• Capital improvements to pre-CGT assets

    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

    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 be subject to capital gains tax if certain conditions are met. These conditions relate to the improvement thresholds in the table below.

    If these conditions are met, when a CGT event happens to the original asset, the cost base of the capital improvement must be:

    • more than the improvement threshold for the year in which the event happens, 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 to each other, they are treated as one separate CGT asset if the total of their cost bases is more than the threshold.

    The improvement threshold is changed to take account of inflation. The thresholds for 1985-86 to 2000-01 are shown in the following table.

    Improvement thresholds for 1985-86 to 2000-01

    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

    2000-01

    92 082

    Example
    Personal use asset

    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 2000-01 income year.

    As the cost base (including indexation) of the new mast was less than $92 802 when the boat was sold, the new mast is not treated as a separate asset. Therefore, because David bought the boat before 20 September 1985, capital gains tax does not apply.

    Last modified: 31 Aug 2010QC 16195