Taxation Determination TD 93/178







This Determination, to the extent that it is capable of being a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953 , is a public ruling for the purposes of that Part. Taxation Ruling TR 92/1 explains when a Determination is a public ruling and how it is binding on the Commissioner. Unless otherwise stated, this Determination applies to years commencing both before and after its date of issue. However, this Determination does not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of the Determination (see paragraphs 21 and 22 of Taxation Ruling TR 92/20). | 1. Section 160ZZK of the Income Tax Assessment Act 1936 is a roll-over provision which potentially provides a deferral of the tax liability, that might otherwise arise on the involuntary disposal of a post-CGT asset, until the disposal of the replacement asset. The extent to which the tax liability is deferred depends on the difference between the amount of the compensation or insurance proceeds and the cost of the replacement asset (subsection 160ZZK(6)). | 2. Subsection 160ZZK(6) applies if a capital gain would have accrued to the taxpayer in respect of the involuntary disposal of an asset if not for the rollover provided in section 160ZZK. For the purposes of subsection 160ZZK(6), the "notional capital gain" refers to the amount that but for section 160ZZK, would have been a capital gain on the disposal of the post-CGT asset. This "notional capital gain" is calculated by subtracting the indexed cost base of the post-CGT asset from the compensation or insurance proceeds received. | (a) Indexed cost base of original asset | (b) Compensation or insurance proceeds | (c) Cost of replacement asset | (d) Notional Capital gain {(b)-(a)} | (e) Capital gain {(b)-(c)} (d) | (f) Reduction to cost of replacement asset (d) {(d)-((b)-(c))} | [Note: In practical terms, the notional capital gain is used to reduce the cost of the replacement asset to the level of the indexed cost base of the original asset. Any balance is treated as a capital gain.] | Commissioner of Taxation 9/9/93 | Previously issued as Draft TD 93/D177


Legislative references: ITAA 160ZZK ITAA 160ZZK(6) ITAA 160ZZK(6)(a) ITAA 160ZZK(6)(b)(i) ITAA 160ZZK(6)(b)(ii)
Subject references: capital gains; compensation; cost base; insurance proceeds; involuntary disposal; notional capital gain; replacement asset.