On 1 June 1999 Cindy entered into a contract to buy two separate shop premises.
Settlement was on 1 October 1999. Cindy paid $200,000 for each shop premises.
There was stamp duty of $10,000 payable for each of the premises. Cindy used each
of these premises to runs shops that sold sports shoes.
On 10 August of 2016, Cindy decided to go into early retirement despite being only
52 years old. As a result, she entered into the two separate contracts with Di:
• The first sports shoe shop was to be sold to Di. Title to the actual shop
premises was to be sold for $600,000. The current shoes in the store were to
be sold for $60,000, and the goodwill attached to the store was to be sold for
$150,000.
• The second sports shoe shop was to be rented to Di for a three year term. The
terms of the lease set the rent at $15,000 per year, and there was an upfront
lease premium of $40,000.
Each of the stores consistently had an annual aggregate turnover of over $2.5m for the
years they were owned and run by Cindy.
When Cindy entered into the 10 August 2016 agreement in addition to the above she
also owned the following:
• 60% share of the house she lived in, which was valued at $1.5m.
• 45% interest in a company called Small Pty Ltd, which owns 4 investment
properties. 55% of this company is owned by Cindy’s friend Nathan. The total
value of this company is $2m.
• 65% share in an investment property with her friend Mike. This property is
valued at $500,000 but has a $200,000 mortgage on it.
• A life insurance policy worth $100,000.
• CBA shares, current market value of $300,000.
A few years ago on 1 July 2011, Cindy had purchased a Melbourne CBD
apartment to live in for $200,000 for which she also paid stamp duty of $10,000.
She immediately moved into it after she bought it and treated it as her main
residence. On 1 July 2012 Cindy purchased a suburban house to live in, which she
immediately moved into and treated as her main residence for tax purposes. She
immediately rented out her CBD apartment at this time, and had it valued at
$400,000. Cindy sold this CBD apartment for $500,000 on 20 August 2016.
Capital Gains Tax implications for this question.
Please refer to all of the relevant sections of the legislation, cases and
any other scholarly material when providing advice to Cindy. Advise
Cindy on:
• Any Capital Gains Tax liabilities for her in relation to her
activities.
• Specifically, make sure that your discussion includes advice on
whether Cindy can take advantage of the CGT small business
concessions to reduce the amount of tax payable.
• Also ensure that you calculate Cindy’s Net Capital Gain for
the current financial year.
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