Yearly Archives: 2017

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Client impact statement: Couriers and cleaners to report contractor payments

The government will extend the taxable payments reporting system to contractors in the courier and cleaning industries, with effect from 1 July 2018.

These changes were recommended in the Black Economy Taskforce that was released on Budget night. The expansion of this reporting system follows its successful implementation in the building and construction industry.

From 1 July 2018, all entities predominately in the courier or cleaning industry will need to report the following to the Australian Taxation Office. A list of each contractor and their ABN, name, address, the gross amount paid to them in the financial year (including GST), and the total GST included (if any) in the gross amount paid.

It is noted in the exposure draft to the legislation that the terms “courier” and “cleaning” are not defined, and are intended to take their ordinary meaning. However, the ATO has mentioned that the following services are not considered to be courier services for the purposes of this system:

 

  •  passenger transport services, ie buses and taxis
  • transporting of blood, blood products, organs or tissue, or
  • freight transport.

Also, entities in these industries are reminded that the following payments are not required to be reported on:

  • Payments for materials only
  • Unpaid invoices as at 30 June each year (for an annual report)
  • PAYG withholding payments, as these are already reported elsewhere, and
  • Payments within consolidated groups.

 

Risk mitigation steps

This amount of reporting brings payments to contractors into line with the reporting of salary and wages paid to employees in these industries.

An intention of this type of policy is to ensure the industry at large is doing the right thing and paying workers appropriately. Whether an individual providing services on behalf of a principal as an employee or a contractor is a question of fact based on substance over form.

While there are legislative tests that require application to determine this issue, they mostly seek to capture the essence of the common law that has developed over time in relation to this issue. CCH iKnow has a wonderful chapter devoted to the question of Contractor versus Employee which will assist you in making the right decision based on the individual circumstances of each case.

 

Implementation process

The legislation states that the payments are required to be reported every quarter, however, it is expected that the Commissioner of Taxation will allow an annual report to be lodged by the businesses in these industries, consistent with the requirements for the building and construction industry.

It is important to note that there will be no need to report payments made for private and domestic purposes. This expansion of the taxable payments reporting system will be applicable to businesses whose primary industry is in the courier and cleaning industries. The policy intention is to improve compliance of both the businesses and the contractors in these industries.

 

The source of this content is CCH‘s professional information services. Thompsons Australia has a professional subscription with CCH providing access to in-depth quality technical information and commentary used by Thompsons Australia in keeping staff and clients currently in formed.

What is stamp duty?

Stamp duty is a tax on written documents (‘instruments’) and on certain transactions. It is imposed by state and territory governments. It can vary depending on the state or territory, and may be called stamp duty, transfer duty or general duty.

 

What transactions are taxed?

 

Taxable transactions include:

  • motor vehicle registration and transfers
  • insurance policies
  • leases and mortgages
  • hire purchase agreements
  • transfers of property (such as businesses, real estate or certain shares).

The rate of stamp duty varies according to the type and value of the transaction involved.

 

Are there any stamp duty concessions or exemptions?

Depending on the nature of the transaction, certain concessions and exemptions may be available.
See the Stamp duty page on the Australian Taxation Office (ATO) website for a list of the concessions and exemptions and how these differ across state and territories.

What to do…

Find out more information about duties that apply to your business:

Housing affordability Bills passed by Senate

The Senate has passed the Bills outlined below, part of the government’s housing affordability package announced in the 2017 Budget, without amendment.

 

Treasury Laws Amendment (Housing Tax Integrity) Bill 2017

This Bill implements an annual vacancy charge on foreign owners of residential real estate where property is not occupied or genuinely available on the rental market for at least six months in a 12-month period. The vacancy charge, to be administered by the ATO, applies to foreign persons who make a foreign investment application for residential property from 7.30 pm (AEST) on 9 May 2017.

 

From 1 July 2017, travel costs for individual investors inspecting and maintaining residential investment properties will no longer be deductible and the expenditure is not recognised in the cost base of the property for capital gains tax (CGT) purposes.

 

The Bill also denies deductions for depreciation of previously used depreciating assets used in gaining or producing assessable income from the use of residential premises for residential accommodation.

