• Capital improvements to assets acquired before 20 September 1985

    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

    A capital improvement to a CGT asset acquired before 20 September 1985 may also be treated as a separate asset and be subject to capital gains tax.

    The capital improvement is treated as a separate CGT asset if its cost base - see Cost base and reduced cost base - when a CGT event happens in relation to the original asset is:

    • more than the improvement threshold for the year in which the event happens and
    • more than 5 per cent of the amount of money and property you receive from the event.

    If the improvements are related to each other, the capital improvements are treated as one separate CGT asset if the total of their cost bases satisfies the threshold.

    The improvement threshold is changed to take account of inflation. The thresholds for 1985-86 to 1999-2000 are shown below.

    Improvement thresholds for 1985-86 to 1999-2000

    Financial year

    Threshold
    $

    Financial 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

     

    Example

    In 1983 David bought a boat. In August 1997 he installed a new mast for $30,000. He sold the boat for $150,000 in the 1999-2000 income year.

    If the cost base of the improvement in the year it is sold is $32,000 (includes indexation) and the improvement threshold is $91,072, the new mast is not a separate asset. Therefore, capital gains tax does not apply because David bought the boat before 20 September 1985.

    Last modified: 18 Sep 2009QC 18323