Private ruling: cost base records
Date of advice: 16 June 2017
Published: October 2017
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Will the Commissioner accept a quantity surveyors report to substantiate the cost of the sheds and office space for capital gains tax purposes? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 Division 121 | Income Tax Assessment Act 1997 Subsection 121-20(5)

Reasons for decision: Summary: Capital gains tax provisions Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) states that a capital gain or capital loss is made only if a capital gains tax (CGT) event happens. Under section 104-10 of the ITAA 1997, CGT event A1, relating to the disposal of a CGT asset, will happen when you dispose of your interests in the property. You will make a capital gain if the capital proceeds from the disposal of each of your interests in each subdivided lot are more than the cost base of the interest. You will make a capital loss if those capital proceeds are less than the reduced cost base of the interest. Records Division 121 of the ITAA 1997 addresses record keeping requirements under the CGT provisions. It requires that you must keep records of every act, transaction, event or circumstance that may be relevant to working out whether you have made a capital gain or capital loss from a CGT event. If records are lost or have not been maintained for the purpose of calculating your CGT cost base you should first make an attempt to obtain the relevant documentation by approaching the relevant parties and obtaining copies. These may be obtained from builders, contractors, accountants, insurance bodies, solicitors, real estate agents and/or government authorities. In the event that the necessary documentation cannot be obtained, subsection 121-20(5) of the ITAA 1997 provides that if the necessary records of an act, transaction, event or circumstance do not already exist, you must reconstruct them or have someone else reconstruct them. In your case, you incurred costs in building the sheds and office. You do not have the receipts or records relating to these costs. In your specific circumstances, a quantity surveyor’s report will be accepted for the purpose of calculating your cost base for CGT purposes.

Relevant facts: You purchased land several years ago, after 1985. The total area of the property was more than 2 hectares. | You constructed a shed and at the time contained an office. | You constructed your home within the first 12 months. | A few years later you built the office above the garage. | You later constructed a second shed for business purposes on the property. | You hold the cost base information for the land. However you hold no receipts for construction of the office and sheds. You believed that you did not need records as it was your main residence. | You have sold the property. | You have not been able to obtain any receipts in relation to the costs of the sheds and office. | You wish to request a quantity surveyor’s report to estimate the cost of construction of the sheds and the office space as at the date of construction.