Should your SMSF trust deed be updated?
Superannuation legislation has continuously changed these past years. Although there are many changes that would not require an update of the SMSF deed each time, it is highly recommended to at least have an update every 5 years to make sure that it is compliant with the current laws.
Remember, before buying, transferring assets, selling, or making any payments, you should double check that your trust deed is suitable for that type of transaction.
Investment Properties – travelling is no longer deductible
Effective 1st July 2016, the Government has removed deductions for travel expenses particularly for the inspection, collection of rent or maintenance for a residential rental property.
Depreciation Changes for Investment Properties
Investors who purchase plant and equipment – like ovens or air conditioners or carpets – for their residential investment property after 9 May 2017 can claim depreciation deductions over the actual life of the asset. But the next owner of a property is not allowed to claim deductions for plant and equipment bought by the prior property owner. When you’re not the first who purchased the item then you won’t be able to maximise depreciation. This is substantial change to depreciation deductions and is likely to have a profound effect on the property market, particularly for new investors who may likely avoid certain property types for this reason.
Investors will still have the chance to claim capital works deductions inclusive of any capital works done by the previous owner. This is primarily based on the original construction work charge and not what the succeeding owner paid to acquire the property.
If you are a co-owner of a property, in some instances the depreciation (for the same asset) can be greater, because depreciation is claimed on each owner’s interest. If the owner’s interest in an asset has value of less than $300, they can claim an immediate deduction. In a situation where there are two owners split 50:50, both owners may be able to claim the immediate deduction, this makes the total immediate deduction up to $600 for a single asset. Similar method can be used when applying low-value pooling.
It is wise to get a schedule of depreciation finalised before you begin any renovations so that the scrap value of whatever items you get rid of can be documented and written-off as a 100% tax deduction in the year of removal. This applies to both plant and equipment depreciation and capital works deductions. When there is new work finished as part of the renovations those works can also be depreciated going forward. Talk to us if you need advice regarding deprecation for your personal assets, investment properties or business assets.
Restrictions on foreign property investors
We have seen a number of measures over the years restricting access to tax concessions for foreign investors, especially for investments in residential property. The latest Federal Budget takes it a step further by further limiting access to tax concessions, increasing taxes, and penalising investors who leave the property vacant. Measures comprise a charge for leaving your property vacant for at least 6 months each year. This charge is expected to be around $5K and does not appear to apply to existing investments as of 9th May 2017. Foreign investors will not be allowed the ‘main residence’ exemption as well as an increase in capital gains tax (CGT). From 1st July 2016, the CGT rate will crease from 10% to 12.5% and the threshold will decrease from $2M to $750K. Properties sold below $750K will be exempt. In order to avoid foreign residents evading Australian CGT liabilities by splitting indirect interests, there will be tighter rules around ownership in companies or trusts.
Affordable housing gets a push
The recent budget announced an increase in the CGT discount for individuals who invest in affordable housing. The current 50% discount will increase by 10% to 60% for Australian resident individuals who invest in qualifying affordable housing.
A property will qualify as ‘affordable’ housing if rent is charged at below market rate and it is made available for eligible tenants on low to moderate incomes. Tenant eligibility will be based on household income thresholds and household composition.
The affordable housing must also be managed through a registered community housing provider and the investment held as affordable housing for a minimum period of three years.
Illegally earned income is still taxable!
With the ATO issuing notices to over 200 Outlaw Motor Cycle Gang members it might be timely to remind everyone that the ATO has an expectation of income from both legal and illegal ventures. Quite simply, if you earn an income, you pay taxes. Naturally, we encourage our clients to partake in legal activities.
14th July Payment Summaries to be issued to your staff.
21st July Monthly BAS or IAS is due
28th July Super for the last quarter is due
28th July Quarterly BAS is due unless you lodge through us; then you enjoy an additional 4 weeks to lodge and pay
31st July Portable Long Service Leave Certificates are due (Building & Construction Industry)
14th August Payment Summary statements are due to the ATO
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