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If you receive both money and an asset

Last updated 7 July 2013

If you receive both money and an asset and choose to take a rollover, the requirements and consequences are different for each part of the compensation.

You need to separately determine what happens to the replacement asset and the money, having regard to the proportion of the original asset attributable to each type of compensation.

The rules are then applied separately to the money and to the asset.

Example 94: Money and an asset received as compensation

The state government compulsorily acquires land Kris bought in 2002. Its cost base at the time was $150,000 but Kris received compensation worth $160,000.

Half of the total compensation is money ($80,000) and half is replacement land (market value $80,000).

Therefore, the cost base of the original land attributable to each part of the compensation is $75,000 (50%   $150,000). Kris bought additional replacement land for $82,000.

The total capital gain is $10,000 which is capital proceeds of cash and property totalling $160,000 less the cost base of $150,000. Half of this capital gain can be attributed to the money and half to the asset (the replacement land).

The money Kris received as compensation is less than the amount he paid to buy the additional land. He can therefore disregard the $5,000 of the capital gain that is attributable to the money compensation. He reduces the expenditure on the additional land by $5,000, so the first element of its cost base is only $77,000.

As the market value of the replacement land is more than that part of the cost base of the original land, Kris can choose to take rollover relief and disregard the capital gain of $5,000 relating to the land.

As a result, the value of the replacement land ($75,000) forms the first element of its cost base, not its market value ($80,000) when he acquired it.