CGT Cost Base Explained
Complete guide to the CGT cost base: the five ATO elements, what reduces it, capital works deductions and the most common mistakes people make.
CGT Cost Base Explained Australia (2025–26)
Your cost base is the total cost of acquiring, holding and disposing of a CGT asset. A higher cost base means a lower capital gain — and less tax. The ATO defines five elements that make up the cost base, and getting them right is one of the most important parts of calculating your CGT correctly.
This guide explains each element, what reduces the cost base, and the most common mistakes people make.
Calculate now: Use the Capital Gains Tax Calculator to see how your cost base affects your CGT estimate.
The 5 elements of cost base
The ATO defines the cost base as having five elements. Not all elements apply to every asset type.
Element 1: Acquisition cost
The money you paid to acquire the asset.
| Asset type | Element 1 includes |
|---|---|
| Property | Purchase price (contract price or market value) |
| Shares | Purchase price per unit × number of units |
| Crypto | AUD value at time of acquisition |
| Inherited asset | Deceased's cost base (post-1985) or market value at death (pre-1985) |
Element 2: Incidental costs of acquisition and disposal
Costs directly connected to buying or selling the asset:
| Buying costs | Selling costs |
|---|---|
| Stamp duty (transfer duty) | Real estate agent commission |
| Legal / conveyancing fees | Marketing and advertising |
| Brokerage on purchase | Brokerage on sale |
| Valuation fees (for acquisition) | Legal fees at disposal |
| Search fees, title registration | Auctioneer fees |
Element 3: Costs of owning the asset (non-deductible)
Ownership costs that you could not claim as a tax deduction:
- Interest on a loan used to acquire a non-income-producing asset
- Rates and insurance on a non-rental investment property
- Maintenance on a non-deductible asset
Key rule: If you already claimed a cost as a tax deduction (e.g. interest on a rental property loan), you cannot also include it in your cost base.
Element 4: Capital expenditure to increase or preserve value
Capital improvements and additions:
- Property: Kitchen renovation, bathroom remodel, extension, new garage, pool
- Shares: Costs of taking up rights issues or additional share purchases in a reconstruction
- General: Any capital expenditure that enhanced or preserved the asset's value
Not included: Routine repairs and maintenance (these are revenue expenses, not capital). For rental property, these are deductible as repairs, not added to cost base.
Element 5: Costs of preserving or defending title
Legal and other costs to:
- Defend your ownership of the asset
- Protect against threats to your title
- Resolve disputes about ownership
This element is uncommon but can apply in contested property or trust situations.
What reduces the cost base
Several things can lower your cost base, increasing your eventual capital gain:
Capital works deductions (Division 43)
If you have claimed capital works deductions (building write-off, typically 2.5% per year) on a rental property, those claimed amounts reduce your cost base when you sell.
| Item | Amount |
|---|---|
| Purchase price | $500,000 |
| Stamp duty + legal | $25,000 |
| Renovations | $30,000 |
| Capital works claimed (8 years × $6,250) | −$50,000 |
| Adjusted cost base | $505,000 |
Common mistake: Many people forget to reduce their cost base by capital works deductions and end up with a cost base that is too high, which understates the capital gain and can lead to an ATO adjustment.
Depreciation on plant and equipment
For rental property, depreciation claimed on items like air conditioning, carpets and appliances under Division 40 can also affect cost base calculations, depending on the circumstances.
Non-assessable payments
Some distributions or payments (such as returns of capital from managed funds) reduce the cost base of your investment rather than being treated as income.
Cost base for different asset types
Property
| Included | Not included |
|---|---|
| Purchase price | Deductible rental expenses (interest, rates, insurance) |
| Stamp duty | Repairs and maintenance (revenue deductions) |
| Legal/conveyancing fees | Furniture/chattels (separate CGT assets) |
| Renovations and improvements | Capital works already deducted (reduces cost base) |
| Agent commission on sale |
Shares and ETFs
| Included | Not included |
|---|---|
| Purchase price per unit | Margin loan interest (deductible separately) |
| Brokerage (buy and sell) | Platform subscription fees |
| Advisory fees for acquisition | Franking credits |
Cryptocurrency
| Included | Not included |
|---|---|
| AUD value at time of purchase | Wallet software costs |
| Exchange fees (buy side) | General internet costs |
| Gas fees directly for acquisition | Trading bot subscriptions |
Reduced cost base
The reduced cost base is used to calculate capital losses (not gains). It is similar to the cost base but excludes:
- Element 3 (non-deductible ownership costs)
- Some elements that are not relevant to the loss calculation
If you sell at a loss, you use the reduced cost base. If you sell at a gain, you use the full cost base.
Common cost base mistakes
| Mistake | Impact |
|---|---|
| Forgetting stamp duty | Understates cost base, overstates gain |
| Not including selling costs | Agent commission and legal fees reduce the gain |
| Ignoring capital works adjustment | Cost base is too high, understates gain — ATO audit risk |
| Including deductible expenses | Expenses you already claimed as deductions cannot also be in cost base |
| Missing DRP cost base | Each DRP parcel has its own cost base from the distribution statement |
| Not tracking improvements | Renovations increase cost base — keep receipts |
| Using wrong date for inherited assets | Pre-1985 assets use market value at death, not original cost |
Record keeping
The ATO expects you to keep records that support your cost base for 5 years after you lodge the return that includes the CGT event. Key records:
- Contract of sale (purchase and sale)
- Settlement statements
- Stamp duty receipts
- Renovation invoices and receipts
- Capital works deduction schedules (depreciation reports)
- Brokerage confirmations
- Distribution statements (for managed funds and DRP)
Tip: Get a quantity surveyor's depreciation schedule when you buy a rental property. It documents the building cost and helps you track capital works deductions accurately for the eventual CGT calculation.
Related guides
- Capital Gains Tax Calculator Australia — complete CGT overview
- Capital Gains Tax on Property — property-specific CGT and cost base
- Capital Gains Tax on Shares — shares, brokerage and parcels
- Capital Gains Tax on Crypto — crypto cost base and exchange fees
- CGT Discount & Indexation Methods — when indexation adjusts cost base further
Important: This guide is general information only and does not constitute tax advice. Cost base rules vary by asset type and circumstance. Consider consulting a registered tax agent.
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