Sarah also owns an investment property in Chippendale, which she purchased in 2015 for $200,000. The annual rent from the property is $25,000 and the annual expenses for the property have been fairly steady-around $2,000 for insurance, $3000 for agents fees, and $25,000 for various other expenses in relation to the property. In addition to these expenses, in December 2020, Sarah discovers that the swimming pool on the Chippendale property is leaking. In January 2021, Saraharranges for her brother Sam, who is a builder, to fix the holes in the pool lining. Sarah pays Sam $10,000 for the work (the market rate for the work is $3,000).

In 2017, Sarah purchased a house in Bowral which she only makes available for use by her relatives. Sarahs uncle suggested that she should place an advertisement for tenants in the newspaper occasionally and claim tax deductions for the property expenses. The purchase price was $800,000 and Sarah was required to pay $40,000 stamp duty on the transfer. She borrowed money from a bank to fund the purchase price and paid $100,000 in interest on the loan. In February 2021, she also paid $40,000 to a builder to renovate the bathrooms. In addition, she paid $20,000 in legal fees to block a proposed development nearby which would have obstructed the houses picturesque views of the surrounding countryside. On 7 June 2021 Sarah entered into a contract of sale of the property to a third party at the market value of $1,200,000. Settlement occurs in August 2021.

Required: Advise Sarah regarding any relevant tax implications arising from the above facts in relation to the 2020/21 income year. In your answer, make sure that you apply the HIRAC methodology and refer to any relevant cases, legislative provisions, tax rulings and principles of tax law, and include any relevant calculations.