• Improvement thresholds for 1985-86 to 1999-2000

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    Income year

    Threshold
    $

    Income year

    Threshold
    $

    1985-86

    50,000

    1993-94

    80,756

    1986-87

    53,950

    1994-95

    82,290

    1987-88

    58,859

    1995-96

    84,347

    1988-89

    63,450

    1996-97

    88,227

    1989-90

    68,018

    1997-98

    89,992

    1990-91

    73,459

    1998-99

    89,992

    1991-92

    78,160

    1999-2000

    91,072

    1992-93

    80,036

       

    When you dispose of the dwelling the capital gain on the major improvements is calculated by taking away the cost base of the improvements, indexed for inflation, from the proceeds of the sale that are reasonably attributable to the improvements.

    Capital gain on major improvement

    =

    proceeds of sale attributable to improvement

    -

    cost base of improvements indexed for inflation

    In calculating the amount of capital proceeds attributable to the improvements, you must take whatever steps are appropriate to determine their value. If you make an estimate of this amount you must be able to show how you arrived at the estimated figure.

    Example

    Improvement on land bought before 20 September 1985

    Martin bought a home in 1984. On 1 December 1993 he undertook major capital improvements worth $85,000. He sold the home on 1 December 1999 for $500,000. At the date of sale, the cost base of the improvements - after indexation - was $95,370. Of the $500,000 he received for the home, $100,000 was attributable to the improvements.

    Test 1

    Is the cost base of the improvements more than 5 per cent of $500,000 - that is, $25,000?

    Yes

    Test 2

    Is the cost base of the improvements more than the 1999-2000 threshold of $91,072

    Yes

    As the answer to both questions is Yes, Martin is subject to capital gains tax on the gain attributable to the improvements. The gain is calculated as follows:

     

    $

    Amount of proceeds attributable to the improvement

    100,000

    Less cost base of improvements indexed for inflation

    95,370

    Taxable capital gain

    4,630

    If the home was Martin's main residence, he does not have to include this gain in his tax return. If he had put the home to some income producing use at any time between undertaking the improvements and selling the home, a proportionate amount of the gain would have been taxable. For example, if the home had been rented out for one-third of the period, then one-third of the gain would have been taxable - assuming that he did not or cannot continue to treat the home as his main residence.

    As Martin sold the home after 11.45 am on 21 September 1999 and had held it for at least 12 months, he could claim the CGT discount rather than choose indexation of the cost base.

    Last modified: 18 Sep 2009QC 18323