QUESTION 4

a) John owns some land and grants a lease to David for seven years, at a premium of $7,000.

b) Deepak is an IT specialist and in his spare time tries to make some extra money investing in shares but he is not so successful. On the 1 September 2018 he bought 10,000 shares in IOOF Pty Ltd for 55 cents and sold them on the 30 June 2019 for 67 cents per share. At the same time, Deepak also purchased 12,000 shares in Greencross Pty Ltd for $1.67 and decided to also sell them on the 30th of June 2019 as he could see they were drastically falling in value. He sold his Greencross Pty Ltd shares for $1.18 per share. Outline and calculate the net capital gain or loss that Deepak would record in his 2018/19 tax return.

c) Li bought a home in March 2010 for $200,000. In March 2013, she converts the separate garage into an office for her physiotherapy business. The garage comprises 20% of the floor space of the dwelling on the property. She sells the property in March 2019 for $700,000. Its market value at the time of first using the converted garage for income producing purposes was $400,000. What are the CGT implications for Li of converting her garage on the sale of her home?

d) Explain in your own words the difference between cost base and reduced cost base.

Outline the CGT consequences in each of the above situations for the 2018/19 tax year and state if the 50% discount would be applicable to any of the above transactions?