THESE QUESTIONS ARE IN AUSTRALIAN LAW CONTEXT

QUESTION 1 (20 marks)

Carol is your accounting client and has come to you to prepare her tax return. During the 2021-22 financial year, Carol disposed of the following assets:

(a) A holiday house. The house was purchased on 1 October 2008 for $350,000 and sold for $650,000. The contract of sale was entered into on 5 May 2022 and settlement is to take place on 5 July 2022. The stamp duty and legal fees at the time of acquisition were $20,000. The advertising and estate agents fees at the time of disposal were $8,000. On 1 April 2015, Carol spent $35,000 adding a second bathroom to the house. Carol rented the house out for 6 months, from 1 October 2010 to 1 April 2012. During this period, she derived rent of $15,000. At all other times she kept it for private use by her family. During the period that she owned the holiday house she had paid a total of $75,000 in interest, local council rates and insurance. She had claimed $10,000 of the $75,000 as a tax deduction during the relevant financial years.

(b) Vacant Land. Carol sold vacant residential land originally purchased on 16 June 1984 for $100,000. She initially intended to build a house on the land but lacked the finance to do so. The land was sold for $500,000. The contract of sale was entered into on 28 May 2022 and settlement is to take place on 30 August 2022.

(c) A Harley Davidson motorcycle. The motorcycle was purchased by Carol for $130,000 on 1 July 2012. It was a special and rare motorcycle with only 4 made in 1956 and based on the Easy Rider film. It was sold for $220,000 on 12 December 2021.

(d) A painting. The painting was purchased by Carol for $20,000 on 1 May 2009 and sold for $30,000 on 30 April 2022.

(e) A horse. Carol used the horse for recreational purposes. Carol had bought the horse on 1 May 2014 for $6,000. She sold the horse to a horse trainer for $16,000 on 26 March 2022.

(f) On 1 July 2006, Carol purchased a house for $300,000, which she used as her main place of residence. On 1 July 2018 she left Australia to take up a job in London. During her stay in London, she did not buy a house, but instead lived in rented accommodation. She returned to Australia and began living in the house again on 30 June 2021. During her absence from Australia, a friend lived in the house and paid Carol rent of $12,000 per year. Her friend also paid all the outgoings on the house such as the rates, insurance, and electricity. The house was sold for $800,000 on 26 May 2022.

(g) Shares. Carol bought BHP shares on 2 June 2021 for $45,000. She sold those shares on 2 May 2022 for $90,000.

Carol has capital losses she is carrying forward from previous years of $65,000 from the sale of an antique and $130,000 from the sale of some shares.

Carol also received a salary of $89,746 from her position as the manager of a small engineering consulting practice. She received a travel allowance of $1,400 for the year and claimed a total of $2,365 as the actual expenses. She has no other deductions. Her employer withheld $22,000 as PAYG W. Carol does not have private hospital insurance and she lives by herself.

In addition, Carol received $500,000 from her grandmother as a gift, and she won a motor car valued at $35,500 from a winning raffle ticket.

REQUIRED:

Calculate Carols tax payable for the year ending 30 June 2022.