This section explains your CGT obligations if your CGT asset is lost, destroyed or compulsorily acquired.
Generally, there are no CGT obligations for assets acquired before 20 September 1985 (pre-CGT).
New terms
We may use some terms that are new to you. These words are explained in Definitions. Generally, they are also explained in detail in the section where they first appear.
There may be a situation where you receive money or another CGT asset (or both) as compensation when you dispose of an asset involuntarily (or under an insurance policy against the risk of such an event happening). In this case, you may be able to choose to:
- defer your liability to pay tax on any capital gain arising on the disposal, or
- get a CGT exemption for any replacement asset if you acquired the original asset before 20 September 1985.
This concession is known as a rollover. It may be available if one of the following events happens:
- all or part of your CGT asset is lost or destroyed
- your CGT asset is compulsorily acquired by an Australian government agency
- your CGT asset is compulsorily acquired by an entity (other than by an Australian government agency or a foreign government agency) under a power of compulsory acquisition conferred by an Australian or foreign law. However, the compulsory acquisition of minority interests (such as shares in a company) under the Corporations Act or similar foreign law are excluded
- you dispose of your CGT asset to an entity (other than a foreign government agency) after a notice is served on you inviting you to negotiate a sale agreement. You must have been informed that, if the negotiations are unsuccessful, the asset will be compulsorily acquired under a power of compulsory acquisition conferred by an Australian or foreign law. However, the compulsory acquisition of minority interests (such as shares in a company) under the Corporations Act or similar foreign law are excluded
- you dispose of land to an entity (other than a foreign government agency) where a mining lease was compulsorily granted over the land, the lease significantly affected your use of the land, the lease was in force immediately before the disposal and the entity to which you disposed of the land was the lessee
- you dispose of land to an entity (other than a foreign government agency) where a mining lease would have been compulsorily granted over the land, the lease would have significantly affected your use of the land and the entity to which you disposed of the land would have been the lessee
- a lease that had been granted to you by an Australian Government agency under a Commonwealth, state or territory law expires and is not renewed.
This rollover is not available for plant disposed of after 11.45am (by legal time in the ACT) on 21 September 1999 and other depreciating assets from 1 July 2001. Instead, if a depreciating asset is lost or destroyed or, acquired compulsorily or by forced negotiation (other than by a foreign government agency), the capital allowances provisions may allow for a balancing adjustment offset.
This means that rather than including an amount in your assessable income by way of a balancing adjustment, you can offset that amount against the cost of a replacement asset (or assets).
If you choose to take rollover, you do not need to lodge a written election stating your choice, it will be clear from the way you prepare your tax return.
You cannot choose to defer a capital loss but you can use it to reduce any capital gain made in the current income year or a later income year.
For rollover relief to apply, the replacement asset you receive cannot be a car, motorcycle or similar vehicle.
Further, from 1 July 2001, for rollover relief to apply, the replacement asset you receive cannot become an item of your trading stock, nor can it be a depreciating asset.
Compulsory acquisition of part of your main residence
For certain compulsory acquisitions, an optional rollover may apply to a particular arrangement to which the exemption for part of a main residence also applies. The rollover may apply to that arrangement to the extent that the compulsory acquisition exemption does not apply.
A compulsory acquisition of part of your main residence may not qualify for the rollover as the requirement that you acquire a replacement asset that is used for the same (or a similar) purpose may not be able to be met. For example if vacant land adjacent to your home is compulsorily acquired you may not be able to acquire replacement adjacent land.
In this case, the main residence exemption may apply to the compulsory acquisition (or similar arrangement) of part of your main residence such as vacant land or structures.
For more information, see Main residence – compulsory acquisition.