INCOME TAX ASSESSMENT ACT 1997 - SECT 108.75 Capital improvements to CGT assets for which a roll - over may be available

INCOME TAX ASSESSMENT ACT 1997 - SECT 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.

  (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:

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.

  (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.

  (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.

  (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.