CGT Cost Base
Published 5 August 2026 · Last updated 5 August 2026
Most investors get the purchase price right and then lose money on everything else. Renovation invoices go missing, stamp duty records are forgotten, and — the most expensive oversight of all — capital works deductions claimed under Division 43 are not tracked, even though they must be subtracted from the cost base when you sell. Every dollar of cost base you cannot substantiate becomes a dollar of capital gain the ATO will tax.
The mechanics matter because they cut in both directions. Claiming building depreciation reduces your cost base, which increases the assessed gain — but the deductions you claimed along the way are usually worth more than the extra CGT, particularly after the 50% discount. Meanwhile plant and equipment (Division 40) depreciation is treated entirely separately and never touches your cost base.
Where a quantity surveyor fits in
Accountants calculate the tax; quantity surveyors establish the property facts the calculation depends on. Where original construction costs, renovation records or capital works histories are missing, a Chartered Quantity Surveyor can produce an independent, ATO-accepted estimate of those figures. That is what our CGT Cost Base Evidence Report does — it reconstructs the missing pieces of your cost base file so your accountant is not forced to assess a higher gain simply because the paperwork is gone.
The guides below cover each part of the puzzle: what goes into the cost base, what stays out, how claimed and unclaimed depreciation interact with it, and what evidence the ATO expects you to hold.
Who this guide is for
Property investors preparing to sell (or planning years ahead), owners who have lost renovation or construction records, accountants assessing a client's cost base position, and anyone who has claimed — or should have claimed — depreciation on an investment property.
Key concepts
Cost base
The total of five elements under s110-25 ITAA 1997: acquisition cost, incidental costs (stamp duty, legals, agent fees), certain ownership costs, capital improvements, and title defence costs. The gain is your sale proceeds minus this figure.
Division 43 adjustment
Capital works deductions you claimed (or were entitled to claim, in some cases) must be subtracted from the cost base under s110-45. This is the single most commonly missed adjustment.
Division 40 separation
Plant and equipment depreciation never adjusts the property cost base — those assets have their own cost and their own balancing treatment when you sell.
Substantiation
The ATO taxes what you cannot prove. Contracts, settlement statements, invoices and depreciation schedules are the evidence file; where records are lost, a QS report can reconstruct construction and improvement costs.
Common mistakes
- Forgetting to subtract claimed Division 43 capital works deductions from the cost base — leading to an understated gain and ATO amendment risk.
- Treating Division 40 plant and equipment deductions as if they reduce the property cost base (they never do).
- Losing renovation invoices and assuming the spend is simply lost from the cost base — a QS can reconstruct these costs.
- Leaving out incidental costs: stamp duty, conveyancing, buyer’s agent fees and selling costs all belong in the cost base.
- Assuming unclaimed depreciation is irrelevant — in some circumstances the cost base must still be adjusted for capital works that were available to claim.
Key legislation
s110-25 ITAA 1997 — defines the five elements of the cost base.
s110-45 ITAA 1997 — requires claimed (and in some cases claimable) Division 43 capital works deductions to be excluded from the cost base.
Division 43 ITAA 1997 — capital works deductions — 2.5% or 4% of eligible construction expenditure per year.
Division 40 ITAA 1997 — plant and equipment depreciation, treated separately from the property cost base.
Start with these guides
How do I calculate my property cost base?
Your property cost base is the total of your purchase price plus all eligible costs of acquisition and ownership — including capital improvements — and it is used to calculate your…
Can depreciation increase my capital gain when I sell?
Division 43 capital works deductions claimed over the years reduce your cost base, which means a higher capital gain when you sell. However, the overall tax benefit of claiming dep…
What renovation costs can reduce CGT?
Capital improvement costs — money spent enhancing or extending the property — can be added to your cost base, reducing your capital gain when you sell. Repairs and maintenance cann…
Does Division 43 reduce my CGT cost base?
Division 43 capital works deductions may reduce the CGT cost base of a property when it is sold. This is why investors should keep depreciation schedules, renovation records and ca…
Working out your cost base
Depreciation and your cost base
Reducing your capital gain
Evidence and reports
When to get professional advice
Speak to your accountant before contracting to sell — not after settlement — because timing, structure and record decisions affect the outcome. Involve a quantity surveyor when construction or renovation records are missing, when you have claimed capital works and need the exact Division 43 adjustment figure, or when the property has a complex history (renovations by previous owners, partial main-residence use, or long holding periods). Koste's CGT Cost Base Evidence Report is designed for exactly these situations.
Frequently asked questions
Why does claiming depreciation increase my capital gain?
Division 43 capital works deductions are subtracted from your cost base, so the assessed gain rises. But the deductions claimed along the way are generally worth more than the additional CGT — especially with the 50% discount applied to the gain.
I have lost my renovation receipts. Is that cost base gone?
Not necessarily. A Chartered Quantity Surveyor can produce an independent estimate of construction and renovation costs that the ATO accepts as substantiation where original records are unavailable.
Does getting a depreciation schedule now hurt me at sale time?
No — the schedule documents your Division 43 position precisely, which you need for an accurate cost base adjustment anyway. Selling without knowing your capital works history is what creates risk.
What is the difference between a CGT Cost Base Report and an Evidence Report?
Both establish property cost facts. The Evidence Report is the more comprehensive substantiation file — reconstructing acquisition-era construction costs, improvements and capital works history so your accountant can defend every element of the cost base.
Do I still adjust the cost base if I never claimed depreciation?
Sometimes. Where capital works deductions were available to claim, the cost base may still need adjusting. This is a genuine trap — get advice on your specific circumstances.
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