It provides that for the purposes of the “separate asset” rules, some intangible capital improvements can be considered separate capital gains tax (CGT) assets from the pre-CGT asset to which the improvements are made. This applies if the improvement cost base is more than the improvement threshold for the income year when CGT event happened, and it is more than 5% of the capital proceeds from the event.
This can result in part of the sale of pre CGT asset being fully taxable (with no 50% discount). Hence, extra care is required when selling.
An example could be the sale under a single contract of an operating hotel where the freehold was acquired prior to 1985, but (arguably) the goodwill is generated after.
The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.