Reference no: EM131158646

Question:

Jonathan lived at 1 Outback Lane, Tax-Haven, Victoria, since he built his house there 10 years ago. Jonathan was left the block of land (no house or other buildings) at 1 Outback Lane when his grandmother died on 1 May of 1983. On her date of death the land was was valued at $200,000. Jonathan house cost him $300,000 to build. Jonathan paid $12,000 in interest on money he borrowed to finance the build. In 2012, Jonathan had to pay $4,000 in legal fees when the government unsuccessfully tried to compulsorily acquire part of his property on which his house was built.

On 23 July 2015, there was a small fire at 1 Outback Lane that destroyed Jonathan's garden shed. The shed cost Jonathan $8,000 to build when he built his house. The insurance company paid him $4,500 compensation on 7 August 2015.

On 1 November 2015, Jonathan decided that the risk of further bushfires in Tax-Haven was too great. So he sold the house and land at 1 Outback Lane for $1.1 million to Jeremy. As part of the sale, Jeremy agreed to take on the remaining $10,000 of Jonathan's mortgage on the house. The land was valued at $600,000. Jonathan paid $3,500 in advertising costs. Stamp duty was an additional cost of $43,000. There were no other legal costs.

On selling 1 Outback Lane, Jonathan rented a small one bedroom unit in Melbourne with little room for fittings and fixtures, and as a consequence he had to dispose of his painting by famous artist John Glover. He acquired the painting in 1999 for $800,000. In his rush to sell it he could only get $750,000 for it. He also decided that it was time to sell his Porsche Boxster which he had driven around the countryside on weekends. He had purchased the car in 2002 for $90,000. He sold it on 14 December 2015 for $58,000. Jonathan had paid a total of $14,000 to insure his car over the years.

Jonathan had 1,000 ordinary shares, and 200 redeemable preference shares in Banana Ltd. He acquired them in 2005 for $1.20 per ordinary share and $2.00 per redeemable preference share. On 19 February 2016, Banana Ltd redeemed the 200 preference shares for $500. On 2 March 2016, Jonathan decided to transfer his 1,000 ordinary shares in Banana Ltd for nil consideration to his daughter. On 2 March 2016 the ordinary shares in Banana Ltd were valued at $5.50 each. Legal fees for the transfer to his daughter cost him $190.

With reference to legal authority, advise Jonathan on the capital gains tax consequences of the above transactions for the year ended 30 June 2016. Jonathan does NOT require any advice on Goods and Services Tax.