Question

Explain, citing sections, whether or not the following expenses can be incurred in the cost base for each of the following situations. Note that all assets are post CGT

I. The cost of repairing a damaged drainpipe caused by a storm to the taxpayer’s rental property.

II. Expenses paid to the auctioneer on the sale of the taxpayer’s property.

III. Land tax expenses on a property that was purchased in 2011 and sold for a loss in 2017.

IV. An apartment gifted (for no consideration) to the taxpayer. The apartment was valued at $400 000 at the time of transfer. It was later sold at a profit.

Answer 1

1. This expenditure cannot be included in the cost base, since it is a maintenance or repair and not any upgrade to property.

2. Expenses paid to auctioneer on sale cant be included in cost base since its is not a cost incurred for buying a property.

3. Land tax expenses connected with purchase in 2011 will be included in cost base of the property. However, if it is land tax expense paid annually, the same cannot be included in base of asset.

4. The FMV of $400,000 at the time of transfer will be taken as the tax basis for the taxpayer for the coputation of profit on sale of apartment.