For CGT purposes, there are exceptions to the rule that what is attached to the land is part of the land. In some circumstances, a building or structure is considered to be a CGT asset separate from the land.
Other improvements to an asset – including land – acquired before 20 September 1985 may also be treated as a separate CGT asset.
Buildings, structures and other improvements to land you acquired on or after 20 September 1985
A building, structure or other capital improvement on land that you acquired on or after 20 September 1985 is a separate CGT asset, not part of the land, if a balancing adjustment provision applies to it. For example, a timber mill building is subject to a balancing adjustment if it is sold or destroyed, so it is treated as an asset separate from the land it is on.
Buildings and structures on land acquired before 20 September 1985
A building or structure on land that you acquired before 20 September 1985 will be a separate asset if:
- you entered into a contract for the construction of the building or structure after that date, or
- construction began on or after that date.
If you make a capital improvement to a CGT asset you acquired before 20 September 1985, this improvement will be treated as a separate asset and is subject to CGT if, at the time a CGT event happens to the original asset, the cost base of the capital improvement is:
- more than the improvement threshold for the year in which the event happens (see Improvement thresholds for 1985–85 to 2003–04), and
- more than 5% of the amount of money and property you receive from the event.
If there is more than one capital improvement and they are related, they are treated as one separate CGT asset if the total of their cost bases is more than the threshold.
The improvement threshold is adjusted to take account of inflation. The thresholds for 1985–86 to 2003–04 are shown in the following table.
Example – Adjacent land
On 1 April 1984, Dani bought a block of land. On 1 June 2004, she bought an adjacent block. Dani amalgamated the titles to the two blocks into one title.
The second block is treated as a separate CGT asset acquired on or after 20 September 1985 and is therefore subject to CGT.End of example