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  • If you receive both money and an asset

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

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

    Example
    Money and an asset received as compensation

    The State Government compulsorily acquires land Kris bought in 2000. Its cost base at the time is $150 000 but Kris receives 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% x $150 000). Kris buys 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 $5000 of the capital gain that is attributable to the money compensation. The expenditure on the additional land is reduced by $5000, 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 roll-over relief and disregard the capital gain of $5000 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 it was acquired.

    Consequences of receiving both money and an asset

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

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

    Indexation

    If a CGT event happens to the replacement asset (for example, a later disposal), you may be able to use the indexation method or the discount method to calculate your capital gain. This applies only if the periods of ownership of the original asset and the replacement asset add up to at least 12 months. For indexation to apply, you must have acquired the asset before 21 September 1999.

    Last modified: 31 Aug 2010QC 16195