Individual Income Tax Changes

No changes to rules around work-related deductions

Despite the publicity surrounding the high level of work-related expenses (WRE) claims, and the ATO’s strong focus on this area, the Budget did not announce any measures in that regard.

The ATO recently announced that it will be closely examining claims for work-related car expenses in 2018 tax returns.

The ATO is concerned about taxpayers making mistakes or deliberately lodging false claims in relation to work-related car expenses.

The ATO will be particularly focused on people “claiming things they’re not entitled to”.

home to work

Buying the land next door can be a great idea to expand your wings while retaining the CGT Main Residence Exemption.

We come across clients that have purchased the adjoining block of land, either at the time of the original purchase or some time later for various life style reasons (ie), building a big pool for the family, tennis court, to expand their love of gardening etc.

At the time of contemplating the sale, an obvious question that may be asked by clients :-

Is there any capital gains, and whether the main

Generally we find if a client has held an investment property for a number of years and decides to sell there is the potential for a sizable capital gain and the inevitable capital gains tax to pay.

However, we also find it is not uncommon for us when reviewing  clients’ capital gains on the sale of a:-

rental property
holiday homes
or land holding

To find cases where expense haven’t be claimed over the years of ownership due to bad advice or not realising they could claim.

Rental Property

When we review the sale of an investment

Yes, if you are carrying on a business of letting residential rental properties after the 1st July 2017.

Generally speaking passive property investor can no longer can claim travel expenses from the 1st July 2017 to:-

To collect rent
Maintain the property
Complete inspections
Attend body corporate meetings
All associated expenses for taxi, hire car costs, airfares, public transport costs, and meals or accommodations.

This also applies to partnerships and trusts.

Excluded Entities from the Changes

Companies
Superannuation funds Not a SMSF
Public Unit Trusts, Managed Investment Trust

Excludes Commercial Properties

Commercial Properties, as with Commercial Residential properties are excluded from the above

Opportunity to help family member get into the property market.

A child or grandchild may not qualify for a home loan in their own right, however the parents or grandparents don’t want to go guarantor, or want to ensure the child is able to make the commitment to purchase a property, but for their inability to gain finance in their own names.

The child may see the purchase of a duel dwelling residence as a good option, live in one, and rent the other, or rent out a second bedroom, however the

The introduction of an annual charge (called -a vacancy fee) of at least $5,500 on foreign owners of Australian residential real estate where the property is not occupied or genuinely available on the rental market for at least six months of a year.

The main provisions that govern the liability to the vacancy are contained in a new Pt 6A (s 115A to 115T) of the Foreign Acquisitions and Takeovers Act 1975 (FATA 1975).

Commencement

The vacancy fee regime applies to foreign persons who make a foreign investment application for a residential dwelling

It is a widely recognised fact that capital gains tax (CGT) does not apply to a taxpayer’s main residence (PPR). What is less well known however is that the main residence CGT exemption can be extended to cover the time it takes to construct (or repair) that residence.

In other words, a taxpayer has the option to treat vacant land as their “main residence”, even though there is no physical dwelling on that land. This is sometimes referred to as the “building concession” or “four year rule” for reasons outlined below.

What’s

Property development could it be just a “mere realisation of an asset”?

A “mere realisation of an asset” implies that the profits made are subject to capital gains tax with the benefit of the 50% discount, whereas otherwise would be seen as an enterprise, and subject to tax as ordinary income, at the owners full marginal tax rate.

A recent Private Binding Ruling issued by the Commissioner of Taxation has shed some light towards their interpretation of property developments and their classification. Specifically, the ruling highlights a point of difference between whether

Airbnb and the like –

There is estimated to be 115,000 properties listed across Australia in 800 towns and cities, generating $441 million in rental income in 2015/16 by 2.1 million people, averaging $119 a night, according to report by Deloitte Access Economics which was commission by Airbnb.

So how do Airbnb host report income and expense to the ATO?

— renting out part of your home – What are the tax issues to consider?

— ATO at some stage may come knocking so ensure all

Capital Gains Tax on Deferred Property Settlements over 12 months

A recent ruling on Capital Gains Tax on Deferred Settlement over 12 months by the ATO TD 94/89 has clarified a position in relation to capital gains tax – when a contract for sale has a deferred settlement period, this could be 12 months or over several years time.

Even though a capital gain must be recorded in the income year where contracts were exchanged, the tax return does not need to record this until after settlement has taken place.