Tag: property

for sale sign

Selling property? Understand the tax implications first

Posted on | by Allan Hall

Know the Tax Consequences before you sell property

ATO flags income tax, CGT and GST issues for business property transactions

If your business or entity is planning to sell property, it’s important to understand how the transaction will be treated for tax purposes. The Australian Taxation Office (ATO) has issued a timely reminder that the way property sales are taxed depends on the purpose of ownership and how the property has been used.

Business Property Sales May Be Taxable

If you’re in the business of buying and selling property or even developing property for resale, you may be assessed on revenue account, not capital account. This means the entire profit from the sale could be considered ordinary income, and not eligible for capital gains tax (CGT) discounts.

The key considerations are:

  • Was the property acquired with the intention to resell for profit?
  • Was the property used in a business of property development or subdivision?
  • Have you previously engaged in similar transactions?

In these cases, tax applies to 100% of the gain and CGT concessions may not be available.

Capital Gains Tax May Apply in Other Situations

If the property was held as a long-term investment and not part of your trading stock, CGT may apply instead. This could allow for CGT discounts if the asset was held for more than 12 months.

Factors affecting CGT include:

  • The nature of the entity (individual / trust / company)
  • The holding period of the asset
  • Whether it qualifies for any small business concessions.

GST Could Be Involved Too

If you are registered for GST and the property transaction is part of your enterprise, you may need to account for GST on the sale. However, if the sale qualifies as the “sale of a going concern” or involves farmland, GST concessions may apply.

Property transactions can trigger complex tax implications depending on your business structure, purpose and transaction history. Incorrect treatment can result in significant tax liabilities and penalties.

Need clarity on your property tax position?

Talk with your accountant or business advisor before you list or sell. We’re here to help you navigate the tax implications and make informed decisions.

CONTACT ALLAN BUSINESS BUSINESS ADVISORS

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managing debt

Upcoming Tax Deductibility Change: Time to Refinance ATO Debt?

Posted on | by Allan Hall

From 1 July 2025, interest on ATO debt will no longer be tax deductible. 

This change could significantly impact business cash flow and overall tax strategy.

As a result, it’s more important than ever to consider alternative financing options that could reduce your interest costs and in some cases, restore the tax deductibility of the debt.

If you own property with available equity, there may be an opportunity to refinance your ATO debt into a home loan. The benefits include:

  • Lower interest rates – potentially reducing from ~11% (ATO) to ~7%
  • Potential tax deductibility – depending on structure (confirm with your accountant as debt related to personal tax debt is not tax deductible)
  • Improved cash flow – longer loan terms up to 30 years

Lenders also offer flexible loan options in regards to documentation required. This can range from full doc loans (full tax returns and financials) to Alt doc loans (BAS, bank statements, accountant/client declarations)

Allan Hall Business Advisors and Allan Hall Finance can work together to help you prepare for this change and explore better funding structures.

Speak with us today to review your options ahead of the 1 July 2025 deadline.

CONTACT ALLAN HALL BUSINESS ADVISORS BROOKVALE SYDNEY

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General and Shortfall Interest Charges no longer deductible from July
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Parliament House, Canberra with a flag on top

2025–26 Federal Budget Highlights

Posted on | by Allan Hall

The Federal Treasurer, Dr Jim Chalmers, handed down the 2025–26 Federal Budget on 25 March 2025.

Guided by five priorities, including helping with the cost-of-living, building more homes and investing in education, the Budget includes two new personal tax cuts for all Australian individual taxpayers, increased Medicare levy thresholds, a ban on foreign individuals buying existing homes and a proposed reduction to student debts.

Described by the Treasurer as a “plan for a new generation of prosperity in a new world of uncertainty”, the Budget did not include any new measures affecting the taxation or regulation of superannuation or new income tax measures affecting small businesses.

Being the government’s last Budget before the expected federal election, the start dates of a number of previously announced but unenacted tax measures have been deferred until amending legislation is enacted.

The tax and tax-related highlights are set out as follows. While this Budget provides an indication of some measures that may be pursued post-election, in reality, they all hang in the balance until a new government is formed and its priorities are laid down.