 

Foreign Acquisitions and Takeovers Fees Imposition Amendment (Vacancy Fees) Bill 2017

 

This Bill which is complementary to the Treasury Laws Amendment (Housing Tax Integrity) Bill 2017, amends the Foreign Acquisitions and Takeovers Fees Imposition Act 2015 to impose vacancy fees on foreign acquisitions of residential land.

 

The source of this content is CCH‘s professional information services. Thompsons Australia has a professional subscription with CCH providing access to in-depth quality technical information and commentary used by Thompsons Australia in keeping staff and clients currently in formed.

the Special Children’s Christmas Party

It is the leadup to Christmas and one of our favorite ways to celebrate each year is to participate in and sponsor the Special Childrens Christmas Party. It is great to see that everyone had such an amazing time. This is an update and thankyou from the organisers of the event. You can find them on facebook at https://www.facebook.com/SCCPDarwin/

 

.                               .

Just look how much she has grown! One of the most amazing things about what we do is watching these little angels grow. (2013 and 2017 photos)

 

Thank you so much for your support of the Special Children’s Christmas Party
and for giving hundreds and hundreds of local families just like Vivienne’s a perfect day. We couldn’t have done it without you.

To all the first time families who attended, and there were many, we hope you enjoyed the day and made some wonderful family memories and we thank you all for your patience and smiles when the queues got a little long.

Here’s some of the feedback …
Joanne Cooter Thank you to all the volunteers and sponsors. Amazing Party. 🙏🏼
· December 10 at 2:01pm

 

 

4 halls of the Darwin Convention Centre filled with joy!

We wish you and yours a Merry and safe Christmas and a New Year filled with great fun and beautiful memories.

Searching for a business grant from the government?

Article source –  https://www.business.gov.au/news/searching-for-a-business-grant-from-the-government

 

Why not start with business.gov.au’s new grant categories search!

 

Last updated: 17 November 2017

 

 

Looking to import products? Or maybe you’re looking for financial assistance to help promote your business or sell your products to new customers?

If you’ve been searching for a business grant from the government, you might like to try our brand new grant categories search.

 

Grant category search

The new search groups together financial assistance from government based on the needs of your business.

Now you can start your grants search by clicking on a category that matches your intended business outcome, instead of searching from scratch.

And it’s not just cash-boosting grants that we’ve listed in this new tool – it’s also things like low-interest loans, tax and tariff concessions and rebates.

Grant Categories

 

I can’t find a grant that suits my business – what other support am I eligible for?

Although there are some grants available, most government programs help businesses by boosting their skills and knowledge – it’s not always with cash and money.

For example, the government doesn’t generally offer funding or grants to help you start a business – however there is plenty of other support on offer!

 

Business experts and advice

The government backs experienced business advisers from different organisations around Australia to provide business advice services for less than what you’d usually pay.

Search using your post code to find an experienced business adviser near you.

 

Search for a business adviser

 

Events and training sessions

There are also plenty of free or low-cost events, webinars and training sessions available to help you boost your business knowledge.

Find an event, or search for your own:

Business planning
Webinars
Marketing

 

Search for an event

 

Be aware of grant scams

Did you know that there are some websites that want business owners to pay for access to government grant information? Don’t get caught out.

Remember that all information about government grants is free from business.gov.au.

Read up on government grant scams.

 

Got some feedback? Tell us all about it!

We’re always aiming to improve the business.gov.au website to give you the best possible experience.

So if you’ve used our new grants category search, we’d love to hear about your experience!

Write on the business.gov.au Facebook wall
Email us at support@business.gov.au.

Personalised perfection

When anyone is handed a complex problem, we want to reach that ‘aha moment’ to solve it and move on soon as possible. In Joel’s case of co-founding his bespoke art business parkeart.com, he needed a personal ‘tax artist’ to paint a clear picture of accountability.

 

In my opinion; Australia is a well respected ‘design savvy’ country. Our nation’s homes showcase some of the best interior designs, largely because we have developed an incredible eye for a beautiful looking home. To add to this beauty, I co-founded a bespoke art business named ‘Parke’.

