Ryan acquired a rental property in Noosa under a contract of purchase on 20 October 1991 for $325,000. Ryan borrowed $300,000 from Westpac to fund the acquisition of the property.

Ryan incurred the following costs on 15 November 1991 (being the date of settlement):

$

• stamp duty on acquisition of property 8,450
• legal fees on acquisition of property 3,460
• loan application fees (loan period is 20 years) 1,300
• mortgage registration fees 1,800

Tenants were already occupying the rental property when Ryan purchased the property. In this respect, the property has been income-producing during the entire period of ownership.

Ryan provides you with a list of renovations to the property since he purchased the property:

1. On 20 November 1991, when replacing the carpets in the third bedroom, he becomes aware that the bedroom has badly damaged floorboards. He was not aware of this at the time of purchase. Ryan subsequently spent $16,050 replacing the floorboards.

2. On 30 November 1991, Ryan spent $3,000 installing new carpets in the third bedroom.

3. On 30 July 1992, Ryan built an in-ground swimming pool costing $26,850.

4. On 18 September 1992, the main bathroom is renovated at a cost of $18,360.

Ryan advises you that he has claimed the 2.5% capital works allowances totalling $87,500 on all eligible construction expenditure and capital improvements to the property from the date the property was first rented out to tenants to the date of sale

Ryan has also incurred the following expenses in relation to the Noosa rental property:

$

• interest expense on loan 18,920
• repairs to broken roof tiles 600
• rates and land tax 4,820
• repainting of the house due to extensive sun damage 11,230
• council rates 1,630

On 31 May 2021, Ryan sold the Noosa property under a contract of sale for $695,000. Sales commission came to $22,800.

Required:

1. Calculate Ryans net capital gain or loss in respect of the sale of the Noosa property using the CGT discount method. Please refer to appropriate sections of the ITAA (1997).

2. Calculate Ryans net capital gain or loss in respect of the sale of the Noosa property using the indexation method. Please refer to appropriate sections of the ITAA (1997).

3. Which method of calculating the net capital gain or loss should Ryan adopt?

(d) How does your answer to (a) and (b) above change if Ryan has carry-forward capital losses of $180,000 which arose as a result of a business in a previous income year? Which method should he use?