In his own right, Brett purchases a run down rental property on 1 July 1997. The price he paid was $150,000 plus $20,000 in total for stamp duty and solicitors fees.
He rents out the property after spending $2,500 on initial repairs.
In the next few years, Brett incurred the following expenses on the property:
Interest on money borrowed |
$10,000 |
Rates and land tax |
$8,000 |
Repairs |
$15,000 |
Total |
$33,000 |
As it was an old property, there was no special building write-off Brett could claim.
When Brett decided to sell the property, a real estate agent advised him that if he spent around $30,000 on major structural repairs, the property would be valued at around $500,000. He had the repairs done and put the property on the market. On 1 April 2001 he sold the property for $500,000.
Brett's real estate agents fees and solicitors fees upon the sale of the property totalled $12,500.
As this is Brett's only capital gain for this year-and he has no capital losses to offset from this year or previous years-he works out his cost base as follows:
Purchase price of property |
$150,000 |
Stamp duty and solicitors fees on purchase |
$20,000 |
Capital expenditure (initial repairs) |
$2,500 |
Capital expenditure (major structural repairs) |
$30,000 |
Real estate agents fees and solicitors fees |
$12,500 |
Total |
$215,000 |
Brett deducts his cost base (expenses) from his capital proceeds (sale price).
Proceeds from selling the house |
$500,000 |
Cost base unindexed |
$215,000 |
Total |
$285,000 |
Brett shows $285,000 at label H-Total current year capital gains in item 17.
He decides the discount method will give him the best result, so uses this method to calculate his capital gain.
$285,000 × 50% = $142,500
Brett shows $142,500 at label A item 17.
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