Document ID: chunk:federal_register_of_legislation:C2004C00958:clause:1_3:p1
Version: federal_register_of_legislation:C2004C00958
Segment Type: clause
Provision Reference: sch 1 cl 3 (pt 1/3)
Character Range: 358698–361398

3                                       The money does not exceed that expenditure                                                                               The gain is disregarded in working out your *net capital or *net capital loss for the income year. That expenditure is reduced by the amount of the gain

Example: In 1999 Simon bought a yacht. 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 yacht'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 yacht. 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 yacht'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.

Original asset acquired before 20 September 1985

 (3) If you *acquired the original asset before 20 September 1985 and you incurred expenditure in acquiring another *CGT asset, you are taken to have acquired the other asset before that day if:

 (a) the expenditure is not more than 120% of the market value of the original asset when the event happened; or

 (b) a natural disaster happened so that the original asset, or part of it, is lost or destroyed and it is reasonable to treat the other asset as substantially the same as the original asset.

 (4) If you *acquired the original asset before 20 September 1985 and you incurred expenditure of a capital nature in repairing or restoring it, you are taken to have acquired the original asset (as repaired or restored) before that day.

124‑90  Consequences for receiving an asset

 (1) If you receive another *CGT asset for the event happening, there are these consequences if you choose to obtain a roll‑over.

 (2) A *capital gain you make from the original asset is disregarded.

 (3) If you *acquired the original asset on or after 20 September 1985:

 (a) the first element of the other asset's *cost base is the original asset's cost base at the time of the event; and