Quick answer: CGT rollover relief lets you move, swap or restructure an asset without paying capital gains tax on the spot. You are not wiping the tax out — you are pushing it down the road. The cost base of the old asset carries over to the new one, so the gain gets taxed later, when you eventually sell for real. But rollover relief only works in specific situations the law names, and assuming it applies when it doesn’t is one of the most expensive mistakes in Australian tax.
This guide maps every major CGT rollover in one place — what triggers it, whether it’s automatic or needs a choice, and the condition that matters most — plus three worked examples in real dollars and the traps no one warns you about.
The one-page rollover map
If you only read one section, make it this table. It covers the rollovers ordinary Australians and small business owners actually encounter:
| Situation | The rollover | Automatic or choice? | The condition that matters |
|---|---|---|---|
| Marriage or relationship breakdown — asset transferred to your ex | Marriage breakdown rollover (s 126-5) | Automatic — and mandatory. Neither party can opt out. | Transfer must follow a court order, formal agreement or binding financial agreement. |
| Moving business assets from one structure to another (sole trader → company, partnership → trust) | Small business restructure rollover (Subdiv 124-N) | Choice — both sides elect | Aggregated turnover under $10 million; genuine restructure; same ultimate economic ownership. |
| Fire, flood, theft, or compulsory acquisition destroys or takes your asset | Replacement-asset rollover (Subdiv 124-B) | Choice | Proceeds used to replace the asset (or for repairs); time limits apply. |
| Takeover — your shares are swapped for the bidder’s shares | Scrip-for-scrip rollover (Subdiv 124-M) | Choice | Acquirer gets 80%+ of the target; same terms for all holders; gain only, not losses. |
| Demerger — your company spins off part of the business | Demerger relief (Div 125) | Choice | Must be an eligible demerger; cost base apportioned between the two holdings. |
| Transferring a business asset into your own company | Disposal to a wholly-owned company (Subdiv 122-A) | Choice | You must own 100% of the company; rollover applies to the CGT asset. |
| Moving assets between companies in the same 100%-owned group | Group transfer rollover (Subdiv 126-B) | Applies where conditions met | 100% common ownership; both companies Australian residents. |
| Small business selling an active asset and buying another one | Small business rollover concession (Subdiv 152-E) | Choice | Separate Div 152 concession — see our small business CGT concessions guide. |
What a rollover actually does (in one paragraph)
Normally, when you dispose of an asset, you compare the capital proceeds against the cost base, and the difference is your capital gain. A rollover tells the tax law to pretend the disposal didn’t happen for CGT purposes. The person receiving the asset steps into your shoes: they inherit your cost base (and reduced cost base), and your acquisition date. The gain hasn’t vanished — it’s embedded in the new asset, waiting to be taxed when that asset is eventually sold to an outsider. That’s why accountants say rollover relief is a deferral, never an exemption.
Rollover 1: Marriage or relationship breakdown
This is the most-used rollover in Australia, and it’s the only one that is mandatory. If an asset moves between you and your spouse as a consequence of a court order, a formal agreement, or a binding financial agreement, the transferor disregards the gain or loss and the recipient inherits the cost base. You cannot choose to pay the tax now instead — which occasionally causes grief when one party would have preferred to crystallise a loss.
The informal-agreement trap is brutal: split the property over a handshake deal with no court order or formal agreement, and there is no rollover — the transfer is a normal CGT event at market value. We covered this one in full detail, including the $41,770 of deferred tax in our worked example, in our CGT on divorce and separation guide.
Rollover 2: Small business restructure (Subdiv 124-N)
Since 1 July 2016, small businesses have been able to change their legal structure — sole trader into a company, partnership into a trust, company into a different company — without triggering an immediate income tax or CGT bill on the active assets moved across. This one covers not just CGT assets but also trading stock, depreciating assets and revenue assets.
The three conditions the ATO cares about:
- Small enough: aggregated turnover under $10 million in the year of transfer.
- Genuine restructure: the change must be about running the business better or protecting assets — not a tax scheme. There is a safe-harbour test (LCR 2016/3): no change in ultimate economic ownership of the significant assets for three years, the assets stay active, and no material private use.
- Same ultimate economic ownership: the same people must own the assets before and after, in the same proportions. If you run the business as a sole trader and move it into a company, you must end up holding 100% of the shares. Hand 20% to your sister in the process and the rollover fails.
Worked example: the $94,000 paper gain that never got paid
Maria runs a landscaping business as a sole trader. The goodwill is worth $400,000 and her cost base is $0 (self-generated goodwill). She restructures into Maria Landscaping Pty Ltd, holding 100% of the shares, and chooses the restructure rollover.
- Without rollover: $400,000 capital gain → 50% CGT discount → $200,000 net gain. At the top marginal rate (45% + 2% Medicare levy), that’s roughly $94,000 in tax — on a gain she received no cash for.
