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Can Property Holding Costs be included in the CGT Cost Base

March 27, 2018
by Duncan Melbin

Can Property Holding Costs be included in the CGT Cost Base

You can potentially add holding expenses to your Property Cost Base if not previously claimed as a tax deduction!

Can Property Holding Costs be included in the CGT Cost Base

Another recent ATO Private Ruling issued to a taxpayer deals with the issue of can property holding costs be included in the CGT cost base of the asset.

In this case the tax payer acquired the property as a hobby farm which they later rented to an unrelated party.

When it was rented a loss was made each year (expenses exceeded income) however the taxpayer did not / could not claim the losses against their other income.

Finally the property was sold and at that time the taxpayer moved to a new accountant who, as we do for all our new Clients, undertook extensive research into their affairs and ultimately recommended the Client seek a Private Ruling in order to see if the ATO will accept the adding of the unclaimed rental losses to the Capital Gains Tax (“CGT”) Cost Base (which in turn would help to reduce the Capital Gain made on the sale).

The ATO ruled in the taxpayer’s favour, finding in the positive that property holding costs can be included in the CGT Cost Base, and ultimately assist in reducing their tax bill!

Though the ATO noted –

“… Taxation Determination TD 2005/47 specifies that, where an amount that could have been deducted was not deducted, a taxpayer cannot include the amount (that could have been deducted) in the cost base of a CGT asset if the period for amending the income tax return to which the deduction relates has not expired.

This case was a good win for the taxpayer, and illustrates one reason why we often recommend to our Clients that a Private Ruling is sought.  It means no more uncertainty, and no risk taking, you get the answer upfront, and can proceed without fear of a future fight with the ATO.

If you have a tax issue that is a little uncertain, allow us to investigate the merits of your claim, and the potential upside of seeking a Private Ruling.  Contact Us here.

Duncan Melbin

Duncan Melbin

I am a Chartered Accountant, Chartered Tax Advisor and the Director of CapitalQ. For me, the average doesn't seem to satisfy. I am always striving to achieve new heights both personally and in business (albeit in my own modest way). I love working with our Clients who share a similar attitude and who strive to make their lives extraordinary (in their own ways).

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