Archive for the ‘Capital Gains Tax’ Category

Transacting with cryptocurrency: updated ATO info

Thursday, August 2nd, 2018

The ATO says a capital gains tax (CGT) event occurs when a person disposes of their cryptocurrency (eg Bitcoin). A disposal can occur when someone:
• sells or gifts cryptocurrency;
• trades or exchanges cryptocurrency (including the disposal of one cryptocurrency for another cryptocurrency) – if the cryptocurrency received cannot be valued, the capital proceeds from the disposal are worked out by using the market value of the cryptocurrency disposed of at the time of the transaction;
• converts cryptocurrency to fiat currency like Australian dollars; or
• uses cryptocurrency to obtain goods or services.
If you need assistance with the tax treatment of cryptocurrency, or the ATO’s record-keeping requirements for taxpayers who are involved in acquiring or disposing of cryptocurrency, please contact our office.

Issues for property owners

Thursday, July 5th, 2018

There have been recent changes to:
• the tax treatment associated with residential rental properties (eg travel deduction and depreciation changes);
• CGT and GST withholding tax obligations for purchasers of property;
• superannuation measures impacting home ownership (eg the first home super saver scheme and the superannuation downsizer incentive); and
• stamp duty and land tax, which varies from state to state.
The government has also proposed to abolish the main residence CGT exemption for taxpayers who are no longer Australian tax residents at the time they sign a contract to sell their home, regardless of how long the home has actually been used as a main residence.

Issues for businesses

Thursday, July 5th, 2018

Lower company tax rates and imputation
Company tax rates are falling in Australia. Companies carrying on a business with turnover of less than $25 million will pay a rate of 27.5% in 2018 – the rate of 30% only applies if turnover is $25 million or more, or the company is not carrying on a business.
By 2027, the tax rate will reach a low of 25% for companies carrying on a business with turnover up to $50 million.
TIP: The dividend franking rate for 2018 may be different from a company’s tax rate, depending on whether turnover in 2017 was less than the current year’s turnover benchmark ($25 million for 2018).

Deductions for small business entities

Small business entities (companies, trusts, partnerships or sole traders with total turnover of less than $10 million) will qualify for a raft of tax concessions in the 2018 income tax year:
• the $20,000 instant asset write-off – an immediate deduction when buying and installing depreciating assets that cost less than $20,000.
• the simplified depreciation rules – accelerated depreciation rates of 15% or 30% for depreciable assets that cost $20,000 or more;
• the small business restructure rollover;
• an immediate deduction for start-up costs;
• an immediate deduction for certain prepaid expenses;
• the simplified trading stock rules – removing the need to do an end-of-year stocktake if stock value has changed by less than $5,000;
• the simplified PAYG rules – the ATO will calculate PAYG instalments;
• cash basis accounting for GST – the ATO will calculate the GST instalment payable and annual apportionment for input tax credits for acquisitions that are partly creditable;
• the FBT car parking exemption (from 1 April 2017); and
• the ability for employees to salary-sacrifice two identical portable electronic devices (from 1 April 2016).
These concessions are very powerful for small businesses, and can lead to substantial tax savings.

Small business CGT concessions
If you’re selling a business that has an aggregated turnover of less than $2 million (a “CGT small business entity”) or the value of its net CGT assets is $6 million or less (it satisfies the $6 million “net asset value” test), you may be able to access the small business CGT concessions.
These concessions include:
• a 15-year exemption – no CGT is payable;
• a 50% active asset reduction – a 50% CGT discount in addition to the 50% general discount;
• the retirement exemption – up to $500,000 lifetime tax-free limit; and
• the active asset rollover – minimum two years’ deferral.

Residential rental property travel expense deduction changes

Friday, May 11th, 2018

Recent changes to Australian tax law mean that individuals, self managed superannuation funds (SMSFs) and “private” trusts and partnerships can longer claim tax deductions for non-business travel costs related to their residential rental properties. Such costs also cannot form part of the cost base or reduced cost base of a CGT asset.
The ATO has issued guidance to make it clear that tax deductions are only permitted for taxpayers who incur this kind of travel expense as a necessary part of carrying on a business such as property investing, or providing retirement living, aged care, student accommodation or property management services.
TIP: The ATO will consider a range of factors, such as number of properties leased, time and expertise needed for their maintenance, and taxpayer record-keeping, when deciding if someone carries on a business that requires travel expenditure related to their residential properties.

