The five elements
| Element | What it includes | Examples |
|---|---|---|
| 1. Money paid | The price you paid, or the market value of property you gave, to acquire the asset | Purchase price; share price |
| 2. Incidental costs | Costs of acquiring and disposing of the asset | Stamp duty, legal and conveyancing fees, agent’s commission, brokerage, valuation, advertising, cost of a tax adviser for the CGT calculation |
| 3. Costs of ownership | Non-deductible costs of owning it (assets acquired after 20 Aug 1991) | Interest, rates, land tax, insurance, repairs – only if not deductible |
| 4. Increasing or preserving value | Capital expenditure to increase or preserve the asset’s value or install or move it | Renovations, extensions, subdivision costs |
| 5. Preserving title | Capital costs to establish, preserve or defend your title or rights | Legal costs to defend ownership |
Amounts you have claimed (or can claim) as tax deductions are generally not included. GST you can claim as an input tax credit is also excluded.
Reduced cost base
When you make a loss, you use the reduced cost base: the same elements, but without the third element (costs of ownership) and without indexation. This stops holding costs from creating a capital loss.
Capital works adjustment
Capital works deductions (Division 43) you claimed or could have claimed must be excluded from the cost base and reduced cost base. The only exception is an asset acquired at or before 7:30 pm (ACT time) on 13 May 1997 where the expenditure was incurred by 30 June 1999. This is often missed when selling a rental property.
ATO example: Brett’s rental property
Brett bought a rental for $150,000 in 2005 with $20,000 of non-deductible purchase costs. He claimed $33,000 of interest, rates and repairs as deductions (not in the cost base). In 2025 he spent $30,000 on structural improvements and claimed $254 of capital works deductions before selling in February 2026 with $12,500 of selling costs.
- Purchase price $150,000
- Purchase costs $20,000
- Improvements $30,000 − $254 capital works = $29,746
- Sale costs $12,500
- Cost base: $212,246 (our engine gives the same result – see tests)
Records to keep
Keep contracts, settlement statements, invoices for improvements, depreciation schedules and broker statements for at least 5 years after the CGT event. From 2027 you will also need records supporting the value of assets at 30 June 2027.
Frequently asked questions
What is the cost base for CGT?
The total of five elements: the purchase price, incidental costs of buying and selling, non-deductible costs of owning the asset, capital costs to increase or preserve its value (improvements), and costs of preserving or defending your title.
Can I include renovation costs in the cost base?
Yes, capital improvements form the fourth element (capital costs to increase or preserve the asset’s value). But if you claimed capital works deductions on them (e.g. for a rental), you must reduce the cost base by the amount claimed.
What is the reduced cost base?
The cost base used when working out a capital loss. It excludes the third element (costs of ownership) and any indexation, and is reduced by certain amounts you could deduct.
Are rental property interest and rates in the cost base?
No, not if you could deduct them. Only non-deductible holding costs (e.g. for vacant land or a holiday home not rented) can be included, and only for assets acquired after 20 August 1991.
References
Every figure on this page was checked against these primary sources on 16 October 2026.
General information only – not financial or tax advice. See our disclaimer. Spotted an error? Email hello@cgtcalculatoraustralia.com.