Are you a taxpayer who has made major capital improvements to a pre-CGT dwelling that is used to derive assessable income?
The Tax Office has released the Capital Gains Tax (CGT) improvement threshold for the 2013-14 year.
You should ensure you meet your CGT obligations when making capital improvements to a pre-CGT asset.
- The CGT improvement threshold for the 2013/14 year is $136,884 (up from $134,200 for 2012/13).
- The CGT improvement threshold is used when determining whether improvements made to a pre-CGT dwelling will attract CGT upon the disposal of the dwelling.
- A pre-CGT dwelling is one that was acquired before September 20, 1985.
- The dwelling is generally exempt from Capital Gains Tax (CGT) when it is sold, irrespective of what the dwelling was used for.
- However, where a pre-CGT dwelling is used to derive assessable income, major capital improvements made to the dwelling on or after September 20, 1985, may be considered to be a separate CGT asset.
- These improvements may be subject to CGT in their own right when the dwelling is eventually sold.
- An improvement is taken to be ‘major’ if the original cost (indexed for inflation) of the improvement is:
- Greater than 5% of the amount you receive when you dispose of the dwelling; and
- Greater than the ‘improvement threshold’ for the income year.
Remember: There may be CGT consequences where major capital improvemetns are made to a pre-CGT dwelling that is used to derive assessable income.
Contact us if you require any clarification or advice.
This article was published on 14/10/2013 and is current as at that date
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