CGT main residence exemption to disappear for non-residents

Friday, May 11th, 2018

A person’s Australian tax residency status may be about to assume a whole new meaning. Currently, both residents and non-residents qualify for a full or partial exemption from capital gains tax (CGT) when they sell a property that is their home (main residence). But if a Bill that is currently before Parliament is passed, that will change, and any individual who is a non-resident for tax purposes at the time they sign a contract to sell their home – for example, if they have moved overseas before signing the sale contract – will no longer qualify for the full or partial main residence exemption, regardless of how long the home was actually their main residence when they were an Australian tax resident.
TIP: If you’re considering selling your home and moving or travelling overseas, talk to us to find out how this could affect your Australian tax residency and CGT costs.

Capital gains tax withholding: updated information for trustees

Tuesday, April 10th, 2018

The foreign resident capital gains tax (CGT) withholding regime requires purchasers of Australian property to withhold an amount from the purchase price (for remission to the ATO) if the vendor is a foreign resident. This regime is designed to assist the ATO in collecting CGT payable by foreign residents.
If the vendor is an Australian resident, they must provide an ATO-issued clearance certificate to the purchaser on or before the day of settlement to ensure no withholding occurs. The ATO has released some guidance for trusts and superannuation funds about specific information they must provide when applying to the ATO for a clearance certificate. Contact our office for further assistance.

Changes to small business CGT concessions

Tuesday, February 27th, 2018

Treasury has released draft legislation to make sure that taxpayers will only be able to access the small business CGT concessions for assets that are used (or held ready for use) in the course of a small business or are an interest in a small business.

The draft also proposes additional conditions to be satisfied from 1 July 2017 when applying the small business CGT concession for capital gains related to a share in a company or an interest in a trust.
TIP: A range of tax concessions are available for small businesses. Talk to us to find out how your business could benefit.

Bill to implement housing affordability CGT changes

Tuesday, February 27th, 2018

As part of the 2017–2018 Budget, the Federal Government announced a range of reforms intended to reduce pressure on housing affordability. Legislation has now been introduced into Parliament that proposes to:
• remove the entitlement to the capital gains tax (CGT) main residence exemption for foreign residents; and
• modify the foreign resident CGT regime to clarify that, for the purpose of determining whether an entity’s underlying value is principally derived from taxable Australian real property (TARP), the principal asset test is applied on an “associate inclusive” basis.
The Bill also proposes to amend the tax law to provide an additional discount on CGT for affordable housing. The discount of up to 10% will apply if a CGT event happens to an ownership interest in residential property used to provide affordable housing.
TIP: The main residence exemption means that CGT doesn’t apply for a capital gain or loss that an individual makes from selling their main residence. A CGT discount applies if the dwelling was their main residence for only part of the time they owned it, or they partly used it to produce assessable income.

Tax consequences of trust vesting

Wednesday, January 31st, 2018

The ATO has issued a long-awaited ruling on trust vesting, including changing a trust’s vesting date and the CGT and income tax consequences of vesting.
TIP: A trust’s “vesting date” is the day when the beneficiaries’ interests in the trust property become fixed. The trust deed will specify the vesting date and the consequences of that date being reached. Vesting does not, of itself, ordinarily cause the trust to come to an end or cause a new trust to arise. In particular, the underlying trust relationship continues after vesting while the trustee still holds property for the takers.
The key points in the draft ruling are that:
• before vesting, it may be possible to extend the vesting date (by applying to a court or by the trustee exercising a power to nominate a new vesting date);
• it is too late to change the vesting date once it has passed (and the ATO says it is unlikely that a court would agree to do so); and
• continuing to administer a trust in a way that is inconsistent with the vesting terms can have significant CGT and income tax consequences.

Housing affordability measures now law

Wednesday, January 31st, 2018

Legislation has been passed to implement the 2017–2018 Federal Budget housing affordability measures. The following will start on 1 July 2018:
• the First Home Super Saver (FHSS) Scheme, which allows individuals to use specific amounts from their super to buy or construct a first home; and
• the option for individuals aged 65+ to make “downsizing” contributions of up to $300,000 to their super from selling a home they have owned for at least 10 years.
TIP: An exemption from meeting the FHSS Scheme “first home” requirement will be available for people suffering financial hardship. “Financial hardship” criteria are likely to include circumstances where someone has limited savings, is currently renting and had a past interest in a home that was in a cheaper real estate market or when the person was in a relationship that has since broken down.


  Liability limited by a scheme approved under Professional Standards Legislation.