In March 2014, Alex and Laura, who were living in the Blue Mountains at the time, saw an advertisement for $1,250,000. these two flats were on separate titles. inspection revealed that although the property was in a run down condition, it was quite livable. They decided to but the property and live with their children in the bottom flat while they rented out the top flat. The signed contract were exchanged for the premises on 15 May 2014 and the purchase price was paid on 28 June 2014, when the property was formally convey to Alex and Laura. Soon after this, Laura parents, who were living in the country town of Bathurst, both had major health crises, Alex and Laura decided that it would be best to have her parents re-locate to Sydney, and live closer to them, so they could monitor and support them during their treatment. Following the purchase of the duplex, Laura's parents moved in and lived rent-free in the upstairs flat continuously for the entire period of ownership, whilst Alex, Laura and their children lived in the bottom flat.

question 1 they would like to find out whether the sale of the property would give rise to any CGT liability, considering the fact that the ground floor flat was their main residence, and that Laura's parents lived in the top floor flat rent-free. Please provide explanation.

question 2. The cost of obtaining and registering a mortgage was $720,000 on the property was $2,700 dollars.

Monthly interest payments on the mortgage loan $3,100

Annual local government rates on the property $3200

Are these expenditure tax deductible in this case?