Private ruling: Capital gains tax and cost base
Date of advice: 25 March 2019
Published: May 2019
Ruling period: Year ended 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Can you include travel expenses specifically relating to the disposal of your residential rental property in the cost base of the property? | A1: No

Relevant facts and circumstances: You sold a residential investment property. You were recommended by your conveyance/solicitor to personally travel from XX to XX to collect and hand over the title deed for the property. You followed the advice and made the return trip to deal with the documents, all on the same day.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 26-31 | Income Tax Assessment Act 1997 section 110-25 | Income Tax Assessment Act 1997 section 110-35

Reasons for decision: Summary: Section 110-25 of the Income Tax Assessment Act of 1997 (ITAA 1997) provides the general rules about cost base and the five elements of a capital gains tax (CGT) asset’s cost base. The five elements are: ● acquisition costs ● incidental costs ● non-capital costs of ownership which are not deductible ● capital expenditure to increase the value of the asset, and ● capital expenditure to establish, preserve or defend title to the asset or a right over the asset The second element of the cost base is the incidental costs that the taxpayer incurs in acquiring the asset or which relate to a CGT event that happens in relation to the asset (subsection 110-25(3) of the ITAA 1997). Incidental costs that can be included in the cost base of a CGT asset are set out in section 110-35 of the ITAA 1997. Travel and accommodation costs are not listed as one of the incidental costs. The expenses you incurred do not fall under any of the other elements of the costs base. In your circumstances your travel expenses for the disposal of your rental property does not meet the requirements of section 110-25 of the ITAA 1997. Therefore your travel expense does not form part of your cost base.