Question 7

Required: Assuming that none of the specified amounts give rise to ordinary income, discuss the CGT consequences of the following for all of the named parties (citing authority where appropriate). In your answer you are not required to include a discussion regarding the applicability of the 50% CGT discount (4 marks).

i. A third party paid Neil $100,000 for the right to run a franchise juice bar for 5 years. This third party also paid Neil a $20,000 lease premium for a 5 year lease, so as to enable the third party to use the premises owned by Neil for the juice bar.

ii.Naomi purchased her first home for $900,000 on 1 January 2017 and moved into it immediately. On 1 January 2022 she rented it out and moved back in with her parents (it was worth $1.2 million at the time). She then sold the house on 1 January 2023 for $1.3 million.

iii. Jing inherited her uncle's investment property in December 2021. Her uncle had bought it for $600,000 in December 2019 and had used it as his main residence for the full time he owned it. At the time Jing inherited the property it was worth $800,000. Jing promptly rented it out after she inherited it, and sold it in May 2023 for $1 million.