Small Business

  • There were no new measures for small business other than the Government’s commitment to deliver the previously announced measure to temporarily extend to 30 June 2025 the $20,000 instant asset write off threshold. This Bill is currently before the House of Representatives and, unless enacted the instant asset threshold for this 2025 financial year will revert to $1,000. There was no announcement of what lies beyond 30 June 2025 for this small business measure.

Individuals

  • The marginal tax rate for the personal income tax threshold bracket from $18,201 to $45,000 will be reduced from 16% to 15% from 1 July 2026, and further reduced to 14% from 1 July 2027.
  • The Medicare levy low‑income thresholds for singles, families, and seniors and pensioners will be increased from 1 July 2024.
  • Student loan debts will be cut by 20% and other reforms will be made to the student loan repayment system from 1 July 2025.
  • The start date of the 2024–25 Budget measure to strengthen the foreign resident CGT regime will be deferred from 1 July 2025 to the later of 1 October 2025 or the first 1 January, 1 April, 1 July or 1 October after assent.
  • Foreign ownership of housing will be restricted.

Tax administration

  • Rules on managed investment trusts will be amended to ensure legitimate investors can continue to access concessional withholding tax rates from 13 March 2025.
  • The start date of the 2023–24 Budget measure to extend the clean building managed investment trust withholding tax concession will be deferred from 1 July 2025 to 1 January, 1 April, 1 July or 1 October after assent.
  • The ATO will be given $999M funding over 4 years to extend and expand its tax compliance activities.

Indirect taxes

  • Indexation on draught beer excise and excise equivalent customs duty rates will be paused for a 2‑year period from August 2025.
  • The excise remission cap is proposed to be increased from $350,000 to $400,000 each financial year for all eligible alcohol manufacturers from 1 July 2026. The Wine Equalisation Tax producer rebate would similarly increase from $350,000 to $400,000 each financial year from 1 July 2026.
READ FULL FEDERAL BUDGET TAX SUMMARY

Full Budget papers are available at www.budget.gov.au and the Treasury ministers’ media releases are available at ministers.treasury.gov.au.

To discuss how these Budget measures impact you or your business, please contact your Allan Hall Advisor.

CONTACT ALLAN HALL BUSINESS ADVISORS

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house key

Changes to foreign purchases of established dwellings

Posted on | by Allan Hall

Banning foreign purchases of established dwellings

On 16 February 2025, the Government announced that it will impose a temporary ban on foreign purchases of established dwellings for at least 2 years and crack down on land banking.

From 1 April 2025 to 31 March 2027, foreign persons, including temporary residents and foreign-owned companies, cannot apply to buy an established dwelling in Australia, unless an exception applies. These limited exceptions will include investments that significantly increase housing supply or support the availability of housing supply, and for the Pacific Australia Labour Mobility (PALM) scheme.

Other existing exceptions remain in place, such as for purchases by:

  • permanent residents
  • New Zealand citizens
  • spouses of Australian citizens, permanent residents or New Zealand citizens (when purchased as joint tenants).

A review will be undertaken to determine if the ban should be extended beyond 31 March 2027.

The Tax Office will enforce the ban through enhanced screening of foreign investment proposals relating to residential properties.

It will carry out a full audit of current foreign investment approvals for vacant residential land development.

The Tax Office will also take a tougher stance on compliance of foreign investment approvals for vacant residential land development. This will help ensure that foreign investors who have bought or want to buy vacant residential land meet development conditions.

CONTACT ALLAN HALL INTERNATIONAL SERVICES

Related reading

Changes for Australian and foreign residents buying and selling property
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Man Surfing on the Water

Is now the right time to buy property?

Posted on | by Allan Hall

The Australian property market is showing signs of change.

CoreLogic data reveals a -0.1% drop in national home values in December 2024 which is the first decline in nearly two years.

However, it’s important to recognise the diversity in Australia’s property markets. For example, Adelaide, Perth and Brisbane have shown strong growth whilst Melbourne, Hobart and the ACT are seeing declines. Sydney has held steady.

With up to three rate cuts predicted for 2025 and more properties expected to hit the market early in the year, now is the time to get your finances in order. Being prepared ensures you can act quickly when the right property becomes available.

Be Ready To Act

Allan Hall Finance specialises in helping buyers navigate the financial landscape. We offer free consultations to discuss your financial situation, come up with structures tailored to your needs and help you prepare for the opportunities ahead.

