CGT Asset, CGT Event, Capital gain, Discounting, Net capital gain

CGT Event A1 Disposal of property

Sale of intended holiday home (a garage on land at Jan Juc)

Scenario John

John is a keen fisherman, and he purchased a block of land at Jan Juc along the Great Ocean road with the intention of building a holiday home on the property. John erected a garage on the Jan Juc property in March 1987 costing $10,000 in order to garage his boat. He used the land and garage mainly on weekends to enable his fishing hobby. John then made renovations to the garage, obtaining permission from the council to include a studio room so that he could have overnight sleeps on the weekend. The studio was fitted in September 1987 at a cost of $5,000. The purchase price of the land was $20,000 as shown in the contract entered into, dated March 1986. Fees on purchase of $1,000 included stamp duty, legal fees, conveyancing and transfer fees and borrowing expenses. John entered into a contract to sell the block of land from Jan Juc on 1 June 2020 for $400,000, and he received this money on settlement in August 2020. Selling costs of $14,000 included commission and legal fees and conveyancing fees. Required: In relation to the sale of the land for the 2019-2020 financial year, you are to advise John :

1. Whether the land is a CGT asset 1 mark

2. What CGT event might apply, and why? 2 marks (4 points @ 0.5 marks)

3. Calculate the capital gain? 7 marks

4. Can John use discounting because he meets the four conditions for discounting? 2.5 marks 5. Advise the net capital gain to include in Johns assessable income 2.5 marks

In your calculations, cite relevant statute law to support your answers.