Sammut Bulow Property Tips

Sammut Bulow

Accountants & Business Advisers

 

Some of Sammut Bulow’s accountants recently attended the NTAA Property & Tax seminar at the Hilton Hotel, Brisbane. The day was filled with hot tips aimed at taxpayers involved in the property industry.
 
Below are 5 of the top tips for rental properties received from the seminar. To discuss the tips in more detail, please contact the Sammut Bulow Office and one of our accountants will be able to assist you. 

TIP ONE: EXPENSE SPLITTING

Rental expenses must be apportioned based on the legal ownership of the property. This is regardless of which owners are actually incurring the expenses. Therefore, it is important when purchasing a new investment property to get the ownership split correct.

If you are aiming to maximise the tax benefits that arise from negative gearing, it is important to reflect on who can benefit the greatest from the losses generated by a negatively geared property. From a tax point of view, having the property owned by the main/higher income earner will provide the most benefit. Conversely, if it is anticipated that a large capital gain will be incurred on the disposal of the property, than consideration should be given to giving a higher ownership percentage to the lower income earner.

TIP TWO: LOAN STRUCTURING

Rental expenses must be apportioned based on the legal ownership of the property. This is regardless of which owners are actually incurring the expenses. Therefore, it is important when purchasing a new investment property to get the ownership split correct.

If you are aiming to maximise the tax benefits that arise from negative gearing, it is important to reflect on who can benefit the greatest from the losses generated by a negatively geared property. From a tax point of view, having the property owned by the main/higher income earner will provide the most benefit. Conversely, if it is anticipated that a large capital gain will be incurred on the disposal of the property, than consideration should be given to giving a higher ownership percentage to the lower income earner.

TIP THREE: SALARY SACRIFICING RENTAL DEDUCTIONS

Salary and wage earners who own residential properties have the potential to minimise rental expenses through salary sacrificing the expenses that incur GST.

Investors are not entitled to claim the GST credits on their rental property expenses. However, If the investor salary sacrifices the payment, the employer is entitled to claim a GST credit.  Therefore, instead of having their gross pay reduced by the GST inclusive total (e.g. $110.00), the investor’s gross pay is reduced by the GST exclusive amount (e.g. $100.00).

No Fringe Benefit Tax (FBT) is payable on the salary sacrifice as the expenses would have been otherwise deductible to the investor in their income tax return.

Speaking to both your accountant and employer is a great step in initiating this process.

TIP FOUR: JOINTLY OWNED DEPRECIATING ASSETS

If you own a rental property with another taxpayer, you both have access to the $300 immediate write-off on rental assets. Therefore if a husband and wife own a rental property and buy an asset for under $600.00, this will be immediately deductible in the year of purchase. In this scenario assets over $600.00 ($300.00 for each owner) will be depreciated over the asset’s effective life.

TIP FIVE: CONVERTING MAIN RESIDENCES TO INVESTMENT PROPERTY

If you are moving out of your main residence and making it a rental property, there are some important tips that can minimise your exposure to Capital Gains Tax (CGT).

6 Year rule

Home owners can continue to claim the main residence exemption on their former main residence that is now being rented out for a period of up to 6 years if they do not have another main residence during that time period.

If the home owner does acquire a new main residence, careful consideration should be given to ensure the main residence exemption is maximised.

Market Revaluation

If you are moving into another main residence, we recommend getting a market valuation completed on the house at the time you move out. This will allow you to reset your cost base to its market value. Upon sale, you will only be liable for capital gains made for the period the property was rented and your cost base will utilise the market valuation obtained when you moved out.

Should you have any questions or require further information regarding planning your tax or any Sammut Bulow services, please do not hesitate to contact us on:

PHONE     07 3812 3400
EMAIL       enquiries@sammutbulow.com
VISIT         www.sammutbulow.com