When valuations of property are important for tax

25 March 2019

There are times when getting a valuation becomes necessary, especially to estimate the cost of transactions that are not arm’s-length or when no actual cash changes hands.  A common example of this is in respect of property, and especially for transactions when a valuation is necessary for tax purposes.

For example, let’s say that Humbert transfers his rental property to his daughter Dolores for no consideration. The tax law, specifically the CGT rules, requires that the transfer be made at “market value”. If Humbert has held the property for a lengthy period of time and the property has increased significantly in value at the time of transfer, then he could be up for quite a hefty CGT bill, even with the general discount. This is so even though he has not received a single cent by gifting his property.

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Rental travel expenses mostly off the table

6 March 2019

The ATO recently highlighted significant non-compliance with the rules prohibiting taxpayers claiming travel expenses related to residential rental properties.
Late last calendar year, the ATO revealed that it had identified 26,000 taxpayers who had incorrectly claimed deductions for travel to rental properties during tax time 2018, despite recent changes to the law in this area.

New rules, introduced just over a year ago (and therefore perhaps not ingrained in many people’s minds), mean that investors can no longer claim travel expenses relating to inspecting, maintaining or collecting rent for a residential rental property as deductions, unless they are carrying on a rental property business or are an excluded entity.

This measure was introduced to address concerns that some taxpayers were claiming travel deductions without correctly apportioning costs where there was a private component to the travel, or claimed travel costs that were exclusively for private purposes.

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Travel expense claims: the term ‘itinerant’ needs clarity

5 February 2019

Being able to make claims for work-related travel expenses is generally an enviable deduction situation, and one that a good many taxpayers would like to achieve — especially given that the status of being deemed an “itinerant” worker brings with it an expectation of a lot of travel kilometres.

While itinerant work is generally held to be undertaken by certain trades or classifications of workers, such as those working in primary production or mining, “itinerancy” can equally apply to any individual worker subject to their employment satisfying certain characteristics and criteria.

Broadly, the definition of “itinerant” refers to shifting places of work. However, as the term is used by the ATO in determining eligibility to make claims for certain travel expenses, it is important to get it right.
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Consumers Compensated by Financial Institutions Still Need to Consider Tax

16 December 2018

With the ongoing financial services Royal Commission, and likely future cases brought before various courts for compensation — or indeed the present building of class action lawsuits on the back of various revelations to come out of the Royal Commission — the ATO has felt the need to run over the rules (as they stand) regarding the taxation of compensation paid to individuals for advice from financial institutions.
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Shares and tax: A stockmarket investment primer

12 November 2018

Investing in the stockmarket is a lot more common than it was years ago, with ordinary Australians having experience with shares and the stockmarket either directly or through managed funds or via their superannuation fund.

Recent research conducted by the Australian Securities Exchange (ASX) found that around 60% of Australians hold share investments outside of their institutional superannuation fund, and 31% directly own listed investments. Over the past five years the proportion of 18 to 24 year olds investing in shares has doubled from 10% to 20%, and over the same time the proportion for 25 to 34 year olds has increased from 24% to 39%.

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Renting out part or all of your home

1 November 2018

If you rent out part or all of your home, the rent money you receive is generally regarded as assessable income. This means:

  • you must declare your rental income in your income tax return, and you can claim deductions for the associated expenses
  • you may not be entitled to the full main residence exemption from capital gains tax (CGT), which means you’ll have to pay CGT on part of any capital gain made when you sell your home.

Goods and services tax (GST) doesn’t apply to residential rents, so you’re not liable for GST on the rent you charge, but also you can’t claim GST credits for associated costs.

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A tax boost for low and middle income earners

15 September 2018

If you or anyone you know are earning income at lower or middle income levels, there’s a new tax offset that has been available since July 1 that was originally announced in the 2018 federal budget last May. But no-one will see any benefit from the new Low and Middle Income Tax Offset (LMITO) until about a year from now, when a lump sum credit will be recorded in next income year’s tax assessment, courtesy of the ATO.

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Claiming self-education expenses

18 August 2018

The value of a good education is widely accepted, and it is a common experience over one’s working lifetime to find that further learning is required along the path of one’s chosen career.

Changing technology and evolving workplaces means that at some stage in every taxpayer’s life, an educational re-boot could become necessary — as the adage says, “you’re never too old to learn”. Therefore supplementary education mid-career is a valuable, and hopefully income-boosting, pursuit.

Funding for that education however is another consideration, although this is generally also seen to be worthwhile pursuing — to use another quote, “if you think education is expensive, try ignorance”. Fortunately, Australia’s tax system is set up to provide some breaks to help the motivated among us get ahead.

To be able to claim certain expenses relating to self education is a tax concession that is not to be overlooked, but to be eligible your present employment and the course you undertake must have sufficient connection for the self-education expenses to qualify as a work-related tax deduction.

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Builders: Get your taxable payments report ready before August 28

30 July 2018

Businesses in the building and construction industry, take note – the deadline is August 28, 2018 to report the total payments you made to each contractor you enlisted the services of in 2017-18. You will need to report these payments to the ATO on the Taxable payments annual report.

The taxable payments reporting system was initially introduced to address longstanding compliance issues by contractors in the building and construction industry. Tax compliance issues that were identified included non-lodgement of tax returns, income being omitted from tax returns that were lodged, non-compliance with goods and services tax (GST) obligations, failure to quote an Australian business number (ABN), and use of an invalid ABN.

Note that the most recent Federal Budget announced that from 2019-20 three additional industries on top of building and construction will be required to lodge taxable payments reports with the ATO — security providers and investigation services, road freight transport, and computer system design and related services.

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