NEW TAX RULES FOR ALL PROPERTIES WITH A SALE VALUE $750,000 AND ABOVE

From 1 July 2017, new tax rules will apply on any property transaction where the market value of the property is $750,000 and above. Although the new laws are aimed at foreign residents, real estate agents must be aware that these new laws also impact Australian residents selling properties above this value.

Australian resident seller/s, if you are looking to sell your property and you consider its market value to be $750,000 or more then you should apply for a clearance certificate from the ATO as soon as practicable to avoid 12.5 per cent of the purchase price being withheld at settlement.

If you are unsure about the ultimate purchase price but there is some prospect that it may sell for $750,000 or above (for example, it is being sold at auction and the purchase price is unknown or it is being sold by expression of interest) you should apply for a clearance certificate from the ATO as soon as practicable to avoid 12.5 per cent of the purchase price being withheld at settlement

How do Australian residents obtain a clearance certificate…A seller who is an Australian resident can obtain a clearance certificate by making an application on ato.gov.au/FRCGW (hyper link). If the seller is automatically assessed as an Australian resident, a clearance certificate will be issued within days of the application however, the process may take longer for more complex applications.

When does the clearance certificate have to be given?…Australian resident sellers must give the clearance certificate to the purchaser on or before settlement occurs to avoid the buyers’ solicitor withholding 12.5 per cent of the purchase price.

What if the seller is a foreign person?…Where the seller is a ‘foreign person’, the purchaser must retain 12.5 per cent of the purchase price and pay that to the ATO at settlement, unless the seller provides a valid “Variation Notice’ in which case the purchaser must remit the amount stated in the notice.

When will the new laws apply?…The new laws will apply to sale contracts (for $750,000 and above) entered into on or after 1 July 2017.

What types of properties do these rules apply to?…All property including, vacant land, residential property, commercial property, strata title and community titles schemes.

Foreign resident sellers…If the purchase price is $750,000 or above and the seller is a foreign resident, you should advise them that 12.5 per cent of the purchase price will be withheld at settlement by the purchaser and provided to the ATO.

Will the REIQ amend its contracts?…Yes, all REIQ property sales contracts (residential and commercial) will be amended to include provisions which reflect the above new tax rules.

**sourced from the REIQ

 

Finance Health Check for Investors

Have you noticed of late significant increases in the interest rates you are paying on your loans?

focus-interest-ratesIf you have, it is due to the governing body for the banks (APRA) directing them to build their cash reserves. It may be time to look at one of the non major lenders.

With increases in investment interest rates and new restrictions on interest only loans, it is becoming tougher to borrow for investment.

In today’s climate of rate rises and banks lower borrowing tolerances it is now even more important to engage the services of a professional mortgage broker and not rely on any one bank for a solution.

Competition among banks has never been greater with large variations in home loan products, interest rates and lending policies.

Some banks will not lend at all to purchase investment properties.

Releasing the equity in your current property or finding the benefits you may be entitled to with different banks could be found by exploring your options with a professional broker. They could find opportunities to help advance your portfolio or streamline your current lending you may not even be aware of.

With the lending markets constantly changing it makes sense to re-evaluate your loans from time to time.

A discussion with a professional mortgage broker who could assist you with all important loan structuring, product selection and interest rates may enhance the performance of your property investment.

If you would like a free no obligation appointment to discuss your circumstances please don’t hesitate to call Tim Hansen from Your Property Finance (YPF Group) on 0413 305 900.

**Written by Tim Hansen, Senior Finance Broker for YPF Group**

Depreciation Schedules on Investment Properties

DID YOU KNOW… Only around 20% of Investors have a tax depreciation schedule done on their investment property, which means the remaining 80% are missing out on substantial ATO Tax Depreciation benefits.

Some frequently asked questions about Depreciation Schedules…

  1. So how does a depreciation schedule help me?

Simple. A depreciation schedule will help you pay less tax. The amount the depreciation schedule says you claim effectively reduces your taxable income.

  1. Is my property too old to claim depreciation?

The simple answer is NO. If your residential property was built after July 1985 you will be able to claim both Building Allowance and Plant and Equipment. If construction on your property commenced prior to this date, you can only claim depreciation on Plant and Equipment. But it will still be worthwhile.

  1. Shouldn’t my accountant prepare this report?

If your residential property was built after 1985 your accountant is not allowed to estimate the construction costs. Tax Ruling 97/25 issue by the Australian Taxation Office (ATO) has identified that only a fully qualified quantity surveyor brings the appropriate education, experience and training to provide reliable figures upon which to base a property tax depreciation schedule.

  1. Will you need to inspect my property?

The Australian Institute of Quantity Surveyors (AIQS) Code of Practice stipulates that site inspections are necessary to satisfy ATO requirements.  A trained Quantity Surveyor will ensure all depreciable items are noted and photographed. This guarantees you won’t miss out on any deductions. The documentation can then be used as evidence in the event of an audit.

  1. My property is renovated. Can I still claim?

Yes. You will need to report how much you spent on renovations. This is an ATO obligation. If the previous owner completed the renovations you are STILL entitled to claim depreciation. In either case, where the cost of renovation is unknown, a Quantity Surveyor has been identified by the ATO as appropriately qualified to make that estimation.

  1. How much will my depreciation schedule cost?

John Willats from Homesure charges a one-off fee of $550 (GST inclusive) which is fully deductible and reports display 10 years of claim.

  1. I bought my property 3 years ago. Can I still make a claim?

Yes you can. Your accountant can amend your previous tax returns up to two years back. There are some exceptions, so contact your tax agent or the ATO for clarification.

**Information supplied by Realestate.com.au