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Capital gains tax (CGT) rollover: statutory licence holders

You may be able to roll over your capital gains tax obligations when your statutory license ends and is replaced.

Last updated 20 June 2016

This fact sheet provides information to statutory licence holders about the CGT rollover.

Information for statutory licence holders when your licence ends and is replaced.

You may be able to roll over your capital gains tax (CGT) obligations when:

  • your statutory licence ends
  • you are issued a new statutory licence authorising activities similar to those authorised under your original licence.

Depending on the conditions under which your licence ends, you may be able to:

  • defer all or part of your CGT obligations
  • roll over all or part of the cost base of your original licence.

What is a statutory licence?

A statutory licence is an authority, quota, licence or permit (except a lease or a mining or prospecting entitlement) granted by or on behalf of a government, or a government body under a law of the commonwealth, state, territory, or foreign country.

Governments grant a range of licences as part of the ongoing management of certain industries. Statutory licences may include but are not limited to:

  • radio and television broadcasting licences
  • taxi licences
  • fishing permits or quotas
  • oyster farming licences
  • liquor licences
  • water licences
  • game licences
  • import or export licences.

A statutory licence that allows you to carry on your business is an asset and any dealings with that licence will have capital gains tax (CGT) consequences.

Exclusions from the definition of statutory licence are:

  • a lease
  • a mining or prospecting entitlement.

These are excluded as there are special statutory rollover relief provisions applicable to Crown leases and to prospecting and mining entitlements.

When does a CGT rollover apply?

To roll over a capital gain, your new licence must:

  • be issued because the original licence ended
  • have a clear connection with your original licence
  • authorise activities that are substantially similar to the activities authorised in the original licence.

What is substantially similar activity?

To work out whether the activities authorised in the new licence are substantially similar to those authorised by the original licence, you must consider:

  • why your licence ended
  • any changes to your skills used to operate your licence
  • the way your business operates.

To decide if a new licence authorises similar activities consider:

  • whether the equipment you used to operate under the original licence is similar to that required to operate under the new licence
  • whether the duration of the authorised licence period changed
  • the authorised quantity, type or volume of a resource you will access
  • the authorised quantity, type or volume of a product you will supply
  • changes to your physical operation.
Start of example


Caughtya Pty Ltd held a licence (the original licence) to catch a species of fish in the protected waters of Banana Bay in southeast Queensland.

The issuing authority worked out that continued fishing of this species was not sustainable and cancelled the licences.

Caughtya Pty Ltd was issued with a new licence to catch a different species of fish in the open waters off central Queensland. The new but more valuable licence was issued to replace the original licence:

  • authorised a different species
  • re-zoned the authorised fishing area.

As a result, Caughtya Pty Ltd modified and replaced equipment including the purchase of a bigger ocean going vessel, to fish in the new waters.

Caughtya Pty Ltd continues to operate in the fishing industry and to use the same commercial fishing skills as authorised under their original licence.

As the activities are substantially similar a capital gains tax (CGT) rollover applies.

End of example


Start of example


Maggie’s aquaculture licence allowed her to farm Murray cod, barramundi and trout. The issuing authority told Maggie she could no longer farm fish due to water sustainability concerns in the region.

When they cancelled her licence, the state government gave Maggie a cash payment to help her move into new business activities.

Maggie chose to accept the state government’s offer of a licence to manufacture eucalyptus oil, using the cash she received to pay for the new licence.

Even though the aquaculture licence was cancelled and Maggie used the proceeds from the cancelled licence to acquire the oil manufacturing licence, the oil manufacturing licence was not issued as a result of the cancellation of the original licence. Further, the activities authorised by the two licences are not substantially similar. The CGT rollover does not apply to Maggie.

End of example

Why rollover your capital gain?

If you satisfy the conditions for a capital gains tax (CGT) rollover you may be eligible to roll over all or part of your capital gain.

Generally, the rollover has three consequences:

  • we disregard any capital gain that arises from ending your original licence
  • the new licence is treated as though you acquired it on the date that you acquired your original licence
  • the cost base of your original licence (or licences) will be allocated to your new licence (or licences).

What if you have multiple licences?

When industries restructure several original licences may collapse into fewer new licences or conditions in the original licence may be split over several licences to recognise the different aspects of the authorised activity.

Where you have multiple licences, the rollover requires that:

  • at least some of your original licences end
  • your new licence or licences be issued as part of a single arrangement.
Start of example


William’s farm is on two land titles. There are several bores on each title. William holds separate groundwater licences for each bore across the two land titles.

The water authority:

  • restructures groundwater access licensing across the region      
    • cancels William’s existing groundwater licences
    • issues one water access licence for each land title.

William can roll over his capital gain on each licence because:

  • each new licence replaces one or more of the original licences (a clear connection)
  • both sets of licences relate to extracting water (a substantially similar activity).
End of example

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.

Start of example


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

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.

Start of example


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.

Start of example


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.