CGT improvement threshold for 2013/14

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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.

 

  1. The CGT improvement threshold for the 2013/14 year is $136,884 (up from $134,200 for 2012/13).
  2. 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.
  3. A pre-CGT dwelling is one that was acquired before September 20, 1985.
  4. The dwelling is generally exempt from Capital Gains Tax (CGT) when it is sold, irrespective of what the dwelling was used for.
  5. 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.
  6. These improvements may be subject to CGT in their own right when the dwelling is eventually sold.
  7. An improvement is taken to be ‘major’ if the original cost (indexed for inflation) of the improvement is:
    1. Greater than 5% of the amount you receive when you dispose of the dwelling; and
    2. 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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