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End of attention
If you acquired the original asset before 20 September 1985 and if:
- you repair or restore it or
- you replace it:
- at a cost of no more than 120 per cent of its market value at the time of the event or
- at any cost, provided it, or part of it, was lost or destroyed by a natural disaster and the replacement asset s substantially the same
you are taken to have acquired the repaired or replacement asset before that day.
This means that you disregard any capital gain or loss you make when a later CGT event happens to the repaired or replacement asset.
Replacement after a natural disaster
Henry acquired a semitrailer for his transport business in June 1985. The asset was totally destroyed by a bushfire at a time when it had a market value of $150,000.
Henry is not subject to any cost limit on the purchase of a new semitrailer because the old one was destroyed by a natural disaster. Provided it s substantially the same as the old one, the vehicle is treated as if it had been acquired before 20 September 1985 and any capital gain on a later disposal is therefore not subject to tax.
If it had been destroyed other than by a natural disaster, Henry would have been entitled to claim pre-CGT status for the replacement vehicle only if it had cost no more than $180,000 ($150,000 x 120% ) .
Last modified: 18 Sep 2009QC 18323