Table of Subdivisions
Guide to Division 124
124-A General rules 124-B Asset compulsorily acquired, lost or destroyed 124-C Statutory licences 124-D Strata title conversion 124-E Exchange of shares or units 124-F Exchange of rights or options 124-G Exchange of shares in one company for shares in another company 124-H Exchange of units in a unit trust for shares in a company 124-I Conversion of a body to an incorporated company 124-J Crown leases 124-K Plant 124-L Prospecting and mining entitlements124-1 What this Division is about
A replacement-asset roll-over event allows you, in special cases, to defer the making of a capital gain or loss from one CGT event until a later CGT event happens. It involves your ownership of one CGT asset ending and you acquiring another one.
124-5 How to find your way around this Division
(1) First, find out if you can obtain a roll-over when your ownership of one or more CGT assets ends and you acquire one or more CGT assets: see Subdivisions 124-B to 124-L.
(2) Second, find out what the consequences are for being able to obtain a roll-over: see Subdivision 124-A.
(3) Third, find out if there are any special rules relevant to your situation: see the Subdivision under which you can get the roll-over.
Subdivision 124-A—General rules
124-10 Your ownership of one CGT asset ends
124-15 Your ownership of more than one CGT asset ends
124-10 Your ownership of one CGT asset ends
(1) There are these consequences (in most cases) if you can obtain a roll-over when your ownership of a
*CGT asset (the original asset) ends and you *acquire one or more CGT assets (the new assets) in a situation covered by this Division.Example: Your commercial fishing licence expires and you get a new one.
(2) A
*capital gain or a *capital loss you make from the original asset is disregarded.(3) If you
*acquired the original asset on or after 20 September 1985, the first element of each new asset’s *cost base is:
The first element of each new asset’s
*reduced cost base is worked out similarly.Example: To continue the example, suppose the cost base of the fishing licence that expires is $5,000. This becomes the first element of the new one’s cost base.
Note 1: In some cases the amount you paid to acquire the new asset also forms part of the first element: see Subdivisions 124-C (about statutory licences) and 124-D (about strata title conversion).
Note 2: There are modifications to the consequences in Subdivision 124-B (about compulsory acquisition, loss or destruction), Subdivision 124-J (about Crown leases) and Subdivision 124-L (about prospecting and mining).
Note 3: No other elements of the cost base of the new asset are affected by the roll-over.
Note 4: There are special indexation rules for roll-overs: see Division 114.
(4) If you
*acquired the original asset before 20 September 1985, you are taken to have acquired each new asset before that day.Note: A capital gain or loss you make from a CGT asset you acquired before 20 September 1985 is generally disregarded: see Division 104. This exemption is removed in some situations: see Division 149.
124-15 Your ownership of more than one CGT asset ends
(1) There are these consequences (in most cases) if you can obtain a roll-over when your ownership of more than one
*CGT asset (the original assets) ends and you acquire one or more CGT assets (the new assets) in a situation covered by this Division.Example: You own 100 shares in a company. The company cancels these shares and issues you with 10 shares in return.
(2) A
*capital gain or a *capital loss you make from each original asset is disregarded.(3) If you
*acquired all the original assets on or after 20 September 1985, the first element of each new asset’s cost base is:
The first element of each new asset’s
*reduced cost base is worked out similarly.Note 1: No other elements of the cost base of the new asset are affected by the roll-over.
Note 2: There are special indexation rules for roll-overs: see Division 114.
(4) If you
*acquired all the original assets before 20 September 1985, you are taken to have acquired each new asset before that day.Note: A capital gain or loss you make from a CGT asset you acquired before 20 September 1985 is generally disregarded: see Division 104. This exemption is removed in some situations: see Division 149.
(5) If you
*acquired some of the original assets before 20 September 1985, you are taken to have acquired a number of new assets before that day. It is the maximum possible that does not exceed:
If the result is less than one, none of the new assets are taken to have been
*acquired before 20 September 1985.Example: To continue the example, suppose you acquired 67 of the 100 original shares before 20 September 1985. The number of new shares that you are taken to have acquired before that day cannot exceed:
So, you are taken to have acquired 6 of the 10 shares before that day.
(6) These rules are relevant to each remaining new asset. The first element of each one’s
*cost base is:
The first element of each one’s
*reduced cost base is worked out similarly.Note: There are special indexation rules for roll-overs: see Division 114.
