If you choose to take a rollover when you receive a replacement asset, any capital gain you make from the original asset is disregarded. The other consequences are outlined below.
Original asset acquired before 20 September 1985
If you acquired the original asset before 20 September 1985, you are taken to have acquired the new asset before that day.
Original asset acquired on or after 20 September 1985
If you acquired the original asset on or after 20 September 1985, the first element of the cost base and reduced cost base of the replacement asset is taken to be the cost base and reduced cost base of the original asset at the time of the event.
However, you may have to recalculate the first element of the cost base of your replacement asset if the cost base of the original asset included an amount of indexation and you are seeking to apply the CGT discount to a capital gain from the replacement asset.
Example – Asset received
Jon acquired land after 19 September 1985 that the state government compulsorily acquired on 14 July 2003. The cost base of the land at the time it was compulsorily acquired was $180,000. As compensation, Jon received another piece of land with a market value of $200,000.
Because the market value of the replacement land was greater than the cost base of the original land just before it was compulsorily acquired, the capital gain Jon made on the disposal of the original land is disregarded. Jon is taken to have paid $180,000 to acquire the replacement land (that is, the cost base of the original land at the time it was compulsorily acquired).End of example