 

Being an Australian Artist I realise every home design lover has their own unique look, and we made parkeart.com about creating authentic wall art for those interior lovers. Specialising in digital contemporary wall art, each piece is exclusively made for one client and never offered to anyone else. Basically, we identify what our client’s unique tastes are, and create wall art that compliments their space and personality. It’s important that our clients feel special, and we do this by making something that no-one else has. I like to call this process; personalised perfection.

 

My wife and Co-Founder Sona takes care of the project management side of things, keeping the printing and framing local in Australia to be more cost-effective. A large focus is using trusted fine art printers and framers who communicate well and deliver premium quality.

 

Setting up a business from scratch is both exciting and challenging, especially living abroad. Currently, we’re based in the Czech Republic, and I had to find out what my tax residency was in order to serve the Australian market. Confirming my tax residency was not as straight forward as I thought it would be. I had to find an agent who really understood our situation and could offer advice for a reasonable price. I needed to know my safety nets were in place before I offered our services to Australia, and that meant asking a LOT of questions.

 

After searching online I reached Thompsons Australia and contacted Greg Thompson. I had many, many questions for Greg and his co-worker Marietta, they gave precise answers so I knew exactly where I stood. I would highly recommend Thompsons Australia, my tax situation was complex, but they made it simple and for an attractive price. I liked that they knew their ‘speciality’, and it gave me peace of mind knowing I could focus on mine.

 

We believe art is an essential element to a stunning interior. If you share the same passion get in touch with Parke today for a free consultation on your truly exclusive art piece.

 

Find Parke at the following online locations-

www.parkeart.com

instagram: @parkebespoke

pinterest.com/parkeart

Comparative table of different business structures

This chart is intended to provide a quick reference to factors considered relevant in the selection of trading and investment structures.

 

 

Individual Partnership Discretionary trust Unit trust Company
Exposure to liability Unlimited Unlimited, as well as joint and several Limited — subject to trust deed Limited — subject to trust deed Limited
Control over assets Absolute Joint Uncertain Collective Separated
Accommodation of general wealth creation Wealth at risk Wealth at risk High level of asset protection Wealth at risk Company wealth
at risk
Ability to obtain finance Good Good Reasonable Good Good
Disclosure of results None None — other than between partners None None — other than between unit holders Disclosure requirements in accordance with the Corporations legislation
Compliance costs Low Low Medium Medium Medium — high
Exposure to personal factors Moderate to high Moderate to high Moderate Moderate — low Low
Employee v proprietor Proprietor Proprietor Employee Employee Employee —
Director
Accommodation of succession planning Low Low High Moderate Moderate
Accommodation to estate planning High Moderate — low High Moderate Moderate — high
Ability to restructure Low Low High Moderate Moderate
Immediate and ultimate rates of tax Personal marginal rates Personal marginal rates Beneficiary rates — marginal or corporate Beneficiary rates — marginal or corporate Initial company rate — top up or refund to personal rates
The tax base Business expenses limited Business expenses limited — some Normal — ability to provide benefits to associates Normal — ability to provide benefits to associates Normal — benefits to employees and shareholders subject to FBT and Div 7A
further financing expenses without FBT or Div without FBT or Div
7A 7A
Access to concessions generally Good Good Moderate Initially good — but subject to claw-back Initially good — but subject to claw-back
Access to 50% CGT discount Yes Yes Yes Yes (post 1 July 2001) No
Access to small business concessions Yes Yes Yes — subject Yes — subject Yes — subject
to “significant individual” test to “significant individual” test and claw-back to “significant individual” test and claw-back
Income diversion and accumulation Little opportunity Moderate opportunity High opportunity Moderate opportunity Low to moderate opportunity
Incidence of tax losses Personal Partner level Quarantined in trust Quarantined in trust Quarantined in company
Ability to carry forward tax losses Unlimited Unlimited Subject to complex carry forward rules Subject to complex carry forward rules Subject to complex carry forward rules
Incidence of financing costs Personal Partner level Trust Trust or unit holder Company or shareholder
Cash flow considerations Good Good — subject to agreement Good — subject Good — subject Poor — subject to distribution or Div
to distribution or loan to distribution of loan 7A commercial loan
Private and business expenses Mixed Mixed All business All business All business
Effect on social security entitlements Direct Direct Possible Direct Direct
Alienation of personal income rules Do not apply Do not apply Potentially apply Potentially apply Potentially apply
Super contributions Deductible — subject to caps Deductible — subject to caps Deductible — subject to caps Deductible — subject to caps Deductible — subject to caps
Possible application of anti-avoidance provisions Low Low — medium Medium — high Medium Low

 

 
This is a checklist ONLY. There are numerous taxation and non-taxation considerations which flow from the content above, which require consideration and analysis in reaching a decision as to an appropriate structure for individual circumstances.

