Private ruling: CGT - record keeping
Date of advice: 14 May 2026
Published: 27 July 2026
Ruling period: Year ended 30 June 20YY
Date scheme commenced: 1 July 20YY

Ruling: Q1: For the purposes of the record keeping requirements in Division 121 of the Income Tax Assessment Act 1997 (ITAA 1997), are you able to reconstruct the figures associated with establishing the cost base of the property by obtaining estimates from a quantity surveyor? | A1: Yes.

Relevant facts and circumstances: Individual 1 and Individual 2 (the Taxpayers) purchased Property 1 at a specified location in 19XX. Property 1 was the main residence of the Taxpayers. In 19YY Property 1 was subdivided and a new dwelling commenced to be constructed at the rear of the property. The new dwelling was Property 2. The Taxpayers undertook the construction of Property 2 as an owner builder. In 19XX the existing residence at Property 1 was sold and the Taxpayers moved into the newly constructed dwelling at Property 2. In 20YY the Taxpayers moved out of Property 2 and moved into a new property. Property 2 was rented out. Property 2 was sold in 20XX. The records relating to the construction of the new dwelling at Property 2 have been lost and destroyed due to computer system damages. The Taxpayers have exhausted all avenues to obtain source documents to reconstruct the records to establish the cost base of the dwelling at Property 2 for capital gains tax purposes.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-5 | Income Tax Assessment Act 1997 section 110-25 | Income Tax Assessment Act 1997 Division 121

Reasons for decision: Summary: The capital gains tax (CGT) provisions are contained in Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 (ITAA 1997). Broadly, the provisions include in your assessable income any assessable gain or loss made when a CGT event happens to a CGT asset that you own. Section 102-5 of the ITAA 1997 provides that a taxpayer's assessable income includes their net capital gain (if any) for the income year. CGT event A1 happens if you dispose of your ownership interest in a CGT asset. You make a capital gain if the proceeds from the sale of the CGT asset are more than the CGT asset's cost base. You make a capital loss if the proceeds from the sale of the CGT asset are less than the cost base of the CGT asset. Section 110-25 of the ITAA 1997 describes the general rules about costs base. Subsection 110-25(1) of the ITAA 1997 provides that the cost base of a CGT asset consists of five elements, with Note 1 stating ' You need to keep records of each element: see Division 121. ' Division 121 of the ITAA 1997 addresses record keeping requirements under the capital gains tax (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, government authorities etc. 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. Taxation Ruling TR 97/25 Income tax: property development: deduction for capital expenditure on construction of income producing capital works, including buildings and structural improvements (TR 97/25) addresses the use of an estimate when actual construction expenditure is not available. It allows that in those circumstances, we would accept a building cost estimate by an appropriately qualified person. In these cases a valuation estimate by an appropriately qualified person would be accepted. An appropriately qualified person would have expertise in calculating these capital costs and would be likely to be accepted by a court or tribunal as an expert in the relevant field. The question of whether a person has the required expertise is an issue of fact in each case. TR 97/25 provides guidance on who we consider to be an appropriately qualified person as follows: 25. We consider that an appropriately qualified person has expertise in the calculation of building construction costs and is likely to be accepted by a court or tribunal as an expert witness on the issue of calculating the cost of construction of the particular building. That expertise may have been acquired through a course of study or through relevant experience in providing building cost estimates over a significant period of time. 26. The attainment of relevant professional qualifications or recognition by an appropriate professional association or organisation is indicative of expertise in this field. 27. Unless they are otherwise qualified, valuers, real estate agents, accountants and solicitors generally have neither the relevant qualifications nor experience to make such an estimate. 28. Appropriately qualified people might include: • a quantity surveyor, who has expertise in the relevant type of construction; • a clerk of works, such as a project organiser for major building projects; • a supervising architect who approves payments at each stage in major projects and who may approve individual payments to subcontractors in smaller projects; or • a builder who is experienced in estimating construction costs of similar building projects. 29. The question of whether a person has the required expertise is an issue of fact in each case. In this case, costs were incurred in constructing a building on the property. This is a capital cost that would be expected to increase the value of the asset and could be included (subject to record keeping requirements) in the fourth element of the cost base. The receivers have been unable to obtain receipts and invoices relating to these costs from the relevant parties. We consider that sufficient efforts have been made to reconstruct the records. Accordingly, for the purposes of reconstructing the CGT cost base of the property we will accept estimates from an appropriately qualified person in accordance with TR 97/25. Any reconstructed cost amount estimated by an appropriately qualified person can be included in the cost base of the CGT asset pursuant to section 110-25 of the ITAA 1997. This would include a quantity surveyor who has appropriate expertise in the relevant type of construction.

Does IVA apply to this private ruling?: Part IVA of the Income Tax Assessment Act 1936 contains anti-avoidance rules that can apply in certain circumstances where you or another taxpayer obtains a tax benefit, imputation benefit or diverted profits tax benefit in connection with an arrangement. | If Part IVA applies, the tax benefit or imputation benefit can be cancelled (for example, by disallowing a deduction that was otherwise allowable) or you or another taxpayer could be liable to the diverted profits tax. | We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part. | If you want us to rule on whether Part IVA applies, we will need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply. | For more information on Part IVA, go to our website ato.gov.au/gaar .