Tag: real estate

Property depreciation tax changes passed

As part of the 9th of May 2017 federal budget, the Australian Government proposed amendments to legislation relating to plant and equipment (division 40) deductions.
The proposed changes, outlined in Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 , have now been legislated after being passed by the Senate on the 15th of November 2017.
This has resulted in a change to the Income Tax Assessment Act 1997 and denies property investors from claiming income tax deductions for the decline in value of ‘previously used’ depreciating assets (plant and equipment) within residential investment properties.
The government’s intention in making this legislation amendment was to deliver an integrity measure which addressed concerns that some plant and equipment assets were being depreciated by successive property investors in excess of their actual value.
These changes affect investors who purchase second-hand residential properties after 7:30pm on the 9th of May 2017 by limiting the depreciation they can claim on existing plant and equipment assets.
The following video has been prepared by BMT Quantity Surveyors to explain the changes.

Stamp duty surcharge risk for trusts

Recent changes to duty legislation in New South Wales, Victoria and Queensland has meant that “foreign persons” who purchase certain types of residential land in each of these states, will attract a foreign duty surcharge as determined in each of those states relevant Acts. Legislation in New South Wales and Victoria also imposes a land tax surcharge.

Most family/discretionary trusts have wide beneficiary classes. As a result, it is probable that many family trusts have a foreign person as a beneficiary. For example, the primary beneficiary’s grandchild or parents might live overseas

The nature and terms of a family/discretionary trust is such that usually a beneficiary does not have a defined interest in the trust. However, for the purposes of applying the foreign duty surcharge, the legislation in New South Wales and Victoria has deemed each beneficiary in a discretionary trust to have a 100% beneficial interest in the trust fund. This means that if a foreign person (as defined) is not excluded from receiving a benefit from the trust, then the trust may be subjected to the higher duty rates. The position is different in Queensland.

If you are going to purchase land in a trust, you should ensure that you trust deed specifically excludes “foreign persons” from being beneficiaries. Only very recent trust deeds are likely to be structured thus way

 

Negative gearing at 4 year low

The cost to the federal budget of  negatively geared rental property deductions has fallen 12.5 per cent to $10.9 billion, the lowest level in four years because of record low interest rates.

A the start of a federal election campaign in which negative gearing will be a key issue, the latest Tax Office statistics show the country’s two million landlords claimed interest deductions of $21 billion, a decline of 9 per cent, while earnings from rents were flat at $38 billion.

The figures, published on Friday and based on taxpayer’s 2013-14 tax returns, show 62 per cent of landlords are returning net losses, down from 64 per cent the year before.

A record 776,672 taxpayers earned a net profit from their investment property in fiscal 2014, an increase of 44,322 people compared with the year before.

 

Capital gains jump $4b

The Tax Office statistics show net capital gains being reported by taxpayers jumped 37 per cent to $14.4 billion, far faster than the rise in the property or stock markets.

The big rise was because losses from the global financial crisis have now washed through the system, inflating the level of gains.