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Can costs incurred by an investor in attending investment seminars or purchasing computer software and investment books and journals be included in the cost base or reduced cost base of shares or units under Division 110 of the Income Tax Assessment Act 1997 (ITAA 1997)?

No. The costs of attending investment seminars or purchasing computer software and investment books and journals cannot be included in the cost base or reduced cost base of the shares or units under Division 110 of the ITAA 1997.

The taxpayer invests in shares and units. The taxpayer does not carry on a business as an investor.

In order to develop their investment knowledge, the taxpayer attended an investment portfolio seminar and purchased computer software and investment books and journals.

The taxpayer sold some of the shares that they acquired after incurring the expenditure and included the expenditure in the cost base of the shares when calculating their capital gain.

The cost base of a CGT asset has five elements (section 110-25 of the ITAA 1997). These elements are: (1) money paid, or the market value of the property given, to acquire the asset (2) incidental costs of acquiring the asset or that relate to the CGT event that happens in relation to the asset (3) certain non-capital costs of ownership (4) capital expenditure on improvements and (5) capital expenditure in respect of title or right to the asset.

The reduced cost base of an asset has the same five elements as the cost base, except for the third: section 110-55 of the ITAA 1997.

The only element that may be relevant in relation to the expenditure incurred by the taxpayer is the second element, being incidental costs.

Section 110-35 of the ITAA sets out the five categories of incidental costs. They are: (1) remuneration for the services of a surveyor, valuer, auctioneer, accountant, broker, agent, consultant or legal adviser (remuneration for professional tax advice, however, is not included unless it is provided by a recognised tax adviser) (2) costs of transfer (3) stamp duty or other similar duty (4) costs of advertising for a buyer or seller or (5) valuation or apportionment costs.

The costs of attending investment seminars or purchasing computer software, investment books and journals do not fall within any category.

Accordingly, these expenses do not form part of the cost base or reduced cost base of the shares or units and cannot be taken into account in the calculation of a capital gain or capital loss from a CGT event happening to the shares or units. Note 1: This ATO ID does not consider the general application of section 8-1 of the ITAA 1997 to the expenses. Note 2: This note has been added to explain the legislative changes made to certain capital gains provisions, as a result of Act No 32 of 2006, which received Royal Assent on 6 April 2006. For CGT events happening on or after 1 July 2005, section 110-35 of the ITAA 1997 has been amended to increase the range of incidental costs incurred to acquire or dispose of a CGT asset. However, these changes do not affect the decision in this interpretative decision. [HISTORY: This ID has been amended to explain the legislative changes made to certain elements of the CGT cost base, where the relevant CGT event happens on or after 1 July 2005.]