Are We Now Finally Seeing a Retail Revival?

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A RECENT ARTICLE in the Financial Review (11 January, page 32) summarised the influx of overseas retailers, who are about to launch new stores within Australia this year.

The key locations being: Melbourne (18), Sydney (10), Brisbane (8) and Perth (4).

[Read more…]

Deductions If You Own Hotel or Motel Accommodation

 

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.

More…

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

 

Have You Sorted Out Your Holiday Reading Yet?

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ABOUT TWO WEEKS ago, my latest book was launched on Amazon. And I gave first look at it to everyone who had bought some of my training materials in the past — as well as, to my Inner Circle. [Read more…]

Tax Benefits for Collins & Pitt Street Farmers

 

Would You Like to be Paid a Bonus to Refinance?

 

Claiming Depreciation on Fitouts … Some Rules to Note

Office-Fitout

COMMERCIAL PROPERTY OWNERS and their tenants can both reduce fitout costs for any business by claiming depreciation deductions.

As deductions can be claimed simultaneously by both owners and tenants, a few simple rules must be considered when a Quantity Surveyor prepares a tax depreciation schedule for a commercial property:

Commercial tenants are able to claim depreciation for any fitout they add once their lease starts. At the same time, commercial property owners can claim deductions for any of the plant and equipment items originally found in the property.

If a tenant’s lease demands that the property must be returned to its original condition, the tenant can write-off the remaining depreciable value of removed assets in the financial year of their removal.

If a tenant vacates a building and does not remove the fitout, the owner may still be able to claim the remaining depreciation for these items.

Small business owners should also be aware of the recent changes outlined in the federal budget and understand how these changes will affect their claims.

The following rules apply

      1. If a business has an aggregated turnover beneath $2 million per year, items added after 7:30pm on budget night (12th of May 2015) worth $20,000 or less will entitle their owner to an immediate write-off in the year of their purchase. This rule will apply until the 30th of June 2017.
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      2. For small business owners, assets which cost $1,000 or less installed between the 1st of January 2015 and the 12th of May can still be written off immediately. Assets above the $1,000 threshold purchased for small businesses between these dates can be added to a low-value pool and depreciated at an increased rate of 15 per cent in the first year and 30 per cent for each year after.
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      3. Assets purchased between the 1st of July 2012 and the 31st of December 2013 for small businesses which cost $6,500 or less are still eligible for an immediate write-off under previous depreciation legislation rules. Most other assets purchased during this time frame can still be pooled at a rate of 30 per cent.
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      4. For businesses with an aggregated turnover of over $2 million, although the measures implemented during the May 2015 federal budget will not apply, there are still substantial deductions available. Items worth $300 or less can still be applied as an immediate write-off and assets which cost $1,000 or less are still eligible to be added to a low-value pool.

Assets not within these thresholds will continue to depreciate based on their individual effective life, as determined?by the ATO.

Bottom Line: Commercial property owners and tenants who would like further information about how any of the recent federal budget rules will affect their depreciation claim can seek expert advice from a specialist Quantity Surveyor such as BMT Tax Depreciation.

BMT also provide depreciation schedules to help outline all of the deductions available for both commercial property owners and their tenants to lodge their claim when completing their annual income tax return.

Bio-Beer

APRA & Commercial Lending

Comm-Lending

WITH MORTGAGE LENDING at a high, RBA rates at an historical low, and competition within the lending industry extremely hot, a peculiar thing began to occur last month. Interest rates began to increase.

This was most profoundly evident with residential investment loans, with several of the majors increasing rates and reducing LVR limits for these loans. [Read more…]

Quiet Enjoyment: It’s More Than Just Noise

Quiet-Enjoyment

QUIET ENJOYMENT IS a right held by all tenants to enjoy their property undisturbed.

Most lease agreements come with a specific clause granting tenants quiet enjoyment, however, courts have readily implied the right into leases not containing such a provision.

In assessing whether a breach has occurred, the court will look to the activities of the tenant and whether they have been rendered practicably impossible to use the premises. [Read more…]

Negotiating is a Learned Skill

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Negotiation

IT WOULD BE FAIR TO SAY I’ve lost count of the number of times people ask me about the secrets for a Successful Negotiation.

And so, you might care to watch this short Video … to gain a quick understanding of the three Key Elements which underpin every negotiation.

Because, once you know how to Negotiate … this will provide you with your ultimate Passport to Success. [Read more…]