Roy Morgan Image of Professions Survey 2017

Health professionals continue domination with Nurses most highly regarded again; followed by Doctors and Pharmacists

 

  •  June 07 2017
  • Finding No. 7244
  • Topic: Press Release Public Opinion
  • Country: Australia

 

Health professionals have continued their domination of Australia’s most highly regarded professions with 94% of Australians (up 2% from 2016) rating Nurses ‘very high’ or ‘high’ for their ‘ethics and honesty’. Nurses have topped the annual survey for 23 years running since being included for the first time in 1994.

Health professionals are clustered near the top with Nurses followed by Doctors on 89% (up 3%), Pharmacists on 84% (down 2%) and Dentists on 79% (up 4%). Only School Teachers on 81% (up 4%) and Engineers on 80% (up 2%) prevent a clean sweep at the top for health-related professionals.

Of all 30 professions surveyed in 2017 sixteen decreased in regards to ethics and honesty while twelve professions increased and only two professions were unchanged according to the Roy Morgan survey conducted in the last week of May with 648 Australians.

 

Nurses on top but Doctors, Pharmacists and Dentists all rated very highly.

Nurses have been rated ‘very high’ or ‘high’ by 94% of Australians in 2017, up 2% from 2016. Nurses have been rated as Australia’s most trusted profession in every year they’ve been included in the survey and have rated at least 90% in each of the last seven years. No other profession has ever rated higher than 89%.

For the fifth straight year Doctors have finished second to their colleagues with 89% of Australians rating Doctors ‘very high’ or ‘high’ for their ethics and honesty, an improvement of 3% on 2016.

Pharmacists were the odd health-related profession out in 2017 with a slight decline to 84%, being the only negative movement for any of the surveyed health-related professions, down 2%.

However, that was still enough to leave Dentists ‘bringing up the rear’ of the four professions, rated ‘very high’ or ‘high’ by 79% of Australians – up 4% on 2016. It was 1989 when Dentists were last rated above any other health profession: Dentists 65% cf. Doctors 62% (1989 result).

 

School Teachers preferred to University Lecturers for 37th straight survey

School Teachers have once again topped University Lecturers for their ethics and honesty – a feat they have accomplished in every Image of Professions survey since first being conducted over 40 years ago in 1976.

A substantial majority of 81% of Australians rated School Teachers ‘very high’ or ‘high’ for their ethics and honesty – up 4% from 2016 and a new record high for the profession.

In contrast 66% of Australians rated University Lecturers ‘very high’ or ‘high’, down 2% from 2016. The gap of 15% between the two professions is considerably larger than their closest ever result in 1988 when only 2% separated them: School Teachers 55% cf. University Lecturers 53%.

 

Engineers rated far ahead of Business Executives and Real Estate Agents

Engineers have increased to a new record high for their ‘ethics and honesty’ – up 2% to 80% in 2017 which puts them fifth overall and ahead of other professions in business-related fields.

Directors of Public Companies on 25% (down 1%) and Business Executives on 18% (down 2%) are both mid-ranged in the overall result, but well ahead of Real Estate Agents who have equalled their record low rating of 7% (down 3%) and perennial cellar-dwellers Car Salesmen on 4% (unchanged).

Car Salesmen have been the lowest rated profession in every year the survey has been conducted since 1976.

 

Police hit record high in wake of increased terrorist incidents

The image of Police has never been better in Australia with a record high 76% of Australians now rating Police ‘very high’ or ‘high’ for ethics and honesty. The rating for police is up 4% from 2016 and up 21% since 1997 when only 55% of respondents rated Police highly or very highly.

