Negative gearing property investors now total 1,967,260 across Australia, according to the ATO latest data.
That’s up from the 1,895,775 in the previous tax year, 2011-12.
There were 1,811,175 investors claiming rental income in the 2010-11 year.
The ATO has a investor rental video series on working out your tax correctly.
The statistics for the 2012–13 income year were sourced from 2013 individual income tax returns processed by 31 October 2014. The statistics are not necessarily complete.
This data is not representative of the total number of properties.
Tax warning on share economy
THE October 31 tax lodgement deadline has arrived and Australians making money from the share economy are being urged to make sure they are on top of their tax obligations.
Money earned on Airbnb, Uber, Airtasker and similar platforms requires tax to be paid, according to Jason Robinson, director at accounting firm RBK Advisory.
“More clients are casually mentioning extra revenue streams,” Mr Robinson said. “I asked one client how their weekend was and found out they were earning $400 every weekend helping strangers move house.”
The government is beginning to regulate side income sources.
“Uber drivers are now required to be GST registered and hold an ABN before they can begin making money,” Mr Robinson said.
Airbnb and Stayz have become popular with landlords taking advantage of holiday locations by organising fixed leases for colder off-season months and then going short term for a bigger yield over summer, said Sandrina Postorino, managing director of Landlords Choice.
“During these months they can command much higher variable rents,” she said. “This all needs to be accounted for in their tax return.
“Another trap is when investors decide to Airbnb their main residence instead of their investment property, which means it is no longer completely exempt from Capital Gains Tax.”
Side hustles, or hobbies turned into income streams by entrepreneurial types also have tax requirements, according to Clayton Howes, CEO of fintech lender MoneyMe.
“If you make even one dollar on your side hustle that comes with tax obligations,” Mr Howes said.
Another confusing one is network marketing- think Avon and other modern incarnations- often undertaken by stay at home parents, said Katrina Haskew, managing director of Leading Advice.
“Where it can get messy is when turnover is more than $20,000, but they have consumed so much of their own products in testing, trials, or giveaways, that it is an effective loss,” Ms Haskew said. “This is extremely challenging to account for, so it’s paramount that stringent records are kept and presented to accountants.”
ATO assistant commissioner Kath Anderson said many Australians lodge their returns at the last minute and can make mistakes overlook income when in a hurry.
Catherine and Gabriel Mihalas both enjoy side hustles in addition to their regular jobs. Catherine joined Nucerity, a network marketing group in the health and skincare field, as a way to earn money in the years following the birth of son Samuel.
“The key attraction was the hope of building a future residual income where I could stop worrying about money completely, by putting in the groundwork today,” Mrs Mihalas said. “My plan is to eventually retire from nursing with this as my main income.”
Mrs Mihalas did not originally focus on what her tax obligations might be, until the company suggested during her onboarding process that she discuss it with her accountant.
“I’m still at a stage where what I’m doing is considered a hobby; I haven’t yet passed the threshold where it will be considered a business,” Mrs Mihalas said. “But I believe that when I reach that stage, the benefits of the program will outweigh the tax obligations.”
Husband Gabriel set up a side business in aerial drone photography, to combine a hobby with his background in aviation.
“It seemed like a great way to earn extra cash while doing something that I loved,” Mr Mihalas said. “I was aware of the tax implications from day one … I knew which records to keep to stay on track.
“I’d like to think it will become a significant additional revenue stream for our family.”
Originally Published: www.sunshinecoastdaily.com.au
Queensland Says No New Taxes on Foreign Property Buyers in Bjelke Petersen-like Strategy
Queensland Says No New Taxes on Foreign Property Buyers in Bjelke Petersen-like Strategy
The Queensland government has ruled out introducing new taxes on foreign buyers of residential real estate.
They are the only state that actually monitors foreign investment, so were in the box seat to implement such a tax regime.
The rejection comes after the populist Victoria Labor government’s recent budget unveiled a new tax regime that will seek to tax foreign buyers and foreign owners.
Queensland has vowed not to follow Victoria’s lead and introduce any new taxes on foreign property investors.
