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YodieM(Newbie)Newbie
10 May 2023

I have a friend with a rental property in Kalbarri. It was destroyed in the cyclone in Apr-21 and compensation was received in Aug-21 from the insurance company. Within a few months of receiving the compensation, he purchased and paid a deposit on a transportable home. The rebuilding of the property is almost finished and once complete he does not wish to rent it again. He will use it as a holiday home until he's ready to retire and move in.


In his 2022 tax return, the insurance compensation needs to be declared and the CGT calculated on the destroyed asset. Can he use the rollover provisions on the calculated CGT? While it will no longer be a rental property, it will still be considered a CGT asset as he owns a PPR in Perth?


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Bruce4Tax(Taxicorn)Taxicorn
11 May 2023

Can he use the rollover provisions on the calculated CGT?


That is only for business assets


While it will no longer be a rental property, it will still be considered a CGT asset as he owns a PPR in Perth?


Yes, whether or not he has another property as main residence.



YodieM(Newbie)Newbie
11 May 2023

Thanks Bruce


I found this PDF Rental Properties Damaged or destroyed property from the ATO and it says that you may be entitled to roll over any CGT made. But when I read the suggested Involuntary disposal, it says that the new asset must be used for a reasonable period for the same or a similar purpose as the original asset.


Could you argue that the purpose of the asset was to be an investment? Even though he has no intention of using the new asset as a rental property it is still an investment/CGT asset as he has the PPR in Perth. Would this be accepted as a similar purpose and therefore he can roll over the CGT until he sells the property?


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What are the rollover provisions on the calculated CGT? | ATO Community