Allowable deductions, cost base of CGT assets and the GAAR: a minefield for taxpayers and their advisers

Abstract

Copyright © 2014 LexisNexis. This article is made available per the publisher's Content Sharing policy.Taxpayers and their advisers have, for decades, struggled to reconcile outgoings that can be considered as allowable deductions under s 8-1 of the Income Tax Assessment Act 1997 (Cth) (ITAA 97), with those outgoings which may be included in the cost base of a Capital Gains Tax (CGT) asset.1 In this article we briefly examine Hart’s case2 and the subsequent Taxation Determination TD 2005/33 issued by the Australian Tax Office (ATO). This Tax Determination sets out the Commissioner’s view regarding the inclusion (or non-inclusion) of non-capital costs of ownership of a CGT asset in its cost base where such outgoings had been previously denied deductibility under the general deduction provisions3 of the ITAA 97 by virtue of the general anti-avoidance rule (GAAR) under Pt IVA of the Income Tax Assessment Act 1936 (Cth) (ITAA 36)