Question

Are capital assets purchased before 20 Sept 1985 subject to CGT?

Option 1:
Yes, all capital assets purchased before 20 Sept 1985 are subject to CGT.

Option 2:
No, capital assets purchased before 20 Sept 1985 are exempt from CGT.

Answer 1

Capital assets purchased before 20 September 1985 are generally exempt from capital gains tax (CGT) in Australia. It's important to note, however, that there are exceptions and specific circumstances that could change the tax implications for such assets.

Step-by-step explanation:

Capital gains tax (CGT) is a tax on the profit when you sell (or "dispose of") an asset that has increased in value. Capital assets purchased before 20 September 1985 are generally exempt from CGT in Australia, because the CGT provisions only apply to assets acquired on or after that date, which is when the CGT regime was introduced. Therefore, option 2 is correct; capital assets purchased before this date are not subject to CGT.

This means if you have a property, shares, or any other capital asset that was acquired before 20 September 1985 and then dispose of this asset, the capital gains made on that disposal would generally not be taxed under CGT provisions. However, there are some exceptions and specific rules that may apply, particularly if substantial improvements were made to the property after that date, potentially bringing it into the CGT regime. Thus, while the general rule is that pre-CGT assets are exempt, individual circumstances can affect tax obligations.