Police are rated just ahead of those who sit in judgment of the people Police apprehend with High Court Judges on 74% (up 3%) and State Supreme Court Judges on 71% (up 1%). Both sets of justices are slightly below their record high rating of 75% which they both achieved in 2011.

Perhaps unsurprisingly, it is Lawyers who bring up the rear of the professions in the legal field with 35% of Australians rating Lawyers as ‘very high’ or ‘high’ for ethics and honesty – unchanged from a year ago, but well down from their record high rating of 44% in 1984.

 

Accountants, Bank Managers and Financial Planners streets ahead of Insurance Brokers and Stockbrokers

Despite a fall in their rating for ethics and honesty this year Accountants have once again retained their lead as the most admired financial-related profession with 50% (down 1%) of Australians rating Accountants ‘very high’ or ‘high’ for ethics and honesty. Accountants have now been the preferred financial-related profession for 26 years since 1991.

Bank Managers improved their standing by 3% this year with 33% of Australians now rating their ethics and honesty ‘very high’ or ‘high’. The improvement for Bank Managers came despite the recent Federal Budget levying a new tax on Australia’s largest banks which was announced only two weeks before this survey was conducted.

The ethics and honesty of Financial Planners has been remarkably consistent since being introduced to the survey for the first time in 2010 with 25% of Australians rating Financial Planners ‘very high’ or ‘high’ for their ethics and honesty, down 2% from 2016.

However two familiar professions continue to be on the nose with Australians – only 11% of Australians (down 3%) now rate Stockbrokers ‘very high’ or ‘high’ for their ethics and honesty and even fewer, just 10%, rate Insurance Brokers ‘very high’ or ‘high’ for their ethics and honesty, down 1% from a year ago.

 

Regard for Public Servants outstrips respect for their Parliamentary bosses

Although views on Public Servants ethics and honesty fell this year those in the profession are rated clearly higher than their Parliamentary bosses with 37% of Australians rating the profession ‘very high’ or ‘high’ – down 2% on 2016.

Both Federal MPs and their State MP colleagues fell in 2017 – both professions retreated 1% to 16% and are now regarded below Union Leaders for the first time since 2013 when that year’s Federal Election resulted in the ejection of the second iteration of the Rudd Government.

Union Leaders improved their standing in 2017 with 17% of Australians now rating the profession ‘very high’ or ‘high’ for ethics and honesty an improvement of 4% on 2016.

 

Public Opinion Pollsters clearly on top of the media professions

The past year may have seen a substantial amount of conjecture about the purported accuracy of public opinion polling and the Australian populace has delivered their verdict (of a sort) – Public Opinion Pollsters are clearly more highly regarded by Australians than the media people who report the results of these polls.

Just over a third of Australians (34%) rate Public Opinion Pollsters as having ‘very high’ or ‘high’ ethics and honesty, an improvement of 2% on 2016 and equal to the rating Public Opinion Pollsters held the first time they were included on the survey in 1995.

However, those tasked with relaying the results of polls to the general public have not fared as well with only 20% of Australians (up 1%) rating Newspaper Journalists ‘very high’ or ‘high’ for ethics and honesty and 17% of Australians (down 1%) rating TV Reporters ‘very high’ or ‘high’.

However, these professions were themselves clearly ahead of Talk-back Radio Announcers who equalled their record low rating of 14% (down 5%) and Advertising People who also equaled their record low rating of only 5% (down 4%).

 

Ministers of Religion continue steady decline to new record low

When first introduced in 1996 Ministers of Religion were rated ‘very high’ or ‘high’ for ‘ethics and honesty’ by 59% of respondents – enough for sixth place overall.

In 2017 Ministers of Religion have hit a new record low rating of only 34% for ethics and honesty, down 1% from a year ago. The considerable scandals experienced this century have clearly had a significant impact on the standing of the profession in the wider community. Ministers of Religion have now plunged to new record lows in six out of the last nine years.

 

Michele Levine, Chief Executive Officer, Roy Morgan Research says long-term trends have continued in 2017:

“Roy Morgan’s annual Image of Professions survey for 2017 shows 12 professions increasing their ratings for ‘ethics and honesty’ compared to a year ago, while 16 professions decreased and 2 professions were unchanged.

