So, you have decided to knock down your home and to build a couple of townhouses instead – and maybe live in one (but will just wait and see how things pan out).

Likewise, you may have decided to subdivide your large backyard to do a similar thing.

In another case, you may have bought yourself a large block of land down the coast or in the country on which to build a holiday home (or your dream retirement home), but have now decided to build some houses on it to sell as the market is now in that region. (And you know how to manage a project; you have been doing it all your working life.)

In all of these scenarios, the ATO may take the view that you are engaging in small scale property development and that, as a result, your profits from this activity should be taxed as ordinary business profit (and possibly at the top rate of tax), and not just merely as a concessionally taxed capital gain.

Furthermore, where you may have “ventured” land into a property development project, the capital gains tax (CGT) laws will apply to capture any capital gain (or loss) made on that land up until that time (but provided the land was not exempt from CGT, such as in the case of a home).

But there is one big advantage in being taxed as a property developer – you can generally claim your deductible costs each year as you incur them, and particularly interest on any money borrowed for the venture

Continue reading “Small-scale subdivision and property development” →

When a person writes a will they usually leave their assets to their children – and usually in equal shares.

And when they first write their will their children may be young – and they may also be relatively young when they later update it.

However, there is a potential capital gains tax (CGT) issue lurking here.

In this increasingly globalized world, when the children do inherit the assets, they may be living overseas.

In this case, if they are considered a foreign resident for tax purposes at the time they become entitled to the assets of the estate (or their share of them), instead of the roll-over applying, it will trigger an immediate CGT liability for the deceased in their final tax return.

And this will usually be paid by the executor from estate assets – thereby diminishing the amount of the estate that would otherwise be available to the beneficiaries.

And in this case the amount of the capital gain (or loss) is determined by the asset’s market value at the time of the deceased’s death and the deceased’s cost for CGT purposes.

However, there is a very important carve out from this rule.

Continue reading “Writing a will in a tax-effective manner” →

It’s pretty well-known that a foreign resident (for tax purposes) cannot get a CGT exemption for a main residence (if they are a foreign resident at the time they entered the contract of sale).

Also, if the home was acquired after 8 May 2012 they won’t be entitled to any 50% CGT discount to reduce the amount of the assessable gain. And if they acquired the home before that date, then the amount of discount available will be reduced on a (disproportionate) sliding scale.

Of course, all this means that if a person is going to become a foreign resident and they want to get the CGT exemption on their home, they need to enter that contract of sale before they leave the country (even if the appropriate transaction takes place at the airport just before they leave!)

However, what is probably less well known is that you can’t get a CGT main residence if you own the home on trust for someone else.

Continue reading “No CGT exemption for homes held on trust” →

Feeding its seemingly insatiable appetite for rental data, the ATO has announced it will soon be collecting rental bond details for some 2.2 million individuals.

The data, which will be collected twice a year from State and Territory bond regulators, is very comprehensive, and will include personal details such as names, addresses, dates of birth, telephone numbers, email addresses and bank account details for rental providers and tenants. The data obtained will also include business-related information for managing agents.

Also included will be the address of the leased property, the term of the lease, lease commencement and end dates, bond amounts, rent payable and payment intervals.

The ATO will also be seeking information about the characteristics of the leased property, including the type of dwelling, the number of bedrooms and a unique identifier for the rented property.

This latest quest for rental data comes after the ATO also acquired property management data records for 2.3 million rental providers from software companies last year.

Continue reading “Yet more rental data matching by the ATO” →

If you’re selling property in Australia and you’re a foreign resident, there are important tax rules you need to know. Recent changes mean that buyers must withhold 15% of the property’s market value and pay it to the ATO, unless the seller provides a residency clearance certificate.

What’s changed?

From 1 January 2025, all property sellers must prove their residency status by obtaining a clearance certificate from the ATO. If they don’t, the buyer is legally required to withhold 15% of the sale price and remit it to the ATO.

This rule is designed to ensure foreign residents don’t avoid capital gains tax (CGT) withholding obligations. The government now assumes all property sellers are foreign residents unless they provide an ATO-issued clearance certificate proving otherwise.

Continue reading “Selling property? Buyers must withhold and pay the ATO!” →

So, you are undertaking a course or further education that relates to your work or business in some way – and you have to pay for the costs of the training or course. Well, the question of whether you can claim a deduction for this cost as “self-education” expenses is not always a clear cut matter.

As a broad proposition, self-education expenses are tax deductible if there is a sufficient connection with your income-producing activities.

Continue reading “Deduction for self-education courses” →

19th February 2025

The Australian Tax Office (ATO) has released new guidance (TD 2024/7) on when financial advice fees can be claimed as a tax deduction. Overall, the ATO has not changed its view but it has given more clarity around the deductibility of upfront and ongoing fees.

Key points to know

Some of the key takeaways from this determination include:

• If you receive financial advice that includes tax-related advice, you may be able to claim a deduction, but only if the advice comes from a qualified tax professional.
• Upfront fees for initial advice (eg, setting up a financial plan) related to structuring investments are generally non-deductible, as they are considered capital expenses. However, if the advice relates to managing investments for income production or relates to managing tax obligations, it may be deductible.
• Ongoing advice fees can be deductible if they’re related to income-generating activities.
• To be deductible under tax law, the fees must relate to you gaining or producing assessable income. If only part of the advice is income-related, you can only claim a partial deduction.

Continue reading “ATO confirms tax deductibility of financial advice fees” →