Tutorial: Capital Gains Tax

1. Kai, a long-term Australian resident, decided to move overseas permanently, leaving during June 2016. Accordingly he entered into the following transactions:

a, He sold his Mitsubishi station wagon (acquired 30 November 2005 for $20,000) on 31 March 2016 for $2,000.

b, He sold his home at Mission Beach (acquired 31 December 1984 for $50,000) on 30 April 2016 for $200,000. His home had included a separate and designated home office occupying 10% of the floor space.

c, He sold a rental property at Tully (acquired - ie contract signed on 30 November 1999 for a purchase price of $100,000) for $150,000. The contract for the sale of this property was signed on 30 June 2016 but under the contract the transfer was not to occur for three months (ie in September 2016). Other costs relating to this property included:

solicitors fees and expenses (November 1999) $5,000

interest payments on mortgage (December 1999 - 2016) $10,000

painting the walls (30 June 2000) $5,000

real estate agents commission on sale $5,000

solicitors fees and expenses on sale $1,000

(Assume no other incidental costs of acquisition or disposal. Ignore the Div 43 rules for the purposes of this question.)

d, He sold an aboriginal art piece (acquired 30 November 1999 for $15,000) on 31 March 2016 for $10,000.

e, He gave his yacht (acquired 30 November 1999 for $12,000) to his best friend as a farewell gift. The yacht was handed over on 31 May 2016 and at the time had a market value of $8,000.

Calculate Kais net capital gain or loss for the years ending 30 June 2016 and 2017 (assuming no other relevant transactions.) Quote supporting sections.

Would it make any difference to your calculations if the yacht had only cost $6,000? What if the market value on disposal was $14,000?

2, In Year 1 Jean had a net capital loss of $2000. In Year 2 she sold two CGT assets. She had acquired the first for $5000 in December 1985 and she sold it for $8000. She had acquired the second in December 2002 for $1000 and she sold it for $3000.

Calculate her lowest net capital gain for Year 2. What if the first asset had been acquired 6 months prior to sale rather than in December 1985?