“For the 23rd survey in a row Nurses 94% (up 2% from 2016) have retained top spot ahead of several other medical professions including Doctors on a new record high of 89% (up 3%) and Pharmacists on 84% (down 2%).

“The recent improvements of the rating of Police – now at a record high 76% (up 4%), and up 11% over the past decade since 2007 – a larger long-term increase than any other profession may reflect the increasing importance of the profession in an age of heightened worries about terrorism.

“Views of Bank Managers also improved over the past year with 33% (up 3%) of Australians rating them ‘very high’ or ‘high’ for ‘ethics and honesty. The improvement for Bank Managers came despite the Government’s decision to impose a new tax on banks in this year’s Federal Budget delivered in early May.

“The biggest losers in 2017 were Talk-back Radio Announcers on 14% (down 5%) and at their equal record low rating first achieved in 2000, Stockbrokers on 11% (down 3%) and hitting a new record low and Advertising people on 5% (down 4%). Only Car Salesmen on 4% (unchanged) – a position they have held for over 30 years unchallenged as Australia’s least trusted profession – were lower.”

These are the main findings of a Roy Morgan telephone survey conducted on the nights of May 22-24, 2017, with 648 Australian men and women aged 14 and over.

 

Respondents were asked: “As I say different occupations, could you please say – from what you know or have heard – which rating best describes how you, yourself, would rate or score people in various occupations for honesty and ethical standards (Very High, High, Average, Low, Very Low)?”

 

Contact Roy Morgan directly for more details, Julian McCrann at (03) 9224 5365 or Julian.McCrann@RoyMorgan.com.

 

Selected Professions across selected years.

 

1989 1996 2002 2017 Comment
Doctors 62% 72% 80% 89% All-time high in 2017
School teachers 57% 68% 79% 81% All-time high in 2017
Police 53% 55% 65% 76% All-time high in 2017
Ministers of Religion n/a 59% 48% 34% All-time low in 2017
Talk-back Radio Announcers 18% (1999)* 17% 14% Equal all-time low in 2017
Stockbrokers 18% 16% 14% 11% All-time low in 2017
Car Salesmen 4% 3% 3% 4% Last for 36 years in a row

 

*Talk-back Radio Announcers were first surveyed in 1999.

Deductions for investors and landlords

A person who derives investment income, such as rents, dividends or interest, can deduct expenditure incurred in connection with the derivation of that income. Deductions include interest on money borrowed to acquire the investment, ongoing expenses of deriving the income and, in certain circumstances, investment losses.

 

 

Interest

Interest on money borrowed to acquire, say, a rental property, shares in a company or units in a property trust, is generally fully deductible if it is reasonable to expect that rents, dividends or assessable trust distributions will be derived. In determining the purpose to which borrowed funds are put, eg to acquire a rental property, the ATO traces the flow of borrowed funds to establish their usage. The security used for such a borrowing has little relevance in determining the deductibility of interest. Interest can be fully deductible in an income year even though it exceeds the investment income of that year (negative gearing). But if, at the outset, the investment is not expected to turn positive over its full term, the interest deduction in each income year is likely to be at least partly disallowed.
Additional interest payable under linked and split loan facilities is not deductible. Interest referable to the capital protection component of limited recourse loans entered into on or after 16 April 2003 is also not deductible.

 

 

Ongoing expenses

Deductible ongoing expenses in deriving investment income include:

  • expenses of collecting the income, bookkeeping expenses and audit fees
  • certain fees paid to an investment adviser (see below)
  • costs of travelling interstate to consult a broker
  • the cost of financial magazines
  • bank charges
  • borrowing expenses (spread over the shorter of the loan period and five years), and mortgage discharge expenses, including legal expenses connected with the borrowing or discharge
  • repairs, rates and land tax, insurance, advertising and the legal costs of recovering arrears of rent
  • expenses connected with the preparation and registration of leases
  • depreciation of furniture and fittings (although from 1 July 2017 this is proposed to be limited to the cost of actual outlays incurred by the taxpayer and exclude outlays by a previous owner)
  • the cost of replacing small items such as crockery and linen.

It is proposed that from 1 July 2017 the travel expenses related to inspecting, maintaining or collecting rent for a residential property will be disallowed.

