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  • Roll-over conditions
    Attention

    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

    To extend the rollover beyond two years, the following conditions must be met by the end of the replacement asset period:

    • you must acquire a replacement asset or make a capital improvement to an existing asset, or do both, within the replacement asset period
    • the replacement asset must be an active asset by the end of the replacement asset period, and
    • if the replacement asset is a share in a company or an interest in a trust, by the end of the replacement asset period:
    • you or an entity connected with you must be a CGT concession stakeholder in that company or trust, or
    • CGT concession stakeholders in the company or trust must have a small business participation percentage in the entity of at least 90%.
    • The cost of the replacement asset must be equal to or greater than the gain you deferred.

    You can choose the rollover even if you have not yet acquired a replacement asset or made a capital improvement to an existing asset, but a new capital gain will arise if the any of the following happens:

    • you do not acquire an active asset, or make a capital improvement to an existing active asset by the end of the replacement asset period
    • the cost of the replacement active asset or capital improvement (including incidental costs) is less than the amount of the capital gain that you disregarded, or
    • a change happens to the replacement (or capital improved) asset after the replacement asset period (for example, you sell it or stop using it in your business).

    Example: small business rollover

    Instead of choosing the retirement exemption, Lana decides that she will search for a suitable replacement asset to use in her business. As all basic conditions are met, she qualifies for the small business rollover.

    This means she can reduce her capital gain remaining after all other concessions have applied ($3,500) to nil.

    After six months, Lana acquires another small parcel of land immediately adjoining the main business premises for use in her business. The replacement land costs $10,000, and it was her active asset before the end of the replacement asset period, so the roll-over conditions are met.

    Deferred capital gain

    The $3,500 remaining capital gain disregarded under the small business rollover is only a deferral of the capital gain. This deferred capital gain may later become assessable if Lana sells the land or stops using it in her business. However, she could then choose a further small business rollover if she acquired another replacement active asset. Alternatively, Lana could choose the retirement exemption.

    End of example
    Last modified: 13 Jul 2020QC 21900