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Question 2:

Dr Greg Marshall acquired a house in Windsor under a contract dated 1 January 2011 for $560,000. He also paid $15,000 in legal fees and stamp duty upon settlement on 31 January 2011. Dr Marshall used the house as the main residence for himself and his family.

Five months later on 1 June 2011, Dr Marshall decided to operate a doctors surgery at his home due to a falling out with his partners at the local surgery as well as his desire to spend more time at home with his family.

A downstairs room was modified for this purpose on the same date. The room represented 10% of the total floor area of the house. The real estate agent estimated the market value of the home at 1 June 2011 was $600,000

Five years later, on 1 June 2016, Dr Marshall was invited to join a new larger practice focusing on holistic and natural medicines and therefore decided to close his home surgery on 31 May 2016. He then converted the surgery space back into a bedroom for his eldest son.

Dr Marshall continued residing in the home until eventually selling the home under a contract of sale dated 31 May 2021. The sale contract price was $1,000,000 but he also needed to pay sales commission of $40,000.

Required:

1. Advise Dr Marshall of the capital gains tax consequences in relation to the sale of his house.

2. Calculate the amount of capital gains tax payable (if any) by Dr Marshall.

Note: There are 1,827 days from 1 June 2011 to 31 May 2016

There are 3,653 days from 1 June 2011 to 31 May 2021

There are 3,804 days from 1 January 2011 to 31 May 2021

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