 

 

Repairs versus improvements

While the costs of repairs to income-producing property are deductions, the costs of improvements are not. A repair involves the replacement or renewal of a worn-out part so as to restore, but not significantly improve, the functional efficiency of a thing without changing its character. Painting a building or replacing broken parts of a fence would be repairs but replacing an entire ceiling with a new and better one would be likely to be deemed an improvement.
The cost of initial repairs to remedy defects in an asset at the time of acquisition is also not deductible but is included in the cost base of the asset for CGT purposes or its cost for depreciation purposes.

 

 

Partial deduction

A landlord’s deductions may be reduced where only part of the property is rented or where the property is let or available for let for only part of the year. Where only part of the property is let, deductions are normally allowed according to the proportion of the floor area that is rented. Where a holiday house, say, is let for only part of the income year, deductions are normally allowed according to the proportion of the year for which the house was let, including periods during which bona fide efforts were made to obtain tenants.

 

 

Financial advice fees

The ability to claim a deduction for a fee paid to a financial adviser depends upon the services which are provided in relation to the fee.
A taxpayer will not be entitled to deduction for a fee paid to a financial adviser for developing or drawing up an initial investment plan. Such a fee is not deductible as it is considered to be both of a capital nature and a preliminary expense incurred for the purpose of deriving assessable income, as opposed to being a fee incurred in the course of gaining or producing assessable income.
An on-going management fee or retainer paid to a financial adviser in relation to the servicing of the income producing investments will be deductible. To the extent that the management fee relates to investments which are not held for the purpose of producing assessable income, a deduction will not be available. Accordingly, where the taxpayer holds a mix of investments held for both income and non-income producing assets, only a portion of the fee will be deductible.
Fees which are paid to a financial adviser for advice regarding the change in mix of the investments held are generally considered to relate to the general management of investments. Such fees will be deductible unless the advice constitutes the drawing up of an investment plan.
Where a taxpayer has investments and pays a financial adviser for drawing up a new investment plan, the fee is considered to be of a capital nature and not deductible. The fee may be included in the cost base of assets acquired. For further explanation see Taxation Determination TD 95/60.

 

 

Losses on investments

Losses on investments such as shares and securities are deductible only if the taxpayer is carrying on a business of investing for profit or of trading in investments. Whether a person is carrying on such a business depends on all the facts. Some relevant factors are the frequency, volume and scale of transactions and whether they are carried out in a business-like way.

 

The source of this content is CCH‘s professional information services. Thompsons Australia has a professional subscription with CCH providing access to in-depth quality technical information and commentary used by Thompsons Australia in keeping staff and clients currently in formed.

Stamp duty and land tax on rental property

When a taxpayer purchases a rental property, she/he will incur various “transaction taxes”. The precise nature and level of these transaction taxes will depend on the state or territory in which the property is situated.

 

Land tax

Land tax is an annual levy imposed on “wealth” in the form of land. Land tax is levied in all states and the ACT on the unimproved value of taxable land. Each state and territory provides various reductions, exemptions and thresholds. For example, in NSW exemptions include the family home including owner-occupied strata title units, land used for primary production and land used for certain charitable purposes. Landlords who provide certain low cost tenancy or lodging may claim an exemption from land tax provided certain thresholds and conditions are met. Requirements for this in the 2017 income year are outlined in Revenue Ruling LT 100 (boarding houses) and LT 101 (low cost rental accommodation).
The rate of land tax varies from state to state. See ¶560-500 in relation to deductibility of land tax.
From 1 January 2017, a land tax surcharge of 0.75% of the average unimproved value over a rolling three-year period applies to [the portion of] residential land owned by a foreign person at midnight on 31 December each year. The surcharge is applicable irrespective of whether the property is subject to primary duty, ie a residential property may not be subject to land tax, for example if it is used and occupied as a principal place of residence and has a value below the relevant threshold, but still subject to land tax surcharge when it is owned by a foreign person.
The rate of land tax surcharge increase to 2% for the 2018 tax year.
From 1 July 2016, the vendor of any land transferred in NSW is required to apply for a Land Tax Clearance Certificate from the OSR, which states whether there is any land tax owing on the property.

