Managing the cost base for capital gains tax (CGT) assets

For shares and managed funds, the cost base can be calculated as follows:

Cost Base = Purchase Price + Brokerage on Purchase + Brokerage on Sale

For other CGT assets, such as property, the cost base is made up of the following five elements:

1. Money paid or the market value of any other property given to acquire the asset
2. Incidental costs of acquiring the asset (see examples below)
3. Cost of owning the asset
4. Expenditure that increases or preserves the value of the asset or that relates to installing or moving the asset
5. Expenditure incurred to establish, preserve or defend title or rights to the asset.

Visit the ATO to learn more.

Incidental costs include but are not limited to:

• professional service fees (e.g.  for surveyors, auctioneers, accountants, brokers, agents, consultants or legal advisers)
• costs of transfer
• stamp duty
• advertising/marketing costs to find a seller/buyer
• valuation fees
• search fees to check land titles
• cost of a conveyance kit
• certain borrowing expenses (e.g.  loan application fees and mortgage) discharge fees
• termination fees.

We show some incidental costs as a deductible expense in an investor’s Tax Report. These expenses will not be recorded by us as an incidental expense in any asset’s cost base. 

Brokerage may be incurred on the purchase or disposal of a CGT asset. We report this as an increase in cost base or reduction in capital proceeds respectively. 
 
Any stamp duty which has been incurred may need to be considered when determining your taxable position. 
 
As not all investor’s circumstances are the same, we strongly recommend investors seek independent taxation advice to determine whether this treatment is appropriate.

The following may reduce the cost base of an asset:

1. Tax deferred amounts
2. AMIT cost base net amounts
3. Return of capital amounts, and
4. Tax free amounts.

These amounts are typically distributed through listed trusts and unlisted managed funds and are non-assessable income for investors. 

Tax deferred amounts, for example, may arise from amounts associated with building allowances. Returns of capital may arise when a company or trust wishes to reduce the capital on the balance sheet.

We report AMIT cost base net amounts as ‘AMIT adjustments’ on your tax report.  These amounts may also increase your tax cost base – please refer to the Tax Guide for further information. 

Please note that tax free amounts will only reduce the reduced cost base of an asset when the asset is sold and the investor is in a capital loss position as a result of the sale.

You can update the cost base for your client’s holdings through Macquarie Wrap.

• Use the Parcel history (cost base) excel template to enter and submit parcel history (cost base) details to Wrap for a transfer in.
• Email the completed template to wrapsolutions@macquarie.com.
  

To check your client’s current status:

1. Log in to Adviser Online
2. Select Reporting from the menu under the Macquarie icon and select Client and Adviser Reporting
3. Select Run a report across all my clients’ accounts
4. Select Generate adviser reports
5. Select Tax Status from the dropdown menu and choose to either view in browser (screen) or download a PDF (PDF). Select Continue
6. Select the tax year. By default, the most recent year is selected. Select Generate.

Your tax election is recorded under the Default Cost Base Method heading.