CONTACT ALLAN HALL FINANCE

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renovations

DIY Repair and Renovation Pressure Points for SMSFs

Posted on | by Allan Hall

Trustees of self-managed superannuation funds (SMSFs) face strict tax and super laws when undertaking repairs and renovations on real estate held within the SMSF. 

Many trustees wonder what they can legally do to enhance the value of their fund’s property without falling foul of these strict rules. 

Trustees must ensure that any services provided to a SMSF are undertaken on an arm’s length basis. Failure to do so may result in some of the fund’s income being taxed at 45% under the Non-Arms Length Expenditure (NALE) rules rather than the general superannuation tax rate of 15% or nil if the fund is in pension phase.    

Broadly, these rules can apply where the cost of expenses connected with a fund’s property investments, such as property management expenses, repairs and maintenance, etc are less than might be expected in an arm’s length situation.    

This does not mean however that a trustee who provides any service to an SMSF must charge a fee – see more information below. 

Further, the SMSF needs to be invoiced directly for any goods and materials as otherwise the fund will be deemed to have acquired them from the members directly which is prohibited. 

Key Considerations 

  • Who provides the service? Consider activities undertaken by a person in their individual capacity vs in their trustee capacity 
  • Who is invoiced for the goods or service? Acquiring building materials and any other goods or services connected with the property from related parties, even if at market value, will breach the super laws. 

Trustee v Individual capacity 

A fundamental rule for SMSFs is that a trustee cannot be remunerated for their duties as trustee. This is embedded in superannuation law. Examples of trustee duties include opening a bank account, making investments, collecting rent and paying expenses, and repairing and maintaining assets. However if a service is provided in their individual professional capacity then a fee must be charged.     

Examples 

Peter is the trustee of his SMSF and he is also a licensed electrician by trade. The SMSF owns a residential property in which Peter undertakes electrical repairs that can only be done by a licensed electrician. Peter is considered to be acting in his individual capacity because the activities have been performed pursuant to a licence/qualification.  The fund must be charged an arm’s length fee for the work. 
Michael’s SMSF owns a commercial property and does not engage the services of a property management business. Michael attends to all administrative duties in connection with the lease (eg collecting rent, renegotiating lease terms upon expiry, organising repairs). Michael also mows the lawn, tends to the garden at the property and makes minor repairs using his personal mower and tools. He does not provide these services to others. These activities are obligations imposed on Michael because he is a trustee of an SMSF (ie they are trustee duties). Michael cannot charge the SMSF fees for these services as he performs them in his capacity as trustee. 
Andrew is a licensed builder and performs minor repairs on a jammed door in his SMSF’s investment property using his tools of trade. On another occasion, Andrew builds a deck at the property, largely using timber and materials left over from another job.  Ad-hoc maintenance activities are obligations imposed on Andrew because he is a trustee of his SMSF (ie they are trustee duties). The use of his tools of trade for such activities are minor and infrequent.   Building the deck however gives rise to Andrew’s specialist skills as a builder, with such services being offered to the public. As Andrew is acting in his individual capacity he must charge an arm’s length fee to the fund for the work performed.     

Further to the example of Andrew above, as the materials for the deck are sourced from Andrew, the SMSF has unknowingly breached the super laws. To avoid such compliance issues, the SMSF trustee must source all materials directly from the supplier and ensure the SMSF is invoiced, not the trustee in their individual capacity.   

Consulting a professional before undertaking any repairs or renovations is crucial to ensuring compliance with the law. 

CONTACT ALLAN HALL SUPERANNUATION

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for sale sign

Changes for Australian and foreign residents buying and selling property

Posted on | by Allan Hall

Withholding changes when buying and selling property

What Australian residents need to know about the updates to the Foreign resident capital gains withholding (FRCGW).

The Foreign resident capital gains withholding (FRCGW) rules are changing from 1 January 2025.

Currently, Australian residents selling property must provide a clearance certificate to the purchaser at or before settlement to avoid having 12.5% withheld from a property sale where the value of the property is $750,000 or more.

Under the changes:

  • the withholding rate will increase from 12.5% to 15%
  • the $750,000 property value threshold will be removed, and the withholding rules will apply to all property sales.

The changes apply to contracts entered into on or after 1 January 2025.