 

Stamp duty surcharge for foreign purchasers

Stamp duty surcharge applies for foreign purchasers of residential real estate. This table details the definition of a foreign purchaser for each state, as well as the new rules that apply to the transfer.

 

State Definition of foreign purchaser Surcharge/new rule
VIC Non-visa holder 7% stamp duty surcharge on regular rates from 1 July 2016 (3% from 1 July 2015)
Temporary visa holder No exemptions are available (including off-the-plan deferral, deceased estates and relationship breakdowns)
Applies from 1 July 2015
NSW Non-visa holder 8% stamp duty surcharge on regular rates from 1 July 2017 (4% from 21 June 2016)
Temporary visa holder No deferral for off-the-plan
Permanent visa holders who have not resided in Australia for 200 days or more in the previous year Applies from 21 June 2016
QLD Non-visa holder 3% stamp duty surcharge on regular rates
Temporary visa holder No concession for first homes and family business
Applies from 1 October 2016

 

Stamp duty

One of the more significant transaction costs associated with purchasing a property is “stamp duty”. Although stamp duty originated as a government levy on the creation of legally binding documents, the tax has evolved, and continues to evolve, into a broad-based tax on “transactions”. This is particularly so in New South Wales.
Stamp duty is imposed on the transfer of ownership in the real property (often referred to as “conveyance duty”).
In the past stamp duty may also be imposed on the creation of a mortgage over the property as security for finance (often referred to as “mortgage duty”). As at 1 June 2011, mortgage duty has been abolished in all states and territories in Australia except for New South Wales, which abolished mortgage duty on commercial property finance from 1 July 2016. See further AMTG ¶37-050.
Stamp duty on the rental part of ordinary leases has been abolished in all states and territories in Australia. However, stamp duty may still be levied on certain leases and premiums paid.
The rates of stamp duty on the transfer of real property vary from state to state, and are commonly levied on a progressive scale. Each jurisdiction also provides various reductions and exemptions.
Stamp duty paid on the transfer of a property will form part of the property’s cost base for the purposes of CGT (¶560-720). Any stamp duty paid on a mortgage may be deductible as an “initial borrowing expense” under s 25-25 (¶560-320).

 

“Land-rich” or land holder companies and trusts

Duty on the transfer of either shares in an unlisted company or units in a trust has not been applicable since 30 June 2010 in all states and territories, except South Australia where it was abolished from 18 June 2015 and New South Wales where it no longer applies from 1 July 2016.
However, stamp duty cannot generally be minimised by transferring shares or units in a property-holding company or trust, as opposed to transferring the underlying property. The rules applying in each state and territory vary, but most jurisdictions define “land-rich” companies and trusts as those which:
• are entitled to land with an unencumbered value of at least $2m, and
• have at least 60% of the value of all their assets invested in real property.
In some states and territories the “land-rich” duty provisions have been replace with “land holder” duty which are substantively similar. However, in New South Wales an entity will be land rich if there is land of $2m or more. The second limb is not required to be satisfied to impose land rich duty. See further AMTG ¶37-030.

 

Foreign purchasers

Absentee owners (and all foreign owners in NSW) are subject to a surcharge on land tax at the taxing date. The following table outlines the rules:

State Definition of absentee/foreign owner Surcharge/new rule
VIC Non-visa holders and temporary visa holders who do not ordinarily reside in Australia and are either absent from Australia on 31 December or absent for more than six of the previous 12 months 1.5% land tax surcharge on all land, starting at $250,000 (tax-free threshold). Applies from 1 January 2017
NSW Non-visa holders 0.75% land tax surcharge on land that has a residential dwelling, starting at $0 (no tax-free threshold). No principal place of residence exemption. Applies from 1 January 2017
Temporary visa holders
Permanent visa holders who have not resided in Australia for 200 or more days in the past year
QLD Anyone who does not ordinarily reside in Australia on 31 December, or has not ordinarily resided in Australia for more than six of the previous 12 months Land tax is imposed at company or trustee rates (reduced threshold). In place since 1 January 2011

For all states and taxes tabled above, a New Zealand citizen who holds a special category visa within s 32 Migration Act 1958 (Cth) is taken to be a permanent visa holder. Any surcharges would generally not apply.

 

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