Private ruling: Cost base
Date of advice: 2 February 2016
Published: March 2016
Ruling period: Year ended 30 June 20VV
Date scheme commenced: 1 July 2012

Ruling: Q1: Is the first element of the cost bases of the shares you acquired from the deceased the amounts you have calculated by reconstructing the cost bases? | A1: Yes

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. Your parent acquired shares, most of which were pre-CGT shares. Your parent died more than 10 years ago. Another relative inherited the shares on the death of your parent. Your relative died in the 20VV income year and you inherited 50% of the shares. You have not been able to locate the original records relating to the purchase of shares and thus do not have records of the number of shares purchased, the date of purchase or the value paid. You have reconstructed the cost base of the shares. You have provided the share register summary and all supporting documentation which you used to determine the cost base for the shares.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 110-25 | Income Tax Assessment Act 1997 Section 121-10 | Income Tax Assessment Act 1997 Section 121-20

Reasons for decision: Summary: Division 121 of the Income Tax Assessment Act 1997 (ITAA 1997) outlines that a taxpayer must keep records of matters that affect the capital gains or losses that they make. In particular, section 121-20 of the ITAA 1997 states that a taxpayer must keep records of every act, transaction, event or circumstances that can be reasonably be expected to be relevant to working out whether they have made a capital gain or loss from a CGT event. The records must show: • the nature of the act, transaction, event or circumstance • the date it happened • who were the parties to the transaction, and • how the act, transaction, event or circumstance is relevant to working out the capital gain or capital loss. | Detailed Reasoning - Reconstructing the cost base: If a taxpayer has not kept records or their records have been lost or destroyed, they should obtain as many details as possible in order to reconstruct the records. It may be necessary to contact the relevant company in which shares were held to obtain the information required to determine their cost base. If purchase dates and acquisition costs are not available within the records held, a taxpayer can contact the Share Registry of the company involved. Market values are also available from the Australian Stock Exchange, archives at local libraries, or on the worldwide web at various sites. Average share prices on the date of purchase are acceptable and can be used to calculate the cost base of the shares. If a taxpayer is unable to reconstruct these costs, then the costs cannot be included in the cost base of the shares. | Detailed Reasoning - Cost base: Division 110 of the ITAA 1997 identifies the cost base or reduced cost base of a CGT asset that a taxpayer may apply in calculating their capital gain or capital loss resulting from a CGT event. The cost base of a CGT asset is generally the cost of the asset when it was acquired, however it may also include certain other costs associated with acquiring, holding and disposing of the asset. Section 110-25 of the ITAA 1997 outlines the five elements that make up the cost base or reduced cost base of a CGT asset, these elements are: • money paid for or the market value of property given in exchange for the asset • incidental costs incurred in acquiring the asset • costs incurred in owning the asset • capital expenditure incurred in increasing the value of the asset; and • capital costs of preserving or defending your ownership of or rights to the asset. | Detailed Reasoning - Application to your situation: In your case, you do not have all the records to determine the cost base of all the shares you inherited from your relative. You have reconstructed the cost base of the shares. You have provided the share register summary and all supporting documentation which you used to determine the cost base for the shares. We are satisfied with the amounts you have calculated as the first element of the cost bases of the shares.