Just a quick update for you all, the tax office have sent us some information about their processing times for getting your refunds (and tax bills!) and things are looking mostly ok this year.
There were a few hiccups early but nothing like the dramas of January – April this year. This little excerpt is from their progress report which was released today:
Despite delays for some people, of returns finalised we have still finalised 77% within 14 days and 99% within 30 days.
Some returns take longer than others to process and there are several reasons that you may not receive your return within our usual service standards.
For example, returns will take longer to process if:
- we require more information or need to cross check data with Centrelink or the Child Support Agency (it can take up to three days to check information with another Government agency)
- it is a complex tax return and requires a large amount of manual checking by a Tax Officer, or
- it is identified as being potentially fraudulent.
So, that’s looking pretty good. And then, our average turnaround for completing your work has been less than three weeks in recent times. That’s gotta be some sort of record at this time of year!
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While most of our readers already own at least one property, we’re also mindful that some of you are yet to buy your own home.
So, we thought that it might be worth mentioning that there’s been a few changes to the First Home Saver Accounts. The tax office have updated and published their guide on what these accounts are and how they work, so if you can see yourself buying a place for yourself (in say, four years or more), then it might be worth checking it out.
To read the full guide, just click here.
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There aren’t many cases when buying property, where you can avoid giving the state revenue office a good pound or two of flesh. One particularly useful exemption though might come up when you buy that property from your partner.
Each state has their own treatment on the matter (of course…). But, by way of example, the legislation looks a little something like this for those of you in Victoria;
43. Marriage and domestic relationships
(3) No duty is chargeable under this Chapter in respect of a transfer of dutiable property from one person to another person, or from two people to one of them, or from one person to themselves and another person if-
(a) the people are spouses or domestic partners of each other; and
(b) no other person takes or is entitled to take an interest in the property under the transfer.
Nice! So, while CGT is always going to be hard to avoid when changing ownership of an investment property, there might just be a way to get out of paying stamp duty at the same time. Gotta love that, hey?
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Long-time members of our facebook page might remember us reporting a case last year, where a former student took the fight up to the tax office – and won!
To recap, the former student (studying Primary School Teaching) figured that as her Youth Allowance income required her to be studying, then surely the cost of those studies must be deductible. After all, those costs directly related to her existing income, which is the fundamental logic of any allowable deduction.
The Federal Court agreed. Upon hearing the news that justice prevailed, the Commissioner immediately replied,
“Appeal.”
And so the case went back to the High Court. The hearing was a few weeks ago, and the tax office have just announced that they expect a decision sometime within the next six, or maybe twelve, months.
Until then, unfortunately, the tax office are choosing to ignore the Federal Court and will continue to apply their own interpretation. Namely, that education expenses are not deductible against Youth Allowance. Hopefully, the High Court will also rule in favour of the Taxpayer… we’ll be sure to keep you posted, of course.
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As they do every year, the tax office have again made a point of telling us that they’re watching people in the cash economy. We received a letter from them recently, which has also been published on the tax office website.
In particular, they’re looking at businesses and self-managing property investors who aren’t reporting all of their income on their BAS and their tax returns. The tax office pick their targets based on;
- data matching to identify discrepancies in reported income
- businesses that report net income that appears to be lower than that required to support the business operator’s personal living expenses
- follow up on allegations of tax evasion we receive from the community, and
- monitor the behaviour of previously audited taxpayers to encourage their continued compliance
For property investors, that first point above will be your main red flag as far as this program is concerned. Amongst other things, we’re lead to believe that the tax office may compare your rental income with the expected band for;
- the postcode in which the property is located
- expected yields based on purchase price
- income previously reported for that property
- the vacancy rates reported in that postcode
It’s almost a little frightening, the amount of data that the tax office can collect from external sources to compare with what you’re reporting. Doing the right thing, of course, removes much of that danger and we would always encourage you to be completely honest in your dealings with the tax office.
]]>It seems to be a common misconception that selling things on ebay and other such fun places doesn’t really count as anything much and therefore, no tax needs to be paid.
Oh, if only…
Now sure, this is true for the odd second-hand washing machine that you’ve long upgraded and want out of the garage or for say, a box of records with band names that nobody under 30 has heard off. However, if it looks like a business, smells like a business and runs like a business; the tax office will probably consider it to be a business. And that means, paying tax like a business.
Last night, the tax office produced a media release entitled “ATO’s data matching program focusing on online selling sites“. The heading says it all, really, but going on to actually read the thing reveals that the tax office will be making significant efforts to gather information from sites like ebay and the trading post. They’ll compare that with tax returns and BAS, and hunt down anyone who they think might owe a little extra tax as a result of their online sales.
