Question

Jacob’s grandfather died on 1 November 2009 and, in her will, left Jacob cash and watches worth $500,000. The watches had been bought by Jacob’s grandmother in August 1985 at a cost of $40,000, and its market value on 1 November 2009 was $150,000.

Jacob used the money from his grandfather and his savings to buy the following assets in January 2010:

• an apartment in Melbourne (cost was $360,000 plus $20,000 legal fees and stamp duty),
• a rare painting (cost was $50,000), and
• 2,000 bank shares (cost was $20 per share, plus $200 brokerage).

In 2019/20, Jacob disposed of these assets as follows:

• on 12 March 2020, he sold the apartment for $470,000 – he had lived in it all the time he owned it,
• on 1 April 2020, the painting was stolen from his apartment – he received $30,000 compensation from his insurance company,
• on 13 May 2020, Jacob sold 1000 bank shares for $30 per share (brokerage cost $150), and
• on 15 June 2020, he lost the watches, which wasn’t insured, when he left his briefcase on a train.

Question 1.

Prepare a report that explains the CGT consequences of these transactions

Answer 1

CAPITAL GAIN TAX FOR HOUSE

indexed acqcution of appartment = purchase price * cost of index of FY 2009 -10/ cost of index of FY 2019-20

= 380000*137/280

= 185820/-

particulars	Amount	Amount
sales price of appartment	470000
- legal fees	20000
	450000
- Indexed acquction of appartment	185820
Gross Ccapital gain		264180

tax on capital gain = 20%* 264180

= 52836/-

CAPITAL GAIN TAX FOR SHARES

Indexed aqusition of shares = purchase price - partial sales * cost of index of FY 2009 - 10/ Cost of index of FY 2019-20

= (440000 - 220000)* 137/280

= 107580/-

Patriculars	Amount	Amount
sales price of shares	180000
less aqusition of shares	107580
Gross Capital Gain		72420

tax on capital gain = 20% of 72420

= 14484/-