INCOME TAX ASSESSMENT ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-1 - CAPITAL GAINS AND LOSSES: GENERAL TOPICS  

Division 108 - CGT assets  

Subdivision 108-D - Separate CGT assets  

Operative provisions

SECTION 108-75   Capital improvements to CGT assets for which a roll-over may be available  

108-75(1)  
This section is relevant only if a *CGT event happens in relation to a *CGT asset that is:


(a) a *Crown lease; or


(b) a *prospecting entitlement or *mining entitlement; or


(c) a *statutory licence; or


(d) a *depreciating asset to which Subdivision 124-K applies.

You must have *acquired it before 20 September 1985.

Note:

Division 124 treats you as having acquired a CGT asset before that day in some situations.

108-75(2)  


There are possible consequences if there has been one or more capital improvements to:


(a) the *CGT asset the subject of the *CGT event; or


(b) any *CGT assets of the same kind that were in existence before the CGT asset and came to an end where a roll-over was obtained under a provision set out in this table:


Roll-over provisions
Item For this CGT asset: Roll-over is obtained under this provision:
1 A *Crown lease Subdivision 124-J
.
2 A prospecting or mining entitlement Subdivision 124-L
.
3 A *statutory licence Subdivision 124-C or former Subdivision 124-O
.
4 A *depreciating asset Subdivision 124-K

Note:

Roll-overs under former sections 160ZWA , 160ZZF , 160ZZPE and 160ZWC of the Income Tax Assessment Act 1936 are also relevant: see section 108-75 of the Income Tax (Transitional Provisions) Act 1997 .

Example:

In 1984 you acquired a commercial fishing licence. In 1986 you paid $62,000 to get an extra right (a capital improvement) attached to the licence.

In June 1999 the licence expired and you got a new licence. You obtained a roll-over for the old licence expiring. In April 2000 you sold the new fishing licence for $200,000.

108-75(3)  
Any capital improvement that is not related to another capital improvement is taken to be a separate *CGT asset if its *cost base (assuming it were a separate CGT asset) when the *CGT event happens is:


(a) more than the *improvement threshold for the income year in which the event happened; and


(b) more than 5% of the *capital proceeds from the event.

Example:

To continue the example, suppose the cost base of the right is $101,000 and the improvement threshold for the 1999-2000 income year is $96,000.

Since the cost base of the right is more than the improvement threshold and more than 5% of the capital proceeds, the right is taken to be a separate CGT asset.

Note 1:

Section 108-80 sets out the factors for deciding whether capital improvements are related to each other.

Note 2:

If the improvement is a separate asset, the capital proceeds from the event must be apportioned between the asset and the improvement: see section 116-40 .

108-75(4)  
Any capital improvements that are related to each other are taken to be a separate *CGT asset if the total of their *cost bases (assuming each one were a separate CGT asset) when the *CGT event happens is:


(a) more than the *improvement threshold for the income year in which the event happened; and


(b) more than 5% of the *capital proceeds from the event.

Note:

If the improvements are a separate asset, the capital proceeds from the event must be apportioned between the asset and the improvements: see section 116-40 .

108-75(5)  
This section does not apply to any capital improvement:


(a) that took place under a contract that you entered into before 20 September 1985; or


(b) if there is no contract - that started or occurred before that day.


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