Question 6

Required: Discuss the CGT consequences of Marnie selling her rental property (citing authority where appropriate). You are not required to discuss the application of the 50% CGT discount, or the impact of Division 43 of the ITAA 1997 (4 marks).

Marnie bought a rental property in 2012. The details are as follows (note that the house was rented out for the full time she owned it):

Upon purchasing the house in 2012, Marnie gave the seller $600,000 cash and $50,000 in CBA shares as consideration for the purchase. Marnie also agreed to take over the $100,000 mortgage that the seller had.

In 2016 the house needed repainting due to the wear and tear that occurred since Marnie purchased the house. Marnie paid someone to have it repainted at a cost of $10,000.

In 2017 Marnie renovated the bathroom of the house. This cost $5,000 in materials. To save labour, Marnie did the renovation work herself she estimated that had she hired a trades person instead of doing the work herself, the labour would have cost approximately $15,000.

Marnie sold the house in February 2023 in exchange for the buyer giving her $1.2 million. The buyer sued her a month later because the sales contract stated that the house had no asbestos, but it ended up having some. This case was settled by Marnie giving the buyer $100,000 for the breach of contract.