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 108-70   When is a capital improvement a separate asset?   Improvements to land

108-70(1)  


A capital improvement to land is taken to be a separate *CGT asset from the land if one of the balancing adjustment provisions set out in subsection 108-55(1) applies to the improvement (whether or not there is a balancing adjustment).
Example:

You own land that you use for pastoral operations. You build some fences that are destroyed by fire. The fences are depreciating assets and are subject to a balancing adjustment on their destruction under Division 40 . The fences are taken to be a separate CGT asset from the land.

Unrelated improvements to pre-CGT assets

108-70(2)  


A capital improvement to a *CGT asset (the original asset ) that you *acquired before 20 September 1985 (that is not related to any other capital improvement to the asset) is taken to be a separate *CGT asset if its *cost base (assuming it were a separate CGT asset) when a *CGT event happens (except one that happens because of your death) in relation to the original asset 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:

In 1983 you bought a boat. In 1999 you install a new mast (a capital improvement) for $30,000. Later, you sell the boat for $150,000.

If the cost base of the improvement in the sale year is $41,000 and the improvement threshold for that year is $96,000, the improvement will not be treated as a separate 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 original asset and the improvement: see section 116-40 .

Related improvements to pre-CGT assets

108-70(3)  
Capital improvements to a *CGT asset (the original asset ) that you *acquired before 20 September 1985 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 a *CGT event happens in relation to the original asset 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 original asset and the improvements: see section 116-40 .

Some improvements not relevant

108-70(4)  
This section does not apply to a 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.

108-70(5)  
Subsections (2) and (3) do not apply if the capital improvement is made to:


(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.

Note:

Section 108-75 deals with this situation.

108-70(6)  
This section does not apply to a capital improvement consisting of repairs to or restoration of a *CGT asset *acquired before 20 September 1985 in circumstances where there is a roll-over under Subdivision 124-B .


 

Disclaimer and notice of copyright applicable to materials provided by CCH Australia Limited

CCH Australia Limited ("CCH") believes that all information which it has provided in this site is accurate and reliable, but gives no warranty of accuracy or reliability of such information to the reader or any third party. The information provided by CCH is not legal or professional advice. To the extent permitted by law, no responsibility for damages or loss arising in any way out of or in connection with or incidental to any errors or omissions in any information provided is accepted by CCH or by persons involved in the preparation and provision of the information, whether arising from negligence or otherwise, from the use of or results obtained from information supplied by CCH.

The information provided by CCH includes history notes and other value-added features which are subject to CCH copyright. No CCH material may be copied, reproduced, republished, uploaded, posted, transmitted, or distributed in any way, except that you may download one copy for your personal use only, provided you keep intact all copyright and other proprietary notices. In particular, the reproduction of any part of the information for sale or incorporation in any product intended for sale is prohibited without CCH's prior consent.