4 Tax Tips for Commercial Property Investors

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AS THE END of the financial year approaches, commercial property players should know their tax implications – especially first-time commercial property investors, who need to be aware of the key differences for owners and tenants. [Read more…]

Underquoting Laws Change

UNDERQUOTING can take place whenever a real estate agent misleads a potential buyer about the likely selling price of a property – be it for commercial or residential real estate.

For example: When a property is promoted at a price that is lower than its estimated selling price, the seller’s asking price or at a price that the seller has already rejected. [Read more…]

Foreign Resident CGT Withholding Regime

ON 25 FEBRUARY 2016, Parliament passed a new foreign resident capital gains tax withholding regime.

The regime applies to contracts entered into on or after 1 July 2016; and is intended to assist the Commissioner of Taxation in the collection of the CGT payable by foreign residents.

Under the regime, a 10% non-final withholding tax will apply to foreign residents on the disposal of relevant taxable Australian property.

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Federal Budget 2016: You and Your Super

SUPERANNUATION, yes, it's still tax free. However, it comes with changes in that if you have more than $1.6m in superannuation at retirement, the amount over those earnings (not the withdrawals) will not be tax free from July 2017.

Not all bad news, as the bits above $1.6m still receive low concessional tax rates (10 or 15%). And, in most cases, it is far better than being taxed outside of superannuation.

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Do You Fully Understand “Cooling Off” Periods?

COMMERCIAL PROPERTY INVESTORS will generally live in a residential property. So, here is something to consider when you come to buy your next home.

A recent decision in the Supreme Court of Victoria (Tan v Russell [2016] VSC 93) has made it clear that real estate agents do not have authority to receive notices of termination when purchasers seek to exercise their cooling off rights, unless otherwise authorised to receive such notices.

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Answers For Commercial Property Investors

MANY OF YOU are now Members and therefore, already receive my Property Briefings podcasts each month. But if you're not, you can simply join here or by clicking on the orange logo above -- because Membership is FREE.

Anyway, I've been regularly receiving requests about providing access to transcripts for the various Episodes -- which number more than 120 so far.

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Capital Gains Tax: Subdividing & Amalgamating Land

THE FOLLOWING is a little-known (but should be widely-known) ATO explanation on how to calculate CGT on a property that was formerly your home that you subdivide much later. And how the principal place of residence can be lost.

Let's go through it in some detail ... for a Dwelling that was purchased on or after 20 September 1985, and then subdivided after that date.

Kym bought a house on a 0.2 hectare block of land in June 2014 for $700,000. The house was valued at $240,000 and the land at $460,000. Kym lived in the house as her main residence. She incurred $24,000 in stamp duty and legal fees purchasing the property.

Kym found the block was too big for her to maintain. In January 2015, she subdivided the land into two blocks of equal size. She incurred $20,000 in survey, legal and subdivision application fees; and $2,000 to connect water and drainage to the rear block.

In March 2015, she sold the rear block for $260,000.

As Kym sold the rear block of land separately, the main residence exemption does not apply to that land. She contacted several local real estate agents who advised her that the value of the front block was $30,000 higher than the rear block.

Kym apportioned the $460,000 original cost base into $215,000 for the rear block (46.7%) and $245,000 for the front block (53.3%). Kym incurred $6,000 legal fees on the sale.

The cost base of the rear block is calculated as follows:

  • Cost of the land $215,000
  • 46.7% of the $24,000 stamp duty and legal fees on the purchase $11,208
  • 46.7% of the $20,000 cost of survey, legal and application fees $9,340
  • Cost of connecting water and drainage $2,000
  • Legal fees on sale $6,000

Total Cost Base = $243,548

The capital gain on the sale of the rear block would be $16,452.

She calculated this by subtracting the cost base ($243,548) from the sale price ($260,000). As Kym had owned the land for less than 12 months, she uses the 'other' method to calculate her capital gain.

Kym will get the full exemption for her house and the front block, because they were used as her main residence for the full period she owned them.

Not a bad result. But imagine if she had bought it 10 years earlier, used it as her principal place of residence the whole time and where the value was about half of the value it is now:

That is: $350,000 purchased with a value of $120,000 for the home and land at $230,000 ... which is now valued at the $700,000 10 years later.

For tax purposes, you do not use the market value -- you must use the original value.

The cost base of the rear block is calculated as follows:

  • Cost of the land (46.7%) $107,410
  • 46.7% of the $24,000 stamp duty etc on the purchase $11,208
  • 46.7% of the $20,000 cost of survey, legal and application fees $9,340
  • Cost of connecting water and drainage $2,000
  • Legal fees on sale $6,000

Total Cost Base = $135,958

The capital gain on the sale of the rear block would now be $124,042 ... with no allowance for the past use as the primary residence.

Bottom Line: As you can appreciate, this can be a real trap. And yet, it is one you can often avoid, with proper restructuring before any sub-divisions occur.

 

Under the Hammer: The Epidemic of Underquoting

WHILE REAL ESTATE AGENTS (both commercial and residential) must act fairly and honestly when advertising property, there is no doubt that underquoting is a significant problem -- predominantly in the current Melbourne and Sydney real estate market.

Although the New South Wales Government has recently proposed legislative reforms in order combat this problem, Victoria is yet to follow.

What is Underquoting?

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The Truth Behind Falling Office Workspace Ratios

THE QUESTION IS: Have the major corporate tenants been "sold a pup"? Or have their Financial Controllers merely been focusing upon cost savings, rather than employee productivity?

Why not watch this short video and then, make up your own mind?

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Your Age and The Full Passage of Time

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I’M IN MY 40s … and well behind where I want or need to be. My career has stalled and the marriage is shaky because we’re constantly arguing about money. This is probably because my partner never returned to serious paid work after we had the children.

We’re far from making any dents in the mortgage. In fact, it’s actually rising slightly each year, what with the kids’ secondary education to pay for on top of all the other demands on our single income. [Read more…]

When is a Bank Guarantee NOT Guaranteed?

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YOUR TENANT’S OBLIGATION to pay rent, care for the premises and abide by the provisions of the lease is usually secured by your right (as the landlord) to terminate the lease and recover possession.

In reality, this does little to remedy the financial loss suffered by a landlord, as a result of a breach by the tenant. [Read more…]