Dec 05, 2018 / News

Taxation

Top Tax Tips - 5 December 2018

Sequel to short term rentals of holiday homes 

Last weeks top tax tips illustrated the difficulty in determining when a property will be genuinely available for rent (and therefore when rental property expenses will be deductible).

Continuing with this theme, we have explained some situations that most likely indicate that a property is not genuinely available for rent (and therefore rental property expenses will not be tax deductible).

Examples of where  a rental property is not genuinely available for rent and therefore rental property expenses cannot be claimed include where the property is:

• only advertised very sparingly (e.g. to limited groups of people, on restricted social media groups or outside holiday periods when it is unlikely that the property will be rented out);
• in such a bad condition or so remote that it is unlikely that anyone would want to rent the property; or
• widely advertised but subject to unreasonable stringent rental conditions (e.g. rental substantially above market value for similar properties in the same area).

Please speak to your Nexia Edwards Marshall Adviser for more information on when you can deduct rental expenses on your properties.

Labor party tax proposals

Given the Federal Election is due to be held before May 2019, we have detailed below Labor’s most important tax policies in very broad terms.

Labor’s policies may not become law, even if a Labor Government is elected. Full details of the legislative impact of the policy are not yet available. Details are important in tax matters and usually policies do not contain enough detail to allow accurate conclusions.  Below is a generalised overview of our understanding of those policies.

Please note, Nexia Australia is a politically neutral organisation and we have merely explained the potential tax effects of these proposals on taxpayers. 

Policy: No more cash refunds of excess dividend imputation credits for individuals and superannuation funds from 1 July 2019
Potential effect on taxpayer: 

• Imputation credits trapped if minimal taxable income
• Cash flow problems for retirees who live on cash refunds and are not exempt from these proposals

Policy: Change the operation of negative gearing
Potential effect on taxpayer: 

• Under this proposal, negative gearing will only be available for purchasers of newly constructed housing
• Grandfather negative gearing treatment that applied to existing properties before the start date of the proposed changes
• The same rules are also proposed to apply to other CGT assets (e.g. share portfolios)

Policy: Reduce current 50% CGT discount to 25%
Potential effect on taxpayer: 

• Grandfather the 50% CGT discount on investments made before the start date of the proposed changes

Policy: Tax discretionary trust distributions at 30% from 1 July 2019
Potential effect on taxpayer: 

• Will prevent income splitting (i.e. the distribution of trust income to family members in lower tax brackets to effect a lower over-all tax burden)

Policy: Allow immediate 20% write-off for assets costing $20,000 or more
Potential effect on taxpayer: 

• Qualify for 20% up-front deduction and remaining 80% balance depreciated as normal

Policy: Limit tax deduction available for managing tax affairs
Potential effect on taxpayer: 

• Limit tax deduction to $3,000

Policy: Various superannuation proposals
Potential effect on taxpayer: 
Some proposals include:

• Reduce current $100,000 non-concessional cap to $75,000
• Reduce current high income earner threshold of $250,000 to $200,000 (i.e. threshold where extra 15% contributions tax kicks in)
• Prohibit SMSFs to borrow money through LRBAs

How can Nexia Edwards Marshall help you?

For any questions or to discuss any of the above in relation to your personal situation, please contact Grantley Stevens or your Nexia Edwards Marshall Adviser.

The material contained in this publication is for general information purposes only and does not constitute professional advice or recommendation from Nexia Edwards Marshall. Regarding any situation or circumstance, specific professional advice should be sought on any particular matter by contacting your Nexia Edwards Marshall Adviser.