Question

Luke and Sarah lived in a house in Albury where they both had permanent jobs. In July 2012 they purchased a rural block of 30 acres for $160,000 with the intention of building a house and moving out of town. In September 2012 they listed their house in Albury for sale at $570,000, however given a downturn in the market the house remained unsold until March 2014 when they finally accepted an offer of $460,000. Settlement took place in April 2014 and they commenced construction on the new house in May 2014. Whilst the house was being built Luke and Sarah rented the Albury house back from the new owners at an amount of $480 per week.

In November 2014 the new house was completed at a cost of $410,000 and Luke and Sarah moved in. Additional costs incurred by them included construction of a road for $15,000, sinking a dam at a cost of $30,000 and connection of electricity at a cost of $40,000. They financed the new property with a home loan of $450,000 payable over 30 years at a rate of 4.20%.

Luke and Sarah began a horse agistment business in January 2015 to which they allocated 20 acres of their property. They constructed fencing to create smaller paddocks, built shade shelters and installed water troughs at a total cost of $80,000. To fund the cost of the improvements they took out a small business loan for $80,000 payable over 10 years at a rate of 5.30%.

In October 2019, Luke was offered a promotion in his job which required them to re-locate to Queensland. They listed the rural property for sale and in December 2019 it sold for an amount of $850,000 with settlement occurring in January 2020 at which time Luke and Sarah moved to Queensland.

Required

Advise Luke and Sarah of the taxation consequences of selling the rural property including whether any taxation exemptions or concessions may apply. You do not need to calculate the amount of any resulting capital gain or loss .

Answer 1

Date	Particulars	Unit	Amount
Jul-12	Purchase Rural land	30 Acre	$        160,000
Nov-14	Constrution of New House	$        410,000
	Additional Cost		$          58,000
Jan-15	Horse agistment		$          80,000
	Total Investment		$        708,000
May-14	Rented accomodation @$480/ week
	Total Rent charges till Nov 14	$          13,440
Jan-20	Listed Value		$        850,000
	Home loan @4.30% for 30 yrs	$        450,000
	Business Loan @5.30 % for 10 yrs	$          80,000
As Luke and Sarah purchased the Rural land for preparation of home to dwell in July 12.
And they prepared home in Nov 14 and shifted there
They live there for almost 5 years thus there will be no Tax on Capital gain is liable to them