules about cost base not relevant for some CGT events
This table sets out each CGT event for which you do not need to know what the cost base or reduced cost base of a CGT asset is to work out if you make a capital gain or loss. The section describing the event tells you what amount is relevant instead.
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Rules about cost base not relevant for some CGT events |
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Event number |
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C3 |
End of option to acquire shares etc. |
104-30 |
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D1 |
Creating contractual or other rights |
104-35 |
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D2 |
Granting an option |
104-40 |
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D3 |
Granting a right to income from mining |
104-45 |
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E9 |
Creating a trust over future property |
104-105 |
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F1 |
Granting a lease |
104-110 |
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F3 |
Lessor pays lessee to get lease changed |
104-120 |
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F5 |
Lessor receives payment for changing lease |
104-130 |
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H1 |
Forfeiture of deposit |
104-150 |
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H2 |
Receipt for event relating to a CGT asset |
104-155 |
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K2 |
Bankrupt pays amount in relation to debt |
104-210 |
110-30 General rules about cost base
(1) The cost base of a
*CGT asset consists of 5 elements. It also includes indexation of those elements (except the third one) if you acquired the asset at least 12 months before a *CGT event happens in relation to the asset.To find out how to index expenditure: see Division 114.
Note: You need to keep records of each element: see Division 121.
5 elements of the cost base
(2) 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).
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.
(3) The second element is the
*incidental costs you incurred:(a) to
(b) that relate to the
*CGT event.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.
(4) The third element is the non-capital costs of ownership of 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.
(5) The fourth element is capital expenditure you incurred to increase the asset’s value. However, the expenditure must be reflected in the state or nature of the asset at the time of the
*CGT event. (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.
(6) 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.)
What does not form part of the cost base
(7) Expenditure in the second or third element does not form part of the cost base to the extent that you have deducted or can deduct it.
(8) Expenditure does not form part of the cost base to the extent of any amounts you have received as
*recoupment of it and that are not included in your assessable income.110-28 Cost base for partnership assets
(1) Expenditure in the second or third element does not form part of an entity’s
*cost base for its interest in a *CGT asset of a partnership to the extent that a partnership in which the entity is or was a partner has deducted or can deduct it.(2) Expenditure does not form part of an entity’s
*cost base for its interest in a *CGT asset of a partnership to the extent of any amounts that a partnership in which the entity is or was a partner has received as *recoupment of it and that are not included in the assessable income of the partnership.(1) There are 5 incidental costs you may have incurred:
(a) to
(b) that relate to a
*CGT event.(2) The first is remuneration for the services of a surveyor, valuer, auctioneer, accountant, broker, agent, consultant or legal adviser. However, remuneration for professional advice about the operation of this Act is not included unless it is provided by a
*recognised tax adviser.(3) The second is costs of transfer.
(4) The third is stamp duty or other similar duty.
(5) The fourth is:
(a) if you
(b) if a
*CGT event happened—costs of advertising to find a buyer.(6) The fifth is costs relating to the making of any valuation or apportionment for the purposes of this Part or Part 3-3.
Subdivision 110-B—Reduced cost base
110-55 General rules about reduced cost base
(1) The reduced cost base of a
*CGT asset consists of 5 elements. It does not include indexation of those elements.5 elements of the reduced cost base
(2) All of the elements (except the third one) of the reduced cost base of a
*CGT asset are the same as those for the *cost base.(3) The third element is:
(a) any amount included in your assessable income for any income year because of a balancing adjustment for the asset; and
(b) any amount that would have been so included apart from sections 42-285 and 42-290.
Note: Those sections deal with balancing adjustment relief and allow amounts that would otherwise be included in assessable income to be offset against other plant.
What does not form part of the reduced cost base
(4) The reduced cost base does not include an amount to the extent that you have deducted or can deduct it (including because of a balancing adjustment) or could have deducted apart from paragraph 43-70(2)(h).
Note: That paragraph excludes from deductibility under Division 43 expenditure that qualifies for the heritage conservation rebate.
(5) The reduced cost base does not include an amount that is taken into account under paragraph 42-175(b).
Note: That paragraph covers reductions in the undeducted cost of plant.
(6) Expenditure does not form part of the reduced cost base to the extent of any amounts you have received as
*recoupment of it and that are not included in your assessable income.(7) If your
*CGT asset is a *share in a company, its reduced cost base is reduced by the amount calculated under subsection (8) if:(a) the company makes a distribution to you under an
(b) an amount (the attributable amount) representing the distribution or part of it is reasonably attributable to profits derived by the company before you
*acquired the share; and(c) you are entitled to a rebate (the dividend rebate) of income tax on the part of the distribution that is a dividend (the dividend amount) under section 46 or 46A of the Income Tax Assessment Act 1936; and
(d) you were a
*controller (for CGT purposes) of the company, or an *associate of such a controller, when the arrangement was made or carried out.(8) The amount of the reduction is:
110-60 Reduced cost base for partnership assets
(1) The third element of an entity’s reduced cost base for its interest in a
*CGT asset of a partnership is the entity’s share of:(a) an amount included in the assessable income of the partnership because of a balancing adjustment for the asset; and
(b) any amount that would have been so included apart from sections 42-285 and 42-290;
calculated according to the entity’s share in the partnership net income or net loss.
(2) Expenditure does not form part of an entity’s reduced cost base for its interest in a
*CGT asset of a partnership to the extent that a partnership in which the entity is or was a partner has deducted or can deduct it (including because of a balancing adjustment), or could have deducted it apart from paragraph 43-70(2)(h).(3) Expenditure does not form part of an entity’s reduced cost base for its interest in a
*CGT asset of a partnership to the extent that a partnership in which the entity is or was a partner has taken the expenditure into account under paragraph 42-175(b).(4) Expenditure does not form part of an entity’s reduced cost base for its interest in a
*CGT asset of a partnership to the extent of any amounts that a partnership in which the entity is or was a partner has received as *recoupment of it and that are not included in the assessable income of the partnership.(5) If a
*CGT asset of a partnership is a *share in a company, an entity’s reduced cost base for its interest in the share is reduced by the amount calculated under subsection (7) if:(a) the company makes a distribution to the partnership under an
(b) an amount (the attributable amount) representing the distribution or part of it is reasonably attributable to profits derived by the company before the partnership
*acquired the share; and(c) the partnership is entitled to a rebate (the dividend rebate) of income tax on the part of the distribution that is a dividend (the dividend amount) under section 46 or 46A of the Income Tax Assessment Act 1936; and
(d) a partner in the partnership was a
*controller (for CGT purposes) of the company, or an *associate of such a controller, when the arrangement was made or carried out.(6) The amount of the reduction is:
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