Treasurer Curtis Pitt said Queensland welcomed foreign property investment.
“We’re ruling out any stamp duty surcharges for foreign investors who purchase a house in Queensland,” said Pitt.
“We’re also ruling out any land tax surcharge for foreign investors in this state.”
The Victorian state budget, revealed on Tuesday, included a 3%t stamp duty surcharge for homes from July and land tax increases of 0.5% from 2016 for offshore-based investors.
News Ltd reported Queensland executive director of the Property Council, Chris Mountford saying the action will strengthen Queensland’s position on the global investment map.
“In particular it creates a compelling case to invest in Queensland over Victoria.”
Nothing new for Queensland as that was how former premier Joh Bjelke Petersen saw the state into an upswing when Queensland didn’t have death duties like other states.
It was in 1977 when the Premier of Queensland Joh Bjelke Petersen abolished death duties and a wave of Australia’s elderly headed towards the Gold Coast with the high rise following as dying in Queensland became a tax avoidance scheme and Surfers Paradise became a retirement haven.
By JONATHAN CHANCELLOR via propertyobserver.com.au
Investment property Tax Benefit
The Investment Property Tax benefit many people don’t receive.
One of the big mistakes that we see with Property Investors is people not utilising the full range of investment property tax benefits.
The Taxation Variation Authority is a massively under-utilised strategy. Sometimes the expenses associated with holding a rental property (eg Interest, repairs, insurances, rates, depreciation etc) are greater than the rental income received from the property. This scenario generates a tax loss and is called negative gearing.
When you incur a negative gearing loss you are entitled to apply to have your PAYG instalments reduced, so the amount of tax collected from your pay-packet is reduced. Effectively this means that your out-of-pocket costs of holding the property are reduced. It is a bit like having another tenant paying you each pay day.
The big mistake many investors make is that they do not collect this payment until the end of the year when they come to do their tax. The tax refund cheque they get back is nice but for 12 months of the year they have been denying themselves of this money. It is a bit like allowing your tenant to pay the rent on the property in one payment at the end of the year. You just would not do it, so why allow the tax man to get away with it.
The other opportunity that people in this situation miss, is one when if they were receiving that tax refund on a regular basis, they may be in a position to purchase another property investment. Allowing them to grow their wealth at a faster rate.
So how do you take advantage of these rules.
- firstly calculating your projected annual assessable income from all sources, wages, interest, dividends, rental property rent etc, and
- calculating your projected annual allowable deductions for work related expenses, interest and dividend expenses, rental property expenses including borrowing costs and depreciation claims and any other allowable deduction, and
- reporting the above to the Australian Taxation Office.
It is very important that the calculation of the projected taxable income reduction be accurate, otherwise the Australian Taxation Office will penalise the taxpayer for lodging an incorrect variation. Similarly, it is very important that the Australian Taxation Office be advised of any change of taxpayer income or expenses which may have occurred after lodging the Application for Variation of PAYG Withholding so that penalties do not apply. It is for these reasons that we recommend you speak with your accountant to assist in the preparation of the Application for Variation of PAYG Withholding and to take a conservative approach to the calculations.
This process is required to be done each year and can be a little slow as the ATO will often take up to 28 days to process your application. The first time that you complete the form, arrange to have it completed as early in the year as possible. In the following years it is prudent to start the process around late May so that the variation can be effective from the start of the financial year.
The ATO will advise your employer how much tax to take out of your salary and therefore creating the benefit. If you change employers you will be required to apply again, so keep this in mind.
So the Taxation Variation Authority can be used to ease your cash flow burdens during the financial year, very important for property investors. The tax variation varies the amount of tax withheld from your wages by way of estimating your total end of financial year tax position in advance. Therefore, rather than getting a lump sum refund at the end of the year you receive it evenly throughout the financial year.
This is just one of the Investment Property tax benefits that wise property investors take advantage of and part of the Success In Property strategy for our clients.
If you are ready to discuss getting started in Property Investment or simply just wanting to review your property investment portfolio then call us on 1300 858665.
Original article published at www.successinproperty.com.au/blog by +Geoff Doyle 12/11/2013
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