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” →

11th January 2025

With Australia going through a major cost of living crisis and interest rates not coming down as quickly as hoped, more and more people are looking at ways of creating additional cash flow to help make ends meet.

What is a side hustle?

Earning extra income on top of your primary job is sometimes known as a side hustle. While the extra money is no doubt welcome, it’s important to stay on top of the tax issues this sort of activity can throw up.

Side hustles can take many forms and may include:

• posting content to platforms such as TikTok and attracting viewing hours;
• being an influencer on a social media platform and attracting followers;
• picking up casual work through platforms such as Airtasker;
• garden maintenance;
• providing tech support;
• creating content for OnlyFans;
• cleaning business premises or private homes;
• coaching or tuition;
• dog walking or pet sitting;
• freelance writing;
• creating and selling art;
• gold fossicking.

Continue reading “How taxable is that side hustle?” →

24th December 2024

Only the ones you want to claim as a tax deduction, might be a common response.

Work-related expenses

But that isn’t quite right, as the tax rules in fact enable you to make legitimate claims for work-related expenses for up to $300 in a financial year without having receipts, provided:

• you have spent the money;
• the expense is directly related to earning your income;
• you haven’t been reimbursed by your employer;
• it is not of a private or capital nature; and
• you have a record of the expense (other than a receipt).

Work-related expenses can include, among other things, tools and small items of equipment, office supplies, union or professional association fees, uniforms and protective clothing and associated cleaning costs, newspapers and periodicals and many more.

The cost of laundering work uniforms and protective clothing can be included without having receipts for an amount of up to $150. These costs form part of the $300 deductible limit without needing receipts. However, where total work-related expenses exceed $300, it is not necessary to have receipts in relation to costs for laundering work uniforms for these expenses if they do not exceed $150. The ATO will accept a rate of $1 per load where the laundry is done at home, or half that amount when accompanied by private items. Dry cleaning costs are not included in the receipt-free $150. Minor items costing up to $10 can be claimed without a receipt, up to $200 per financial year, and are also included in the $300 limit. But again, where total work-related expenses exceed $300, it is not necessary to have receipts for these costs.

The record of the expense can be in the form of a diary that records how much you have spent, what you spent it on, how you paid for it and how it relates to earning your income. You will need to retain those records for five years.

Of course, there is nothing wrong with keeping all your receipts as you go along, just in case you unexpectedly overshoot the $300 limit later in the financial year. Where that happens, you will need receipts and invoices to substantiate your entire work-related expense claim – not just for the excess over $300.

Continue reading “What tax receipts do I need to keep?” →

23rd October 2024

There are many adverse consequences associated with failing to lodge income tax returns or omitting income from those returns if the ATO finds out.

The ATO has increasingly sophisticated technology to track such matters and catch people out – including “data matching” programs where it compulsorily obtains masses of information from certain authorities (eg, banks, insurance companies, real estate bond boards etc).

And on top of this, the ATO does not even have to actually look at the information too closely – as a computer program does this for the Commissioner.

Continue reading “The dangers of failing to declare income or lodge returns” →

3rd August 2024

Whether you are a resident of Australia or non-resident of Australia for tax purposes has significant consequences for you.

Primarily, if you are a resident of Australia for tax purposes you will be liable for tax in Australia on income you derive from all sources – including of course from overseas (eg, an overseas bank account, rental property, an interest in a foreign business etc).

On the other hand, if you are a non-resident of Australia for tax purposes, you will only be liable for tax on income that is sourced in Australia (including capital gains on certain property such as real estate in Australia).

And while there may be difficulty in determining the source of income in some cases, if you are a resident for tax purposes, the principle of liability for tax in Australia on income from all sources remains clear.

Resident of Australia for tax purposes

So, what does it mean to be a resident of Australia for tax purposes?

Well, broadly, it means you “reside” in Australia (as commonly understood), unless the Commissioner is satisfied that your permanent place of abode is outside Australia.

However, a recent decision of the Federal Court has shed some light on this matter – especially the often-misunderstood presumption that “connections with Australia” is all that counts.

Continue reading “The importance of “Tax Residency”” →