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TRL(Initiate)Initiate
4 June 2026

Hi Taxduck, thanks for your reply.


What you have suggested in your sentence, "The simplest way...." is what I suggested to my Accountants and they have told me this is incorrect.


Broadly speaking, I thought that the Adjusted Cost Base would be calculated as follows.


i) Purchase Price: $ 650,000

ii) Capital Works Costs (paid by me): $ 18,000

iii) Capital Allowance Asset Costs (Paid by me): $ 20,000

iv) Capital Works Costs claimed $ 10,000

v) Capital Allowance Asset Costs claimed $ 8,000


Adjusted Cost Base = (i) + (ii) + (iii) - (iv) - (v)


My Accountants are telling me the Adjusted Cost Base = (i) +(ii) - (iv) - (v)


I am fully in agreement that anything that has been depreciated can't be claimed, since they have already been claimed in previous tax years. I have never depreciated any fixtures and fittings that were part of the house when I first purchased it.


I am only trying to understand why the outstanding unclaimed Capital Allowance Asset amount of $12,000 does not have some write off or disposal, either used in the calculation of the adjusted cost base, or accounted for in some other area of the Tax Return.


Thanks. If I am still misunderstanding your reply, please let me know. Am I wrong in my expectation on how the adjusted cost base should be calculated.

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Taxduck(Taxicorn)Taxicorn
4 June 2026

" Am I wrong in my expectation on how the adjusted cost base should be calculated."


Aligns with my reply.


Imagine the absurdity of not being able to include the cost of fixtures and fittings if you had spent thousands of dollars on new assets (e.g. air conditioners, carpets, stoves, flooring, etc) just before selling and not being able to add them to the cost base as a capital improvement.

All those assets will be bought by the purchaser (at written down value) so are included in the sale price.

The alternative (more accurate method) is detailed below.

As taken from the ATO

"When calculating your capital gain or loss, the value of a property’s depreciating assets at the time of purchase and at sale are removed from the cost base and capital proceeds"

See "Capital gains tax on the sale of property". It is a pdf from an outside source so I can't provide the link. Google it (add ATO after the title)


TRL(Initiate)Initiate
4 June 2026

@Taxduck

Thanks for the link to the pdf.


If an Accountant reading my question can tell me whether in my example if the Adjusted Cost Base is $670,000 or $650,000 I would be very grateful.


If the Adjusted Cost Base is $650,000 and you can explain it to me like you're talking to a 5 year old why it is $650,000, I would be even more grateful.


If the Adjusted Cost Base is $670,000 and you can give me an ATO example that shows a case where the Initial Cost of Acquistion of the Depreciating Asset Pool is added to the Cost Base, so I can show my Accountants, I would be especially grateful


Thanks very much



NikkiATO(Community Moderator)Community Moderator
8 June 2026

Hi @TRL,


Depreciating assets and capital works are treated differently for CGT purposes.


Fixtures and fittings, such as carpets, appliances or air conditioners, are separate depreciating assets rather than part of the building itself.


From what you’ve described, the issue isn’t whether depreciation claimed reduces the calculation. The issue is how depreciating assets are treated separately from the property for CGT purposes.


The sale of a rental property can involve:

  • the property itself
  • capital works
  • separate depreciating assets.

The treatment can depend on:

  • whether the asset was separately identified
  • whether decline in value was claimed
  • the asset’s adjustable value at the time of sale
  • how the sale proceeds are apportioned between the property and depreciating assets.

We can’t validate either of the calculation methods you’ve outlined or confirm a specific adjusted cost base amount for your circumstances.


The Guide to capital gains tax @Taxduck provided explains that depreciating assets in a building are treated separately from the building for CGT purposes, and balancing adjustment rules can apply instead of CGT treatment for those assets.

TRL(Initiate)Initiate
5 June 2026

@TRL

Update for other members.


The Accountants had erred with their caculation


The Initial Acquisition cost of the Capital Allowance Assets should have been added to the Cost Base, or as the ATO illustrate, subtracted from the Property Sale price.


Tax return ammendment has been lodged. It's easy to have blind faith in Accountants and Lawyers. Always double check and don't accept an answer if it doesn't make sense.



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RE: Consideration of Capital Allowance Assets CWDV at time of Investment Property sale on CGT | ATO Community