Question

The following question is based on the material in Chapter 18 of the textbook “Advanced Income Tax Law”:

Q

(Capital Gains – Active Asset reduction and small business rollover)

On 9 August 2017, Alfonso Garcia sold the business premises from which he has conducted his sand and gravel wholesale business for $790,000. The cost base of the premises was $520,000 when purchased in 2010.

Alfonso moved into rented premises and spent $35,000 on fittings and leasehold improvements on 19 August 2017. These are deemed to be replacement assets.

Alfonso’s business satisfies all of the eligibility criteria to access the small business capital gains tax concessions.

Required:

Calculate Alfonso’s net capital gain for the 2017/18 tax year.

Answer 1

Ans. Alfonso's Net Capital Gain for the Year 2017/18 tax year.

Capital Cost = final price - indexed acquisition cost

= $ 790,000 - $ 520,000

= $ 270,000

Alfonso’s business satisfies all of the eligibility criteria to access the small business capital gains tax concessions.

Capital Gain Concession = Long Term Capital Gain @ 50% Concession

= $ 270,000@50% concession

= $ 135,000

Net Capital Gain for the Year 2017/18 tax year= $ 135,500.

Note:- Alfonso moved into rented premises and spent $ 35,000 on fittings and leasehold improvement on 19 August 2016 is not less from final price, because spent after the selling of premises.