Does stamp duty get included in my cost base?

Yes. Stamp duty paid on purchase is an incidental cost of acquisition and forms part of your cost base (Element 2).

Can I include renovation costs in my cost base?

You can include capital improvement costs that have not already been claimed as Division 43 deductions. Improvements that were depreciated at 2.5% per year cannot be added to the cost base — they reduce it instead.

What if I do not have records of all my costs?

A quantity surveyor can reconstruct costs using historical construction data, council records, and other documentation. The ATO accepts reasonable estimates supported by professional assessment.

What about costs I paid but did not claim as deductions?

Some costs — like stamp duty and legal fees on purchase — are not deductible but are included in the cost base. Others, like council rates, are deducted each year and cannot also be added to the cost base.

How do I calculate my property cost base?

How to calculate your property cost base

When you sell your investment property, you pay capital gains tax (CGT) on the difference between your sale price and your cost base. A higher cost base means a lower capital gain and less tax. Getting your cost base right is one of the most important things you can do before selling.

The five elements of cost base

Under the Income Tax Assessment Act 1997, a cost base has five elements:

Element 1 — The purchase price What you paid for the property, excluding stamp duty and legal fees (these go in Element 2).

Element 2 — Incidental costs of acquisition and disposal

Stamp duty
Conveyancing and legal fees on purchase
Building and pest inspection costs
Mortgage broker fees (if capitalised)
Real estate agent commissions on sale
Conveyancing fees on sale
Advertising costs for sale

Element 3 — Non-capital costs of ownership (not included in residential property cost base — this element does not apply to investments that have generated income)

Element 4 — Capital improvements Any capital expenditure that added to or improved the property's value — such as an extension, new kitchen, new bathroom, or other structural upgrade. Note: This does not include amounts you have already claimed as Division 43 capital works deductions — those amounts reduce your cost base.

Element 5 — Capital expenditure to establish, preserve or defend title Rarely relevant for residential property investors.

Division 43 reduces your cost base

This is critical and often misunderstood. Under section 110-45 of the ITAA 1997, any Division 43 capital works deductions you have claimed (or could have claimed) over your ownership period are deducted from Element 4 of your cost base. This means that claiming Division 43 now reduces your cost base for CGT purposes — but the overall tax effect is still beneficial in most cases because the depreciation saves tax now at your marginal rate, while the CGT impact is at the concessional CGT rate.

Division 40 and cost base

Division 40 plant and equipment deductions do not reduce your cost base for CGT purposes in the same way. However, when you sell, any assets still in the depreciation schedule may give rise to balancing adjustments (residual value assessments) handled separately.

Getting professional help

A quantity surveyor's cost base report documents all capital improvements and construction costs throughout your ownership. This is especially important for:

Long-term ownership where records are incomplete
Properties that have been renovated
Properties inherited or received as gifts

Written by Koste Team · Koste Chartered Quantity Surveyors · AIQS Member · RICS Member · TPB Registered · 1300 669 400 · info@koste.ai