Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-3 - CAPITAL GAINS AND LOSSES: SPECIAL TOPICS  

Division 124 - Replacement-asset roll-overs  

Subdivision 124-B - Asset compulsorily acquired, lost or destroyed  

The consequences of a roll-over being available

SECTION 124-95   You receive both money and an asset  

124-95(1)    

If you receive both money and another *CGT asset for the event happening and choose to obtain a roll-over, the requirements and consequences are different for each part of the compensation attributable to the original asset (having regard to the amount of money and the *market value of the other asset).

The other asset as a part of compensation

124-95(2)    

The *market value of the other asset (when you *acquire it) must be more than that part of the *cost base of the original asset that is attributable to the new asset.

Note:

This requirement is different to that in subsection 124-80(3) . It requires a proportional attribution of the cost base of the original asset.

124-95(3)    
If you *acquired the original asset on or after 20 September 1985:

(a) the first element of the other asset ' s *cost base is that part of the original asset ' s cost base at the time of the event that is attributable to the new asset; and

(b) the first element of the other asset ' s *reduced cost base is worked out similarly.

Note:

These consequences are different to those in subsection 124-90(3) . They require a proportional attribution of the cost base of the original asset.

124-95(4)    
If you *acquired the original asset before 20 September 1985, you are taken to have acquired the new asset before that day.

Money as a part of compensation

124-95(5)    
If you make a *capital gain from the event, this table sets out in what situations that part of the gain on the original asset that is attributable to the amount of money you received is reduced, not reduced or disregarded.

It also sets out in what situations the expenditure you incurred to *acquire another *CGT asset or to repair or restore the original asset is reduced.

You make a capital gain from the event
Item	In this situation:	There are these consequences:
1	The money exceeds the expenditure you incurred to *acquire another CGT asset or to repair or restore the original asset	If that part of the gain that is attributable to the amount of money is more than the excess:
		(a)	that part of the gain is reduced to the amount by which the money exceeds that expenditure; and
		(b)	that expenditure is reduced by the amount by which that part of the gain (before it is reduced) is more than the excess
.
2	The money exceeds that expenditure	If that part of the gain that is attributable to the amount of money is less than or equal to the excess, the gain is not reduced
.
3	The money does not exceed that expenditure	That part of the gain that is attributable to the amount of money is disregarded in working out your *net capital gain or *net capital loss for the income year. That expenditure is reduced by the amount of that part of the gain

Note:

These consequences are different to those in subsection 124-85(2) . They require a proportional attribution of capital gain on the original asset.

124-95(6)    
If you *acquired the original asset before 20 September 1985 and you incurred expenditure in acquiring another *CGT asset, you are taken to have acquired the other asset before that day if:

(a) the expenditure you incurred in acquiring the other asset is not more than 120% of the *market value of that part of the original asset that is attributable to the other asset when the event happened; or

(b) a natural disaster happened so that the original asset, or part of it, is lost or destroyed and it is reasonable to treat the other asset as substantially the same as that part of the original asset that is attributable to the new asset.

Note 1:

The consequences in paragraph (6)(a) are different to those in paragraph 124-85(3)(a) . They require a proportional attribution of the market value of the original asset.

Note 2:

The consequences in paragraph (6)(b) are different to those in paragraph 124-85(3)(b) . They require a proportional attribution of the original asset.

Example:

Kris owns land, which he acquired in 1998. It is compulsorily acquired, and Kris receives $80,000 in cash and replacement land with a market value of $80,000.

The cost base of the original land is $150,000.

Kris buys additional land for $80,000.

Subsection (2) is satisfied because the market value of the replacement land ($80,000) is more than the part of the cost base of the original land that is attributable to the replacement land:

50%   ×   $150,000   =   $75,000

Applying subsection (5), the other part of the gain is disregarded, and the first element of the cost base of the replacement land is the part of the cost base of the original land that is attributable to the replacement land:

50%   ×   $150,000   =   $75,000

Applying subsection (3), the money he received ($80,000) is the same as the expenditure he incurred to buy the additional land. Item 3 in the table applies. The part of the gain that is attributable to that money is disregarded:

50%   ×   $10,000   =   $5,000

The expenditure is reduced by $5,000.