Example: To continue the example, suppose the total of the cost bases of the 33 shares you acquired on or after 20 September 1985 is $400.
The first element of the cost base of each of the remaining 4 shares is:
The first element of the reduced cost base of those 4 shares is worked out similarly.
Subdivision 124-B—Asset compulsorily acquired, lost or destroyed
Table of sections
When roll-over is available
124-70 Events giving rise to a roll-over
124-75 Other requirements if you receive money
124-80 Other requirements if you receive an asset
The consequences of a roll-over being available
124-85 Consequences for receiving money
124-90 Consequences for receiving an asset
124-95 You receive both money and an asset
[This is the end of the Guide.]
124-70 Events giving rise to a roll-over
(1) You may be able to choose a roll-over if one of these events happens to a
*CGT asset (the original asset) you own:(a) it is compulsorily
(b) it, or part of it, is lost or destroyed;
(c) you
*dispose of it to an *Australian government agency after a notice was served on you by or on behalf of the agency:(i) inviting you to negotiate with the agency with a view to the agency acquiring it by agreement; and
(ii) informing you that if the negotiations are unsuccessful, it will be compulsorily acquired by the agency;
(d) if it is a lease granted to you by an
*Australian government agency under an *Australian law—the lease expires and is not renewed.Note 1: There are no roll-over consequences if you make a capital loss from the event.
Note 2: Section 103-25 tells you when you have to make the choice.
(2) You must receive money or another
*CGT asset, or both:(a) as compensation for the event happening; or
(b) under an insurance policy against the risk of loss or destruction of the original asset.
Note: There are other requirements that must be satisfied if:
(3) The requirement in subsection (4) must be satisfied if:
(a) you are not an Australian resident just before the event happens; or
(b) you are the trustee of a trust that is not a
(4) The original asset must have the
*necessary connection with Australia just before the event happens. The other asset must have the *necessary connection with Australia just after you *acquire it.124-75 Other requirements if you receive money
(1) If you receive money for the event happening, you can choose to obtain a roll-over only if these other requirements are satisfied.
Note: The roll-over consequences are set out in section 124-85.
(2) You must:
(a) incur expenditure in
(b) if part of the original asset is lost or destroyed—incur expenditure of a capital nature in repairing or restoring it.
(3) At least some of the expenditure must be incurred:
(a) no earlier than one year, or within such further time as the Commissioner allows in special circumstances, before the event happens; or
(b) no later than one year, or within such further time as the Commissioner allows in special circumstances, after the end of the income year in which the event happens.
Special rules if you acquire another asset
(4) If just before the event happened the original asset:
(a) was used in your
(b) was
*installed ready for use in your business; or(c) was in the process of being
*installed ready for use in your business;the other asset must be used in the business, or be installed ready for use in the business, for a reasonable time after you
*acquired it.Otherwise, you must use the other asset (for a reasonable time after you
*acquired it) for the same purpose as, or for a similar purpose to, the purpose for which you used the original asset just before the event happened.(5) The other asset cannot become an item of your
*trading stock just after you *acquire it.124-80 Other requirements if you receive an asset
(1) If you receive another
*CGT asset for the event happening, you can choose to obtain a roll-over only if these other requirements are satisfied.Note: The roll-over consequences are set out in section 124-90.
(2) The other asset cannot become an item of your
*trading stock just after you *acquire it.(3) The market value of the other asset (when you
*acquire it) must be more than the *cost base of the original asset just before the event happens.The consequences of a roll-over being available
124-85 Consequences for receiving money
(1) If you receive money for the event happening, there are these consequences if you choose to obtain a roll-over.
Original asset acquired on or after 20 September 1985
(2) If you make a
*capital gain from the event, this table sets out in what situations the gain 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.
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You make a capital gain from the event |
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Item |
In this situation: |
There are these consequences |
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1 |
The money exceeds the expenditure you incurred to *acquire another CGT asset or to repair or restore the original asset |
If the gain is more than the excess: (a) 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 the gain (before it is reduced) is more than the excess |
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2 |
The money exceeds that expenditure |
If the gain is less than or equal to the excess, the gain is not reduced |
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3 |
The money does not exceed that expenditure |
The gain is disregarded in working out your *net capital or *net capital loss for the income year. That expenditure is reduced by the amount of the gain |
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Example: In 1999 Simon bought a yacht. In 2000 a fire destroys part of it. He receives $100,000 under an insurance policy.
The capital gain is worked out under section 112-30.
