• If you receive both money and an asset

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    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    If you receive both money and an asset and choose to take a rollover, the requirements and consequences are different for each part of the compensation.

    Example - Money and an asset received as compensation

    The state government compulsorily acquires land Kris bought in 2002. Its cost base at the time was $150,000 but Kris received compensation worth $160,000.

    Half of the total compensation is money ($80,000) and half is replacement land (market value $80,000).

    Therefore, the cost base of the original land attributable to each part of the compensation is $75,000 (50% x $150,000). Kris bought additional replacement land for $82,000.

    The total capital gain is $10,000 which is capital proceeds of cash and property totalling $160,000 less the cost base of $150,000. Half of this capital gain can be attributed to the money and half to the asset (the replacement land).

    The money Kris received as compensation is less than the amount he paid to buy the additional land. He can therefore disregard the $5,000 of the capital gain that is attributable to the money compensation. The expenditure on the additional land is reduced by $5,000, so the first element of its cost base is only $77,000.

    As the market value of the replacement land is more than that part of the cost base of the original land, Kris can choose to take rollover relief and disregard the capital gain of $5,000 relating to the land.

    As a result, the value of the replacement land ($75,000) forms the first element of its cost base, not its market value ($80,000) when it was acquired.

    End of example
    Last modified: 04 Mar 2016QC 27527