On 25 January 2017, the ATO issued Taxation Determination TD 2017/1. It provides that for the purposes of the "separate asset" rules in ss 108-70(2) or (3) of the Income Tax Assessment Act 1997 (ITAA 1997), intangible capital improvements can be considered a separate CGT asset from the pre-CGT asset to which those improvements are made, if the relevant thresholds are satisfied. The thresholds require that the improvement's cost base is more than the improvement threshold for the income year in which the CGT event happened to the original asset, and that the improvement's cost base is more than 5% of the capital proceeds from the event.
The determination also provides an example: where a farmer who holds pre-CGT land obtains council approval to rezone and subdivide the land, those improvements may be considered separate CGT assets from the land itself.
Note: This determination was originally issued as CGT Determination Number 5 in relation to the CGT provisions in the Income Tax Assessment Act 1936 (ITAA 1936). The current determination updates the ruling for the purposes of the equivalent ITAA 1997 provisions, without any change in substance.
The Determination applies to years of income commencing both before and after its date of issue.
Source: ATO, Taxation Determination TD 2017/1, 25 January 2017, http://law.ato.gov.au/atolaw/view.htm?docid=%22TXD%2FTD20171%2FNAT%2FATO%2F00001%22.