Dan and Judith Murphy are an Australian married couple who live in Gold Coast, Queensland with their 3 children and Dan's father. Dan and Judith plan to purchase some assets and wonder which way is best to optimize their tax obligations on various investments. They have visited your office to seek advice to optimize their tax obligation in relation to the following investment situation.

 

2) Regarding Rental property  

Dan wishes to purchase an apartment from which he can collect rent before making profit on the sale of the property in three years' time. He intends to buy the property in July 2022 and sell it in July 2025. He has determined that he can afford to purchase a three-bedroom apartment costing $480,000 and has identified two suitable alternatives as follows; Address of property 1 Single St, Brisbane 32 Pam Ave, Brisbane Purchase price (including stamp duty & legal costs) $580,000 $580,000 Construction date built in 1971 built in 2001 Construction cost $47,000 $230,000 Depreciable assets (fillings) $7,000 $29,000 Remaining effective life (use Prime cost) 4 years 10 years Annual maintenance fees $4,500 $4,500 Annual council & water rates $3,000 $3,000 Annual interest on $400,000 mortgage $24,000 $24,000 Annual rental income $31,000 $31,000 Expected selling price in July 2025 $700,000 $700,000 In each case, the values of the fillings and construction costs have been verified by certified valuer. Required For each property advise Dan on the following: a) Provide an estimate of annual net rental income or loss b) Provide an estimate of the net capital gain on sale in July 2025 c) Which property will minimize Dan's total taxable income from the investment?