August 2017

Are you?
– A taxpayer who owns a rental property.

At a glance:
– As of July 1, 2017, residential rental property owners may not be able to claim a deduction for the cost of travel incurred to inspect or maintain rental properties or to collect rent.

You should:
– Keep appropriate records to demonstrate expenses incurred.
– Contact us if you require any clarification or advice.

Prior to July 1, 2017, the following travel expenses could have be claimed for both residential and commercial properties:

• Preparing the property for new tenants, except for the first tenants;
• Inspecting the property during or at the end of tenancy;
• Undertaking repairs, where those repairs are because of damage or wear and tear incurred while you rented out the property;
• Maintaining the property, such as cleaning and gardening, while it is rented or available for rent; and
• Collecting the rent and visiting your agent to discuss your rental property.

Rental property owners cannot claim travel expenses for:

• the personal use of the property or for purely private purposes;
• Carrying out general maintenance of the property while it was not genuinely available for rent; and
• Undertaking repairs, where those repairs did not result from damage or wear and tear incurred while the property was rented.

Where your travel expenses are partly for private purposes and partly related to the rental property, you could only claim the amount relating to the rental property.

If you are an Australian resident and own a rental property overseas and the main purpose of the trip is a holiday, you cannot claim the cost of getting there but you may be able to claim local expenses directly related to inspecting the property, such as taxi fares and part of your accommodation expenses.

You cannot claim for travel to inspect a property before you buy it. You cannot claim for travel to rental seminars about helping you find a rental property to invest in.

As of July 1, 2017, you may not be able to claim travel expenses relating to your residential rental property.

For more information on rental properties, click here.

Remember:
– If you do not have an ownership interest in the rental property, you cannot claim travel expenses, even if you travel for the purposes of maintenance or inspections.

This article was published on 30/07/2017 and is current as at that date

Are you?
– Selling a property

At a glance:
– You are likely to make a capital gain or capital loss when you sell or otherwise dispose of a property not elected to be your main residence.

You should:
– Determine what expenses you can as a deduction.
– Contact us if you require any clarification or advice.

If you make a net capital gain in an income year, you will generally be liable for capital gains tax (CGT). If you make a net capital loss you can carry it forward and deduct it from your capital gains in later years.

A capital gain, or capital loss, is the difference between what it cost you to obtain, maintain and improve the property (the cost base) and what you receive when you dispose of it.

Amounts that you have claimed as a tax deduction, or that you can claim, are excluded from the properties cost base.

If you acquired the property before CGT came into effect on 20 September 1985, you disregard any capital gain or capital loss. However, you may make a capital gain or capital loss from capital improvements made on or since 20 September 1985, even if you acquired the property before that date.

You may be able to include capital expenses when calculating the cost base of your property. This can help you reduce the amount of CGT you pay when you sell your property.

Capital expenses include:

• Conveyancing costs paid to a conveyancer or solicitor;
• Title search fees;
• Valuation fees, when it is a private valuation conducted by your solicitor; and
• Stamp duty on the transfer of the property.

To find out more, click here.

Remember:
– Generally, your main residence is exempt from capital gains tax.

This article was published on 30/07/2017 and is current as at that date

Are you?
– An employer involved in an employee share scheme.

At a glance:
– If an employer provides ESS interests to employees at a discount, the employer must first meet specific employee share scheme (ESS) obligations.

You should:
– Know how the changes to the taxation of employee share schemes will affect you.
– Contact us if you require any clarification or advice.

An ESS provides employees with a financial share in the company where they work. Through share ownership, the employees benefit financially when the company performs well.

An ESS is a long-term incentive. They are generally plans that have a life span of 2 to 15 years and are specifically aimed at creating ownership of company shares by employees.

Companies of all sizes and types can use an ESS to improve their business outcomes. There are ESS available to suit companies that are both publicly listed on the stock exchange and privately owned.

Your obligations will depend on when the employee acquired the ESS interests.

In deciding which ESS will best suit your company, you need to consider:

• The companies aim in introducing an ESS;
• How an ESS fits into a broader employee participation or remuneration plan; and
• The conditions attached to the plan.

Your company may be interested in offering shares that qualify for tax concessions:

• If yes – then your company might immediately be considering a tax-exempt plan, a tax-deferred plan, or a plan that takes advantage of the ESS start-up concessions.
• If no – your company may want to consider an alternative type of ESS where tax concessions are not important and where there are specific company preferences.

For more information, click here.

Remember:
– ESS can take many forms, depending on the company size and type, and the organisations reasons for introducing the plan.

This article was published on 30/07/2017 and is current as at that date

Are you?
– A taxpayer who owns shares in a company in liquidation or administration.

At a glance:
– If a company is placed in liquidation or administration, company law restricts the transfer of shares in the company.

You should:
– Determine if you can choose to recognise a capital loss before the dissolution of the company.
– Contact us if you require any clarification or advice.

In the absence of special capital gains tax (CGT) rules, you may not be able to realise a capital loss on shares that have become worthless unless you declare a trust over them.

In certain circumstances, you can choose to realise a capital loss on worthless shares prior to the dissolution of the company.

If you make this choice, you will make a capital loss equal to the reduced cost base of the shares at the time of the liquidators or administrators declaration.

This applies if you own shares in a company and a liquidator or administrator declares in writing that there is no likelihood you will receive any further distribution in the course of winding up the company. The declaration can still be made after you receive a distribution during the winding up.

Financial instruments relating to a company can also be declared worthless by a liquidator or administrator.

The cost base and reduced cost base of the shares are reduced to nil just after the liquidator or administrator makes the declaration.

These rules do not apply to some assets, which include:

• A financial instrument where any profit made on the disposal or redemption of it would be included in your assessable income or any loss would be deductible;
• A right acquired prior to 1 July 2009 under an employee share scheme (ESS);
• Units in unit trusts or financial instruments relating to trusts.

For more information, click here.

Remember:
– If a company is wound up voluntarily, shareholders may realise a capital loss either three months after a liquidator lodges a tax return or on another date declared by a court.

This article was published on 30/07/2017 and is current as at that date