Property Flipping – The Next Target of ATO
One of the tax laws says that even if you are living in a property it won’t be tax-free if you flip it. Many people assume that they can do these things on their property and sell it after without paying the tax – move in and renovate it. It doesn’t exempt you from paying the tax even if you are living in a property that you are going to sell.
People might be wondering how the ATO can know about this if someone happens to do it. Most of the time the ATO looks for a declaration of intent or even a pattern of behavior. For instance:
- You are an unemployed person but you somehow are earning income, moving into a new house, doing renovations and then selling it.
- You have had a history of renovating houses and selling them.
- The loan documents on the mortgage indicate that your property is for flipping purposes and not for long-term use.
The ATO’s take on property is very simple and straightforward: “If you’re carrying out a profit-making activity of property renovations also known as ‘property flipping’, you report in your income tax return your net profit or loss from the renovation (proceeds from the sale of the property less the purchase and other costs associated with buying, holding, renovating and selling it).”
Often times, people have the misconception that any profit that they make for flipping properties will be exempted from tax so long as they mainly live in this house during ownership time. However, what many don’t realize is that this is only true for a property that is held on capital account. This is usually done when the property is bought with the intent of being a private residence or rental property and there is evidence to prove this statement.
Vacant property fee hits foreign owners
Australia has been following this worldwide trend of giving a penalty to foreign owners of Australian properties who keep their houses vacant for a very long period of time. This has been put into effect since last month when the Parliament mentioned that an annual vacancy fee will be imposed onto the foreign owners who leave their property vacant for not less than 183 days within a year.
How can foreign owners avoid this fee? By either living in the house themselves or having a family member live there, have it for lease or rent around 183 days a year. You should have advertised the property as available in the rental market.
If in any case the foreign owners fail to follow this new law, the Government has full authority to recover any fee that is outstanding as a debt by creating a charge of Australian land owned by a foreign person. This vacancy fee is equivalent to the fee that was for the initial foreign investment application and is also applicable if the initial application fee has been waived. Once the occupancy certificate for a newly built house is issued or the property has been acquired, that is the time the vacancy year starts. However, the new vacancy fee is only applicable if the application or notice in order to receive the property has been submitted to the Foreign Investment Review Board on or after 7:30 pm on the 9th of May 2017.
Another important thing to know is that the foreign owner who falls into this category needs to be lodged a vacancy fee return to the Australian Taxation Office (ATO) within the 30 days limit for the 1 year period. If this requirement is not met for whatever reasons, then the owner needs to pay the vacancy fee even if the 183 days contract has been satisfied. Thus, this is an extremely crucial task. The only exception to this is when the owner has got rid of any interest in the property before the end of the vacancy year.
All you need to know about the Uber GST charge
As more Australians are now well aware, the Uber drivers have to GST-registered after the completion of their first drive. However, many do not know that this GST is also applicable for those with another business especially as a sole trader, for instance, a person who has been part of or is running a micro business that has a turnover of less than $50,000. Under the GST law, the business owner does not have to be registered as part of the GST and there is no GST imposed on the items or products that they sell except when the same business owner starts driving for Uber, then the GST will not only apply to their work with Uber but also on their micro business.
Tougher rules set on credit cards surcharge by ACCC
The ACCC has warned all merchants that charge more for credit card transactions. A large merchant was already given 4 different infringement notices and paid a total of $43,200 as part of the penalties. A new rule that has been put into practice since the 1st of September 2017 prevents all the businesses from charging more than the actual cost of the transaction. The ACCC has mentioned that a consumer is likely to pay from 0.5% to 1% for all payments done by debit cards, 1% to 1.5% for all payments that are made using MasterCard or and Visa credit cards and 2% to 3% for American Express. They ask the consumers to contact the ACCC in case they are being charged for more than needed.
7th Each month Payroll Tax
21st February – monthly BAS is due
Please note the quarterly BAS (due to Christmas) is 4 weeks later; 26th February.
*For those dates above which have passed, so be sure to action urgently if not already completed.
At Tax Depot, we service Logan, Springwood and Beenleigh clients in all areas of taxation, tax planning, bookkeeping and business accounting services. If you need assistance or advice from our CPA qualified accountants, call us today on 1300 722 955; we would be only too happy to discuss how we can help you and your business.
Noel Ryan BCOM CPA