- With rollover: the company inherits the $0 cost base. No tax now. If the company later sells the goodwill for $500,000, the $500,000 gain is taxed then.
One warning specific to this rollover: moving assets into or out of a discretionary trust is where it most often breaks down, because beneficiaries don’t have fixed entitlements and the ATO struggles to identify the ultimate economic owners. A family trust election naming a test individual is usually required. This is the single most common reason restructure rollovers fail in practice — and it’s exactly why advisers insist on a private ruling before moving trust assets.
Rollover 3: Involuntary disposal — fire, flood, theft, compulsory acquisition
If your asset is destroyed, stolen, or compulsorily acquired by a government authority, the law doesn’t punish you with a tax bill on top of the disaster. The replacement-asset rollover (Subdiv 124-B) lets you defer the gain if you use the insurance money or compensation to repair the asset or buy a replacement.
The mechanics: if the replacement asset costs at least as much as the capital proceeds, the whole gain is deferred and your old cost base effectively carries across (the replacement’s cost base is reduced by the deferred gain). If you pocket some of the proceeds — say the compensation exceeds what you spend on the replacement — the excess can be assessable.
Example: The council compulsorily acquires Daniel’s vacant block. His cost base is $300,000; compensation is $450,000. He buys a replacement block for $470,000. Choosing the rollover defers the $150,000 gain — the replacement block’s cost base is treated as $320,000 ($470,000 − $150,000 deferred gain). Sell that block later for $600,000 and the $280,000 gain is taxed then. Note: unlike some rollovers, you must make the choice — it doesn’t happen by itself.
Rollover 4: Scrip-for-scrip (takeovers)
When a bidder takes over a company and pays you in shares rather than cash, you’d face a CGT bill without receiving a cent of cash to pay it. The scrip-for-scrip rollover (Subdiv 124-M) fixes that: you disregard the gain and your old cost base carries over to the replacement shares.
Key conditions: the acquirer must end up with at least 80% of the target, the deal must be open to all holders on substantially the same terms, and — a detail people miss — both you and the acquirer must choose the rollover, and you must tell the acquirer your cost base. Another detail people miss: the rollover only defers gains. If you’d made a loss on the swap, you can’t roll it — the loss stays crystallised.
Worked example: the $7 takeover
Dave holds 1,000 shares in Target Ltd with a cost base of $2 each ($2,000 total). Bidder Ltd acquires 100% of Target, offering 1 Bidder share (worth $7) for each Target share.
- Without rollover: $7,000 − $2,000 = $5,000 capital gain → 50% discount → $2,500 net gain → roughly $1,175 tax at 47%, with no cash received.
- With rollover: Dave’s 1,000 Bidder shares take a total cost base of $2,000. The $5,000 gain is deferred until he sells the Bidder shares. And his 12-month ownership clock for the 50% CGT discount carries over too.
Partial scrip trap: if the offer is $4 cash + $3 in shares per Target share, the rollover only covers the scrip portion. The cash component is a normal disposal — Dave would have a part-gain to deal with now.
Rollover 5: Demergers
When a company spins off part of its business into a separate listed entity — shareholders of the original company receive shares in the new one — demerger relief (Division 125) lets you disregard any gain on the restructure. Your original cost base is then apportioned between your old shares and your new shares, usually based on relative market values just after the demerger. The ATO publishes a class ruling for most major demergers spelling out the apportionment percentages, so check the ruling for your specific demerger rather than guessing.
Rollovers 6 & 7: Moving assets inside your own group
Two related provisions cover internal moves:
- Into your own company (Subdiv 122-A): transfer a CGT asset you own into a company you wholly own, and you can roll the gain. The company inherits your cost base.
- Between group companies (Subdiv 126-B): companies with 100% common ownership can move assets between each other without triggering CGT. Both companies must be Australian residents.
These are workhorses of corporate groups but rarely relevant to individuals — except the first one, which is the classic “incorporate my business” move for a single asset (often paired with the Subdiv 124-N restructure rollover for the whole business).
The “no rollover” list — what does NOT qualify
This is the section that saves people the most money, because the assumptions are so widespread. The ATO states these explicitly:
- Selling one investment property to buy another: no rollover. Each sale is a standalone CGT event. The “I’ll just roll it into the next property” idea does not exist in Australian tax law.
- Putting the sale proceeds into super: no rollover either — even though the money stays “invested”. (Contributing to super has its own deduction rules, but it doesn’t defer the CGT.)
- Buying an identical replacement asset voluntarily: selling your ETF units and immediately rebuying the same ETF is two CGT events, not a rollover — and doing it to manufacture a loss can attract the ATO’s wash-sale attention under Part IVA.
- Informal divorce splits: as above — no court order or formal agreement, no rollover.
- Gifting property to family: a gift is a disposal at market value with no rollover (covered in our CGT on gifting property guide).
