CGT Determination Number 4

TD 4

Capital Gains: When will an asset be a replacement for an asset that has been lost or destroyed?

• Please note that the PDF version is the authorised version of this ruling.
  This CGT Determination has been replaced by TD 94/76
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

FOI status:

1. Under the CGT provisions, roll-over relief is allowed in certain circumstances where a replacement asset has been acquired for an asset that has been lost or destroyed (section 160ZZK).

2. Subsection 160ZZK(7) sets out the requirements for an asset to be treated as a replacement asset. Broadly, the two requirements are:

•

the asset acquired is used in the same business as the asset disposed; or

•

the asset acquired is used for the same or similar purpose as the asset disposed.

3. Whether an asset is a replacement asset for the purposes of allowing roll-over relief is a question of fact to be determined in each case.

Example:

An individual taxpayer owns a house that has been treated as a separate asset for CGT and used for rental purposes. The house is destroyed by fire and the insurance proceeds are used to:

(a)

build on the same site a block of units to be used for rental purposes;

(b)

build on a different site a house to be used for rental purposes;

(c)

acquire an existing house and land to be used for rental purposes;

(d)

acquire shares in a public company to be used for income producing purposes.

For roll-over purposes, the asset acquired will be taken to be a replacement asset in cases

(a)

, (b) and (c) but not (d).

Commissioner of Taxation
10 September 1991

References

ATO references:
NO CGT Cell 7

Subject References:
Roll-over
Replacement asset

Legislative References:
ITAA 160ZZK