Income tax: capital gains: do borrowing expenses form part of the consideration in respect of the acquisition of an asset pursuant to paragraph 160ZH(1)(a)?

No. As borrowing expenses are costs incurred in obtaining a loan or other finance, they are not part of "any consideration in respect of the acquisition of an asset" (paragraph 160ZH(1)(a) of the Income Tax Assessment Act 1936).

Although interest incurred on a loan taken out to finance the acquisition of an asset may constitute a 'non-capital cost' and hence be included in the cost base of the asset under paragraph 160ZH(1)(ba), borrowing expenses are not expenses of a non-capital nature as they do not satisfy the requirements of subsection 160ZH(6A).