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vickidapooh(I'm new)I'm new
2 May 2024

Hi There,


I would like to know do I need to adjust depreciation claimed in Div 40 to the cost base when calculating CGT?

I have read through the thread https://community.ato.gov.au/s/question/a0J9s0000001K24EAE/p00053306 but I am still confused.


In the most helpful reply, BlakeATO says "No, you don't adjust for Div 40 deductions claimed in the cost base calculation. Div 40 assets are separate from the property and are not subject to CGT. Div 40 items should not be included in your cost base because of this. " However Jodie_ATO also mentions "You need to deduct any capital allowance and capital works you've already claimed in the depreciation schedule away from your cost base."


Both are the advises from ATO and which one should I follow?@Jodieato


Many thanks!


3,467 views
3 replies
3,467 views
3 replies

Most helpful response

Most helpful reply

Taxduck(Taxicorn)Taxicorn
2 May 2024

Yes. Any capital works deductions claimed off rental income can't be included in the cost base. So the cost base is adjusted to take out those capital works that have been claimed. (or were claimable)

As taken from ATO article

"You need to subtract any capital works deductions if you acquired the rental property after 13 May 1997 and you either: • claimed a deduction for them in any income year • have not yet claimed a deduction because the period for amending the relevant income tax assessment has not expired."

For capital allowances the following applies: (from ATO article)

"A depreciating asset is considered a separate asset from the property for CGT purposes. They include things like flooring, air conditioners and [Removed by moderator] goods. 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. "

All replies

Taxduck(Taxicorn)Taxicorn
2 May 2024

Well they are both right and essentially they mean the same. As taken from ATO article

"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".

vickidapooh(I'm new)I'm new
2 May 2024

thanks for the quick turnover! @Taxduck does it mean as long as the asset has been claimed throughout the inverstment period, it needs to deduct from the cost base, regardless it belongs to 40 or 43?

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Do I need to adjust depreciation claimed in Div 40 to the cost base when calculating CGT? | ATO Community