On 5 April 2017, the Commissioner issued TD 2017/10, ruling that costs that a taxpayer incurs, after a CGT event happens, can still ‘relate to’ that CGT event under paragraph 110-35(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) and thus be ‘incidental costs’ that can be counted in the ‘second element’ of an assets’ ‘cost base’ under s110-25(3) of the ITAA97.

Apart from coming within one of the 10 specified types of expenditure, the amount must have been incurred either to ‘acquire’ the CGT asset, or ‘relate to’ the CGT event.

Amongst the range of expenditures that are included in the definition of ‘incidental costs’, include: remuneration for lawyers, accountants, auctioneer, brokers and auctioneers; transfer costs; stamp duty; advertising; obtaining a valuation; search fees; borrowing expenses; termination fees.

Naturally, incidental costs could be incurred after a CGT event, which is deemed to have occurred at the time of the contract of sale – such as things incurred prior to that sale settling.

What is interesting is that the Commissioner envisages expenses even later than this (including after a sale settles). In this determination he gives the example of a vendor of goodwill being later sued by the purchaser for misrepresentations about its value.

[ATO website: TD 2017/10; LTN 59, 29/3/17]