Making ‘intangible’ capital improvements to pre-CGT assets
The ATO has confirmed that, if intangible capital improvements are made to a pre-CGT asset, they can be a ‘separate CGT asset’ from that pre-CGT asset if the relevant requirements are satisfied.
The result of this is that, while the disposal of the pre-CGT asset itself will be exempt from CGT, the improvements which are treated as a separate, post-CGT asset could still give rise to CGT.
A farmer, holding pre-CGT land, obtains council approval to rezone and subdivide the land.
Those improvements may be separate CGT assets from the land, so if the land is sold with those improvements (the council approval), there may be some CGT (even though the land itself is exempt).