What information do you need?

Is your licence pre-CGT?

If you acquired your original licence before 20 September 1985 (pre-CGT):

  • we will treat the replacement licence as if it was acquired before that date
  • there are no capital gains tax (CGT) consequences for any cash payments.

Generally, we disregard any capital gain you make on a pre-CGT asset.

What is the cost base of your post-CGT original licence?

The cost base of your original licence includes any amount that you paid and the value of any property you gave, to acquire the licence. If you acquired the licence as part of acquiring property and you did not pay for it separately, the cost base is the portion of the total amount you paid for the property and licence that is reasonably attributable to the licence.

You can work this out by using a reasonable estimate of the respective market values of the property and licence at the time you acquired them. Make sure you keep a record of how you worked out these values.


Bill paid $2 million for land including a water licence in 2002. Based on the values at that time, Bill works out that:

  • the land was valued at $1.9 million
  • the licence was valued at $100,000.
End of example

What cost base applies to the gain from the cash payments?

First, reduce the cost base of the original licence by the amount you attribute to the cash payment. Then, apply the revised cost base of the old licence. The balance is the cost base of your new licence.


Bill’s cost base for his original licence was $100,000.

Bill receives a new licence with a value of $120,000 and a cash payment of $40,000 because of the local water authority restructuring program.

Of the $100,000 cost base of the original licence, $25,000 is attributed to the cash payment, resulting in a capital gain of $15,000. There is no CGT rollover for this gain.

The cost base of his new licence is $75,000.

Total capital proceeds = value of new licence + cash

Step one – cost base attributed to the cash payment

(Cash ÷ Total capital proceeds) × Original cost = Amount attributed to cash

($40,000 ÷ $160,000) × $100,000 = $25,000

Step two – calculate portion of cash payment that is assessable for CGT

Cash − Cash attributed to the cost base = Portion of cash payment assessable

$40,000 − $25,000 = $15,000

Step three – calculate the cost base of your new licence

Original cost − Amount attributed to cash = Cost base of new licence

$100,000 − $25,000 = $75,000

End of example

What if your licences are a mix of pre-CGT and post-CGT licences?

If you have pre-CGT and post-CGT licences that end and you receive a new licence in their place, treat the new licence as two separate assets. That is, treat one as though you acquired it pre-CGT and the other as post-CGT.

You can work out the cost base of your post-CGT asset by allocating the total cost base of your original post-CGT licences between your new post-CGT licences in proportion to their market values.

What if you are a foreign resident and you hold an Australian statutory licence?

You may be able to roll over your capital gain if you:

  • are a foreign resident
  • hold a statutory licence
  • use the statutory licence to carry on a business through a permanent establishment in Australia (taxable Australian property), and
  • also use a new licence or licences in that business.

See also:

For help applying this to your own situation, phone 13 28 66.

    Last modified: 21 Jun 2016QC 21301