Question

For the following transactions state for the taxpayer the CGT event, whether there is a capital gain/loss, and whether the Division 115 discount is available

I. The taxpayer owned a factory that was destroyed by fire and they received $500 000 as an insurance payout in March 2018. They purchased the factory for $200 000 on 22 September 1999.

II. The taxpayer entered into a contract in January 2015 with her former employer agreeing not to work as a tax consultant within 300km of Melbourne for a period of 3 years. He/She was paid $120 000 on entering into this agreement.

Answer 1

(I)
If any insurance claim is received on destruction of asset then profit or gain arriving from it will be charged under income from capital gain.
In the given case -
Insurance Claim received on destruction of factory-	5,00,000.00
Less: Cost of Acquisition of Factory	2,00,000.00
Capital Gain	3,00,000.00
(II)
A capital gain from a CGT asset is a discount capital gain only if the entity making the gain acquired the asset at least a year before the CGT event causing the gain and no choice has been made to include indexation in the cost base of the asset.
In this case the taxpayer has entered into the agreement not to work within 300Km from Melbourne for a period of 3 years in January 2015 which is more then a year before the CGT event i.e( Fire in the factory)
therefore, the taxpayer can avail the discount under Division 115.