What if you receive cash or property with a new licence?
Capital gains tax (CGT) rollover only applies to your original licence ending and you receiving a new licence that satisfies the conditions for a CGT rollover.
Any cash or property you receive along with your new licence is not eligible for a CGT rollover and you need to work out the CGT on any cash or property you receive because your licence ended.
However, the CGT discount and small business concessions may apply to a gain you make on the cash or property you received.
For example, if you are an individual or a trustee that owned the original licence for more than 12 months, the 50% discount applies.
You may reduce the cost base of your original licence to take into account the ineligible proceeds you received. This reduced amount will be allocated to the cost base of your new licence.
Joe held a low power radio spectrum licence (issued in 2000) that he used to run a closed narrowcasting television service in his local area for 10 years. The service had subscribers who met the cost of the narrowcasting. The subscription fee also gave Joe a small return on the cost of his spectrum licence.
The licensing authority withdrew Joe’s licence for the frequency he was using as they allocated the frequency to another service. As part of the arrangement, the authority issued Joe a new licence for another low power frequency.
The new frequency required additional power to transmit, so the authority gave Joe a cash payment so that he could continue to operate without having to increase his subscription fees.
The CGT rollover applies to the new licence only. Any capital gain on the cash payment is assessable.
End of example