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Subdivision 108-D sets out cases in which an asset that would be regarded as a single asset under property law is to be treated as more than one asset for CGT purposes. The Subdivision treats each of the following as a CGT asset separate from post-CGT land to which it is attached: • a building or structure on land acquired on or after 20 September 1985 (subsection 108-55(1)) or a capital improvement to land acquired at any time (subsection 108-70(1)), if one of the balancing adjustment provisions in the table below applies to the building, structure or improvement (whether or not there is a balancing adjustment): Balancing adjustment provisions Item For this capital allowance: You do a balancing adjustment under: 1 Depreciation Subdivision 42-F 2 Mining Subdivision 330-J 3 Research and development section 73B of the Income Tax Assessment Act 1936 4 Timber mill buildings Subdivision 387-G 5 Timber operations: access roads Subdivision 387-G Note (a): A building or structure constructed on or after 20 September 1985 on land acquired before that date is always treated as a separate CGT asset (subsection 108-55(2)). * a unit of plant that is part of a building or structure which is taken to be a separate CGT asset from the building or structure (section 108-60); Note (b): Chattels (e.g., items of furniture) that are sold with the property are separate CGT assets in their own right and are not part of the real property. This is the case whether the chattels were acquired with the property or afterwards.

On a CGT event happening to the real property, that CGT event happens to each separate asset comprising the property and a separate capital gain or loss calculation is necessary for each CGT asset. The capital proceeds from each CGT event are so much of the overall capital proceeds as is reasonably attributable to that event (subsection 116-40(1)).

If the property is disposed of under a contract, it is preferable that the parties allocate the overall capital proceeds to the separate assets in the contract.

If the contract is made, including the allocation of the capital proceeds, by parties dealing with each other at arm's length, we will accept the allocation for the purpose of subsection 116-40(1).

We will accept a later agreement, between the parties in paragraph 4, that allocates the capital proceeds if this was not done in the original contract.

In the absence of an agreed allocation, each party needs to make their own reasonable apportionment of the capital proceeds to the separate assets. In making this apportionment, it is expected that each party would generally have regard to, and be able to justify, their reasonable apportionment based on the relevant market values of the separate assets at the time of the making of the contract.

It should be noted that the written down values of depreciable assets are not necessarily their market values. Note (c): This draft Taxation Determination rewrites Taxation Determination TD 94/64. From the beginning of the 1998-99 income year, this Determination, rather than TD 94/64, applies to CGT events under the Income Tax Assessment Act 1997 that happen to real property. It implements a change in the law underlying TD 94/64 by now applying separate asset treatment to a building or structure on post-CGT land only if one of the balancing adjustment provisions applies (sections 108-55 and 108-70). Improvements that entitle owners to a deduction for capital works expenditure are no longer treated as assets separate from the land. An Addendum to TD 94/64 will be issued on finalisation of this draft Determination. The wording will be: '1. After paragraph 8, insert: "9. This Determination continues to apply to disposals of real property under the Income Tax Assessment Act 1936 occurring before the beginning of the 1998-99 income year. From the beginning of the 1998-99 income year, this Determination does not apply to a CGT event under the Income Tax Assessment Act 1997 (the 1997 Act) that happens to real property. Rather, Taxation Determination TD 98/xx [i.e., the final version of TD 98/D8] applies." " Note: The 1997 Act now applies separate asset treatment to a building or structure on post-CGT land only if one of the balancing adjustment provisions applies (sections 108-55 and 108-70). Improvements that entitle owners to a deduction for capital works expenditure are no longer treated as assets separate from the land. This Addendum reflects this change in the law by specifying that Taxation Determination TD 94/64 does not apply to CGT events that happen after the beginning of the 1998-99 income year." '