Capital Gain Tax

Q&A Tax

Question :

Mr K purchased a building in 1991. Since then, building costs 100% have been written off in their
income tax returns.

This property has now been sold. When preparing the capital gains tax calculations, given the age of the
property, does the building write off need to be added back?


Answer :

The general rule is that the cost base of a property needs to be reduced by capital works deductions
that have been (or could be) claimed if the property was acquired after 13 May 1997.

However, if the property was acquired before this date it is not generally necessary to adjust the cost
base for capital works deductions. The main exception to this is the rules require you to reduce the
cost base of the property for capital works deductions claimed on improvements that were carried out
after 30 June 1999.

Refer to section 110-45 ITAA 199

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