• ### Appendix 5: Example of sale of a rental property

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This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

End of attention

In his own right, Brett purchases a run down rental property on 1 July 1997. The price he paid was \$150,000 plus \$20,000 in total for stamp duty and solicitors fees.

He rents out the property after spending \$2,500 on initial repairs.

In the next few years, Brett incurred the following expenses on the property:

 Interest on money borrowed \$10,000 Rates and land tax \$8,000 Repairs \$15,000 Total \$33,000

As it was an old property, there was no special building write-off Brett could claim.

When Brett decided to sell the property, a real estate agent advised him that if he spent around \$30,000 on major structural repairs, the property would be valued at around \$500,000. He had the repairs done and put the property on the market. On 1 April 2001 he sold the property for \$500,000.

Brett's real estate agents fees and solicitors fees upon the sale of the property totalled \$12,500.

As this is Brett's only capital gain for this year-and he has no capital losses to offset from this year or previous years-he works out his cost base as follows:

 Purchase price of property \$150,000 Stamp duty and solicitors fees on purchase \$20,000 Capital expenditure (initial repairs) \$2,500 Capital expenditure (major structural repairs) \$30,000 Real estate agents fees and solicitors fees \$12,500 Total \$215,000

Brett deducts his cost base (expenses) from his capital proceeds (sale price).

 Proceeds from selling the house \$500,000 Cost base unindexed \$215,000 Total \$285,000

Brett shows \$285,000 at label H-Total current year capital gains in item 17.

He decides the discount method will give him the best result, so uses this method to calculate his capital gain.

\$285,000 × 50% = \$142,500

Brett shows \$142,500 at label A item 17.