Vacant land deduction changes

Vacant land deduction changes hit 'Mum & Dad' property developments

Legislation that passed through Parliament last month prevents taxpayers from claiming a deduction for expenses incurred for holding vacant land. The amendments are not only retrospective but go beyond purely vacant land.

Previously, if you bought vacant land with the intent to build a rental property on it, you may have been able to claim tax deductions for expenses incurred in holding the land such as loan interest, council rates and other ongoing holding costs.

The new laws, aimed predominantly at Mum & Dads (individuals, closely held trusts and SMSFs), prevent these deductions from being claimed. Since the new laws apply retrospectively to losses or outgoings incurred on or after 1 July 2019 regardless of whether the land was first held prior to this date, and with no grandfathering in place, the amendments will not only impact those intending to develop vacant land but those who have already acquired land to develop. This is the same target as previous tax changes that denied travel claims to visit residential rental properties and depreciation claims on plant and equipment in some residential rental properties.  Read more…

Estate Planning Will challenges on the rise

Will challenges on the rise

Wealth and longevity are posing new challenges to estate planning

Will

Key estate planning issues at a glance

  • Economic factors and a rise in longevity are driving an increase in the number of challenges to wills.
  • There have been amendments expanding the scope for who qualifies as an eligible claimant in virtually every jurisdiction in Australia.
  • Parents dying aged 90+ leave behind children likely to be in varying circumstances that can influence their decision to contest a will.

Some families have been embroiled in disputes over deceased estates, with increasing acrimony and legal action from families disputing wills. The property boom of recent years means that a modest family home in a capital city may be so valuable it is worth fighting for a slice of the sales proceeds.

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CGT & the family home

Expats and foreigners targeted again

The Government has resurrected its plan to remove access to the main residence exemption for non-residents – a move that will impact on expats and foreign residents.

family homeBack in the 2017-18 Federal Budget, the Government announced that it would remove the ability for non-resident taxpayers to claim the main residence exemption. The unpopular measures were introduced into Parliament but stymied. An election later, a recomposition of Parliament, and the Government has again introduced the reforms but in a modified form.

The proposed changes would apply from the original Budget announcement date back on 9 May 2017, so could impact on properties that have already been sold. However, a transitional rule would allow CGT events happening up to 30 June 2020 to be dealt with under the existing rules as long as the property was held continuously from before 9 May 2017 until the CGT event. That is, if you held a property from 9 May 2017 up until the sale date, the existing rules might continue to apply.

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SMSF asset diversity scrutiny

Are all your SMSF eggs in one basket?

The investment strategies of Self Managed Superannuation Funds (SMSFs) are under scrutiny with the Australian Taxation Office (ATO) contacting 17,700 trustees about a lack of asset diversity.

nest eggThe ATO is concerned that, "a lack of diversification or concentration risk, can expose the SMSF and its members to unnecessary risk if a significant investment fails."

This does not mean that you must have diversity in your fund. A lack of diversity might be a strategic decision by the trustees but you need to be able to prove that the strategy was an active decision. Section 4.09 of the Superannuation Industry (Supervision) Regulations require that trustees "formulate, review regularly and give effect to an investment strategy that has regard to the whole of the circumstances of the entity." 

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Overseas pensioner status

'Proof of life' certificates required for overseas pensioners

One of the stranger pieces of legislation to be introduced into Parliament last month is an attempt to ensure that overseas welfare recipients over the age of 80 are in fact, alive.

pensionerThere are approximately 96,000 people permanently living overseas who currently receive an Australian social security payment. The majority of these receive the age pension. At present, the system relies on a relative to advise Services Australia that the recipient of the payment has passed away for payments to cease. 

Government data suggests that, "there is a disparity in the death rate of pensioners aged 80 years and above overseas, compared to pensioners in Australia." So, either living overseas is good for your health and people are living longer than Australian norms suggest, or deaths are simply not being reported. The Government is betting on the latter.

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