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Under paragraph 124-85(3)(b) and paragraph 124-95(6)(b) of the Income Tax Assessment Act 1997 , if: (a) you acquired a CGT asset before 20 September 1985 and it, or part of it, is lost or destroyed on the happening of a natural disaster; and (b) you incur expenditure in acquiring another CGT asset, you are taken to have acquired the other asset before that day if 'it is reasonable to treat the other asset as substantially the same as the original asset'.

Whether it is reasonable to treat a CGT asset as substantially the same as another is an objective question and the answer depends on the facts of each particular case. Consideration needs to be given to such matters as the nature of the replacement asset, the use to which it is put, its cost, location, size, value, quality and composition, compared with those attributes of the original asset.

Application of this reasonableness test is best illustrated by examples.

We stress that the examples which follow are intended to be indicative only and the presence or absence of any factor specified in them would not necessarily be determinative of a change in result. Original asset Market value before disaster New asset Cost Substantially the same ? Example 1 3 bedroom brick veneer house $200,000 4 bedroom brick veneer house built in accordance with new recommended structural design $320,000 yes Example 2 2 bedroom 50 year old fibro rental cottage $100,000 newly built 5 bedroom double brick 2-storey rental house $260,000 no Example 3 3 bedroom terrace house 40 km from the city centre $170,000 3 bedroom terrace house in the city centre $370,000 no Example 4 piece of machinery used in a printing business $20,000 truck to be used for deliveries for the printing business $70,000 no Example 5 a 12m square ice-cream counter in a shopping mall $150,000 a 50m square shop on the street opposite the mall used for the same business $350,000 no Example 6 a 2000m square, one storey warehouse used for a toy business $500,000 a two storey warehouse on a 1250m square block (totally 2500m square floor space) 10 metres down the road $650,000 yes

Having regard to the use, cost, location, size, value, quality, and composition of the new assets, the following comments are offered :

The new asset is similar to the original asset in all respects except the number of bedrooms and the structural design. We consider that it would be reasonable to treat the new asset as substantially the same as the original asset .

The size, value, quality, use and composition of the new asset is different from the original asset. We consider that it would not be reasonable to treat the assets as substantially the same .

While all factors except location and value are the same, the change in location and greatly increased value are enough to render it unreasonable to treat the assets as substantially the same .

Although the asset is to be used in the same business, the complete change in its nature (from machinery to a truck) means that it is unreasonable to treat the assets as substantially the same.

Although the asset is used in the same business, the nature, size and value of the premises are substantially different. It would not be reasonable to treat the premises as substantially the same .

Having regard to the size and location of the warehouse, the new warehouse is similar to the original except for the number of storeys. It would be reasonable to treat the warehouses as substantially the same .