So, if you’ve been a little over-enthusiastic with the online selling thing but figured that it doesn’t count as income… you might want to talk to us about talking to the tax office. It is entirely possible that your activity may still be considered a hobby, yes, but it’s probably worthwhile making sure that you’re on the right side of the fence before the tax office start asking difficult questions, hey?
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After every financial year the ATO update their software, mainly to take account of any changes to the tax laws for the previous year. After the new software has been installed it has to be tested and verified and during this time only a small amount of returns are processed. You might remember when they did a complete overhaul earlier this year. Gosh, what a mess. Things seem to be going a little smoother now though.
Anyway, the ATO have upgraded their technology again so they can detect over-stated or fraudulent claims for refunds. This process has added an extra two days to the processing time of your refunds but the Tax office are still pretty sure they can have your refunds within the usual 14 day timeframe.
Some returns will take longer than others, because a claim needs to be checked or more information is needed. People dealing with the Family Assistance Office & the Child Support Agency should expect small delays, we’re told. Clients with HECS / HELP debts might also have to wait a little longer than usual too.
In good news though we now can get refunds banked straight into your account. So if you are interested please make sure you provide details with your other tax info and we can get that organised for you.
]]>I wrote an article about this time last year (yep, we’ve been doing this blog thing for over a year now!!) about an email doing the rounds, seemingly from the tax office, asking for bank account details. If you missed it at the time, you can get a quick recap now.
We figured that now is as good a time as any, to remind you again that the tax office will never email you asking for bank account or credit card details. And certainly never to ask for your PIN or access codes.
There’s a few different scams going around at the moment with people pretending to be tax office staff. Some have official-looking email addresses… other use something like “service@ato.gov.corn.au“. Yes, corn. Some direct you to online forms to complete while others are a little more obvious in their approach.
The tax office are also aware of many such scams, and have a section of their website dedicated to updates on such things. You can find that here, if you’re interested.
So, as always, be alert and don’t provide your bank details or tax file number to anyone unless you’re sure that it’s going to the right place. And while we can now get your tax refund banked straight into your account, all we need is your BSB and account number. No password necessary.
]]>With all this talk of converting between PPORs and IPs, I figured I’d take it a step further and look at some other, more complex situations. It could possibly make the CGT event a little messy, but it’s best to know the right way of handling things.
The ATO has a free tool for individuals who want to find out what proportion of their capital gain is exempt from tax on disposal. For this example, let’s assume the owner has a 100% share in the property.
Let’s look at what would happen if the property owner was using a house as a PPOR, moved out and rented it for 5 or so years, moved back in for 2, and finally rented it out for another 3 years before selling it. It may look a little tricky, but this is a good situation to be in. Because the property was not rented for more than 6 years in each rental period, the whole disposal may CGT exempt. As long as you move back into the house at least once every 6 years, you’ll be right.
Another common scenario; If you move out of your home and then rent it for say, eight years or so before selling the property, then you’ll need to use a percentage for CGT. This is because even after the property is used as a PPOR, it’s then rented for more than 6 years afterwards. The percentage liable for CGT will be based on time covered by the exemption (including the first six years of rental), compared to the amount of time after the exempted 6 years that the property is rented for. No valuations in between are taken into account and it’s just a simple percentage to be applied.
Both of these examples only apply if you actually make the property your PPOR for a decent period of time… moving in for a week probably won’t cut it. Also note that as always, you can only have one property covered by the exemption at any one time. So if you moved into a new PPOR during the periods of absence from our examples above, then you’ll need to choose one place or the other for any overlapping times.
Of course, there are many different variables that need to be taken into consideration when calculating CGT, so don’t just rely on those examples. You know where to find us if you’d like a little help.
]]>Hiya Guys,
One of our most favourite depreciation people, BMT Quantity Surveyors, are generously offering free tickets to the upcoming Home Buyer & Property Investor Show for our clients and readers. Nice!
It will be held on 23-25 July 2010 at the Melbourne Convention & Exhibition Centre – 2 Clarendon Street, Southbank Vic 3006. 12pm to 5pm Friday & 10am to 5pm Saturday & Sunday. It will be an awesome event, with heaps of experts on hand and free seminars held throughout every day.
If you’re interested in taking up this great opportunity please click here and use ‘BMT’ as the promotional code to receive your free tickets. And when you’re there, be sure to drop in on their stall and say thanks!
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