Draft Taxation Determination

TD 92/D224

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)?

• Please note that the PDF version is the authorised version of this draft ruling.
  This document has been finalised by TD 93/1.

FOI status:

Preamble

1. 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).

2. 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).

N.B. Section 67 may permit a deduction to be claimed where loan funds are used to acquire an income-producing asset.

Commissioner of Taxation
26/11/92

References

ATO references:
NO ADVG CHERM

Subject References:
borrowing expenses
cost base
acquisition costs
non-capital costs

Legislative References:
ITAA 160ZH(1)(a)
ITAA 160ZH(1)(ba)
ITAA 160ZH(6A)
ITAA 67