How to actually claim a rollover
Most rollovers are choices, not automatic entitlements. In practice that means:
- Evidence the choice: for most rollovers, choosing is as simple as preparing your tax return on the basis the rollover applies — but you need records showing you chose it. For scrip-for-scrip, the acquirer must also choose, and you must inform them of your cost base.
- Track the inherited cost base: the whole point is that the tax follows the asset. Record the original cost base, acquisition date, and the rollover chosen — your future self (or your accountant) will need them when the asset is eventually sold.
- Watch the clocks: the replacement-asset rollover has time limits for acquiring the replacement. The 50% CGT discount ownership clock generally carries across with the asset.
- Check state taxes separately: rollover relief is an income tax concept. Stamp duty, land tax and GST consequences of the same transfer are governed by state law and may still apply — and the rules differ between NSW, Victoria, Queensland and the other states.
The 1 July 2027 angle: deferral into a new regime
Here’s a forward-looking point no rollover guide mentions. Rollover relief defers your gain into the replacement asset — which means the gain will be taxed under whatever rules apply when you eventually sell. Under the legislated CGT changes, contracts entered on or after 1 July 2027 lose the 50% discount in favour of CPI indexation plus a 30% minimum tax rate (see our CGT reform guide).
So a restructure or scrip swap you do today could push a gain into the post-reform world. That doesn’t make rollovers wrong — deferral is usually still valuable — but it’s a genuine planning consideration worth modelling before you choose, especially for large gains on long-held assets where the 50% discount was doing heavy lifting.
Common mistakes
- Assuming rollover means exemption. The tax isn’t gone; it’s embedded in the replacement asset’s cost base. Forgetting this leads to nasty surprises years later.
- Forgetting both parties must choose. In scrip-for-scrip and restructure rollovers, the other side’s choice (or a defective one) can sink yours.
- Changing ownership mid-restructure. Bringing in a new shareholder or beneficiary during a Subdiv 124-N restructure fails the ultimate-economic-ownership test.
- Ignoring the trust problem. Discretionary trusts and the restructure rollover are a minefield — get a private ruling first.
- Missing state duties. A CGT rollover doesn’t stop the state revenue office from assessing stamp duty on the same transfer.
- Losing the cost-base records. The inherited cost base must survive until the eventual sale — sometimes decades later.
Tips
- Before any restructure, map which rollover fits and confirm the choice requirements in writing with your adviser — the ATO’s private ruling system exists for exactly this.
- If you’re facing a takeover, check whether the bidder’s scheme booklet mentions scrip-for-scrip rollover availability — most ASX schemes do, and it tells you the acquirer will make the matching choice.
- After a demerger, download the ATO class ruling for the apportionment percentages and file it with your cost-base records.
- Use the CGT calculator to model the with-rollover vs without-rollover outcomes before you commit.
Frequently asked questions
Does a CGT rollover mean I never pay the tax?
No. Every rollover in this guide is a deferral. The gain is carried into the replacement asset or entity via the inherited cost base, and it’s taxed when that asset is ultimately sold to someone outside the rollover.
Do I need to tell the ATO I’m using a rollover?
Most rollovers are choices you evidence by preparing your return on that basis and keeping records. There’s generally no separate form — but for scrip-for-scrip you must notify the acquiring entity of your cost base, and for restructures both entities choose.
Can I roll over a capital loss?
Generally no — and specifically not under scrip-for-scrip, which by law only defers gains. If the swap would produce a loss, the loss crystallises normally.
I got cash AND shares in the takeover. Does the rollover still work?
Partly. The rollover applies to the scrip (share) component only. The cash component is treated as a normal disposal, and you’ll have a part-gain or part-loss on it.
Does rollover relief cover trading stock and depreciating assets too?
The small business restructure rollover (Subdiv 124-N) does — it expressly covers CGT assets, trading stock, revenue assets and depreciating assets. Most other rollovers are CGT-assets only.
Can a foreign resident use scrip-for-scrip rollover?
Only in limited circumstances — broadly, where the shares are taxable Australian property (for example, interests in land-rich companies). Most non-resident shareholders are outside the CGT net on ordinary shares anyway.
The bottom line
CGT rollover relief is the tax law’s way of saying: if you haven’t really cashed out — you’ve restructured, swapped, or been forced to move by disaster or divorce — you shouldn’t be taxed as though you have. The eight rollovers in the map above cover virtually every situation you’ll encounter, and the worked examples show the deferral is worth real money: $94,000 on a restructure, $1,175 on a modest takeover parcel.
But relief is narrow by design. The “no rollover” list — sell-and-rebuy, proceeds into super, informal splits — is where the expensive mistakes live. When in doubt, model both outcomes with the CGT calculator, keep your cost-base records like they’ll be audited in 2040, and get advice before moving trust assets.
