Allowable deductions, cost base of CGT assets and the GAAR : a minefiled for taxpayers and their advisers

Taxpayers and their advisers have, for decades, struggled to reconcile outgoings that can he concidered as allowable deductions under s 8.1 of the Income Tax Assessment Act 1997 (Cth) (ITAA 97). with those outgoings which may be included in the cost base of a Capital Gains Tax (CGT) asset. In this article we briefly examine Hart's case and the subsequent Taxation Determination TD 2005/33 issued hy the Australian Tax Office (ATO). This Tax Determination sets out the Commissioner's view regarding the inclusion (or non inclusion) of non-capital costs of ownership of a CGT asset in its cost base where such outgoings had heen previously denied deductibility under the general deduction provisions of the ITAA 97 by virtue of the general anti-avoidance rule (GAAR) under Pt IVA of the Income Tax Assessment Act 1936 (Cth) (ITAA 36).