Q1 Tom Blake is a senior accountant in one of the big four accounting firms in Melbourne. He bought a property in Melbourne in September 1986 for $100,000 and made it available to produce income as soon as he purchased it.

On 1st December 1993, he has done some extensive improvement and renovation to this home, costing $150,000. He sold the home for $500,000 under a contract that settled on 1st December 2019. Tom also paid an agent cost of $20,000 at the time of sale.

Tom has a carried forward loss of $30,000 from previous years and $15000 capital loss from the current year. Both losses are associated with investments in shares.

Required:

a) Consider the above information given by Tom and analyze his current position for capital gain tax. Assume that Tom was a resident for tax purposes for the whole period. In your analysis, you are required to apply both the indexation and discount method and identify a suitable way in calculating capital gain tax for Tom.

b) How would your answer change if you assume that Tom had no previous or current capital loss and also, he is entitled to small business concessions for the active asset?