When you calculated your cost base and subtracted it from your capital proceeds, if you worked out that you’d made a loss, you recalculate using the reduced cost base instead.
The reduced cost base of a CGT asset has the same elements as the cost base, except for the third element. The reduced cost base elements are:
- Money or property given for the asset.
- Incidental costs of acquiring the CGT asset or that relate to the CGT event, for which you’re not entitled to a deduction.
- Balancing adjustment amount (any amount that is assessable because of a balancing adjustment for the asset or that would be assessable if certain balancing adjustment relief was not available).
- Capital costs to increase or preserve the value of your asset or to install or move it.
- Capital costs of establishing, preserving or defending your title or a right over your asset.
You need to work out the amount for each element, then add the amounts together to find out your reduced cost base for the relevant CGT asset.
Once you know your reduced cost base, there’s only one way to calculate a capital loss for a CGT event, which is to subtract the reduced cost base (or the amount specified by the relevant CGT event) from the capital proceeds.
The ATO website has more information on how to calculate your reduced cost base.
