Document ID: chunk:federal_register_of_legislation:C2004C01190:clause:2_298
Version: federal_register_of_legislation:C2004C01190
Segment Type: clause
Provision Reference: sch 2 cl 298
Character Range: 188835–190050

298  Subsection 124‑85(2) (example)
Repeal the example, substitute:

Example: In 1999 Simon bought a small factory. In 2000 a fire destroys part of it. He receives $100,000 under an insurance policy.

 The capital gain is worked out under section 112‑30.

 Suppose the factory's cost base at the time of the fire is $75,000 and the market value of the part that is not destroyed is $150,000. The cost base of the part that is destroyed is:

 The capital gain is:

 Case 1

 Suppose Simon spent $80,000 on repairing the factory. The money he received under the insurance policy exceeds the repair cost by $20,000. The gain exceeds that by $50,000.

 The result is that the gain is reduced to $20,000 and the $80,000 he spent on repairs is reduced to $30,000.

 Case 2

 Suppose Simon spent $15,000 on repairs instead. The money he received under the policy exceeds that amount by $85,000. This is more than the gain he made.

 The gain is relevant to working out Simon's net capital gain or loss for the income year and the $15,000 he spent on repairs forms part of the factory's cost base.

 Case 3

 Suppose Simon spent $120,000 on repairs instead. The gain is disregarded and the $120,000 is reduced to $50,000.