FRCGW is designed to support the collection of tax liabilities owed by non-residents selling Australian property.

All Australian residents selling property will require a clearance certificate from the ATO, or withholding will apply to the transaction. If an Australian resident vendor doesn’t provide a clearance certificate by settlement, 15% of the sale price must be withheld by the purchaser and paid to the ATO.

If an amount is withheld from the sale price, the vendor will only receive any refund due after their next income tax return is processed at tax time.

Most clearance certificates will issue within a few days, but it is important to apply early because some can take up to 28 days to issue. They are valid for 12 months, so the vendor doesn’t need to wait until they have signed a contract.

Foreign resident vendors may be able to apply to vary the withholding rate. 

CONTACT ALLAN HALL BUSINESS ADVISORS

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empty property

Victoria Vacant Residential Property Declarations due Jan 2025

Posted on | by Allan Hall

Important: Victoria Vacant Residential Property Declarations Due by 15 January 2025

The Victorian State Revenue Office (SRO) requires all owners of potentially vacant residential properties to submit a vacant property declaration by 15 January 2025.

Failure to comply may result in additional Vacant Residential Land Tax (VRLT) penalties, which will be charged on top of existing land tax obligations.

Key Details:

  • Vacant Residential Land Tax (VRLT): From 2025, properties with dwellings deemed vacant are subject to VRLT. From 2026 onward, vacant land without a dwelling will also be taxed.
  • Exemptions for Holiday Homes: Owners may claim an exemption if the property is used for at least four weeks per calendar year. This exemption is not automatic; owners must explicitly apply.
  • Building or Renovating: There is a two-year exemption period for properties undergoing construction or significant renovation.
  • Escalating Rates: The VRLT starts at 1% of the Capital Improved Value in the first year and increases to 2% in the second year and 3% in the third year if the property remains vacant.
  • Strict Enforcement: The SRO Victoria applies these regulations rigorously. Retroactive adjustments or penalty waivers are generally not granted.

Please note that a signed authorisation form is necessary for us to act on your behalf in dealings with SRO Victoria. Read more »

To avoid penalties and ensure compliance, please make your vacant property declaration before 15 January 2025.

If you have any questions or need further guidance, we encourage you to seek professional advice promptly.

CONTACT ALLAN HALL BUSINESS ADVISORS

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house key

Landlords targeted in expanded ATO crackdown

Posted on | by Allan Hall

ATO Expands Property Management Data Matching Program to Strengthen Tax Compliance

The Australian Taxation Office (ATO) is expanding its Property Management Data Matching Program as part of its ongoing commitment to enhance tax compliance.

This program plays a critical role in identifying and addressing potential discrepancies in rental income reporting, particularly within the property management sector.

Key points

  • Expansion of Data Matching Program: The ATO has expanded its program to better track rental income reporting and ensure tax compliance within the property management sector
  • Enhanced Data Collection: The program now collects more detailed rental data, cross-referencing it with ATO records to identify under-reporting or non-compliance
  • Focus on Compliance: Property owners and managers are advised to maintain accurate records, as the ATO’s enhanced capabilities increase the likelihood of detecting discrepancies.

The Property Management Data Matching Program enables the ATO to collect and analyse a wide range of data from property management agencies across Australia. This includes detailed information on rental income, property expenses and other financial activities related to investment properties. The data collected is cross-referenced with other ATO records to identify cases of under-reporting or non-compliance with tax obligations.

Objective and Scope

The primary objective of the expanded program is to ensure that all property owners and managers accurately report their income and meet their tax obligations. By gathering data from property management software, rental bond authorities and other relevant sources, the ATO can detect inconsistencies between reported income and actual rental earnings. This helps to identify individuals and entities who may be attempting to under-report their income or avoid their tax responsibilities.

Implications for Property Owners and Managers

The program covers a broad spectrum of rental properties, including residential, commercial and short-term accommodations.

Property owners and managers are advised to ensure that their records are accurate and up to date. The ATO’s expanded data matching capabilities mean that discrepancies in rental income reporting are more likely to be detected, leading to potential audits, penalties or other compliance actions.

By leveraging advanced data matching technology, the ATO aims to ensure that all taxpayers meet their obligations. Read more »

CONTACT ALLAN HALL BUSINESS ADVISORS

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