Suppose the yacht’s cost base at the time of the fire is $75,000 and the market value of the part that is not destroyed is $150,000. The cost base of the part that is destroyed is:
The capital gain is:
Case 1
Suppose Simon spent $80,000 on repairing the yacht. The money he received under the insurance policy exceeds the repair cost by $20,000. The gain exceeds that by $50,000.
The result is that the gain is reduced to $20,000 and the $80,000 he spent on repairs is reduced to $30,000.
Case 2
Suppose Simon spent $15,000 on repairs instead. The money he received under the policy exceeds that amount by $85,000. This is more than the gain he made.
The gain is relevant to working out Simon’s net capital gain or loss for the income year and the $15,000 he spent on repairs forms part of the yacht’s cost base.
Case 3
Suppose Simon spent $120,000 on repairs instead. The gain is disregarded and the $120,000 is reduced to $50,000.
Original asset acquired before 20 September 1985
(3) 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 is not more than 120% of the market value of the original 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 the original asset.
124-90 Consequences for receiving an asset
(1) If you receive another
*CGT asset for the event happening, there are these consequences if you choose to obtain a roll-over.(2) A
*capital gain you make from the original asset is disregarded.(3) If you
*acquired the original asset on or after 20 September 1985:(a) the first element of the other asset’s
(b) the first element of the other asset’s
*reduced cost base is the original asset’s reduced cost base at the time of the event.Note: There are special indexation rules for roll-overs: see Division 114.
Example: Steven bought land in 1999 for $100,000. In 2001 the government compulsorily acquires the land and gives him new land in return.
A capital gain he makes from the original land is disregarded. Suppose the original land’s cost base when it is acquired is $120,000. The first element of the new land’s cost base becomes $120,000.
(4) If you acquired the original asset before 20 September 1985, you are taken to have
*acquired the other asset before that day.124-95 You receive both money and an asset
(1) If you receive both money and another
*CGT asset for the event happening, the consequences are different if you choose to obtain a roll-over.(2) Subsection 124-80(3) has effect as if it referred to the market value of the other asset being more than that part of the
*cost base of the original asset that is attributable to the new asset.(3) The table in subsection 124-85(2) has effect as if it referred to that part of the
*capital gain you made that is attributable to the amount of money you received.(4) Subsection 124-85(3) has effect as if it referred to the sum of the expenditure you incurred to
*acquire another *CGT asset and the market value of the asset you received.(5) Subsection 124-90(3) has effect as if it referred to that part of the
*cost base of the original asset that is attributable to the new 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 124-80(3) 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:
Applying subsection 124-85(2), 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:
The expenditure is reduced by $5,000.
Applying subsection 124-90(3), 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:
Subdivision 124-C—Statutory licences
124-140 Renewal or extension of a statutory licence
(1) There is a roll-over if:
(a) a
(b) you get a new licence by renewing or extending the original one (which is due mainly to you having the original one).
Note 1: The roll-over consequences are set out in section 124-10. The original asset is the original licence. The new asset is the licence you get by renewing or extending the original licence.
Note 2: If there has been a capital improvement to the statutory licence: see section 108-75.
(2) The first element of the
*cost base and *reduced cost base of the new licence includes any amount you paid to get it (which can include giving property: see section 103-5).Note: The rest of the first element is worked out under Subdivision 124-A.
(3) A statutory licence is an authority, licence, permit or quota (except a lease or a
*mining entitlement or *prospecting entitlement) granted by:(a) an
(b) a
*foreign government agency under a *foreign law.Subdivision 124-D—Strata title conversion
124-190 Strata title conversion
(1) You can choose to obtain a roll-over if:
(a) you own property that gives you a right to occupy a unit in a building; and
(b) the building’s owner subdivides it into
(c) the owner transfers to you the stratum unit that corresponds to the unit you had the right to occupy just before the subdivision.
Note 1: The roll-over consequences are set out in section 124-10. The original asset is the property that gave you the right to occupy a unit in the building. The new asset is the stratum unit.
Note 2: Section 103-25 tells you when you have to make the choice.
(2) The first element of the
*cost base and *reduced cost base of the *stratum unit includes any amount you paid to get it (which can include giving property: see section 103-5).Note: The rest of the first element is worked out under Subdivision 124-A.
(3) A stratum unit is a lot or unit (however described in an
*Australian law or a *foreign law relating to strata title or similar title) and any accompanying common property.
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