222nd MONTHLY EDITION

June 2024

Recent ATO Focus: Payment Plans and Rental Property Deductions

BY ED CHAN | MAY 14, 2024

In a time of increased oversight and stricter regulations, the Australian Taxation Office (ATO) is emphasising that tax reliefs like payment plans should be accessed only by those who truly need them. Additionally, the ATO is keeping a close watch on deduction claims for rental properties. This article explores the ATO’s latest guidelines, offering crucial information for taxpayers to ensure compliance with tax laws.

Tightening of Payment Plan Eligibility

The ATO has observed an increasing trend where tax professionals secure payment plans for clients who might not truly need them. Sylvia Gallagher, ATO Assistant Commissioner, emphasizes that these plans are intended as a support mechanism, not a financial loophole. During a recent webinar, she explained that the leniency shown during the pandemic era is tightening. Payment plans will now be scrutinized more closely, with the ATO evaluating the taxpayer’s genuine capacity to pay on time. The message is clear: those who can pay should do so without delay.

Increased Scrutiny on Rental Property Deductions

Errors in tax returns for rental properties are alarmingly common, with the ATO finding that 90% of such returns have mistakes, primarily around deductions for repairs and maintenance. Assistant Commissioner Rob Thomson pointed out that many landlords fail to differentiate between immediate deductions for repairs and capital improvements that should be depreciated over time. For instance, replacing a broken window can be claimed immediately, but upgrading to a modern kitchen constitutes a capital improvement and is not deductible as a repair.

Consequences and Compliance

Non-compliance with tax obligations can lead to significant penalties and General Interest Charge (GIC). The ATO is not just watching for late payments but also improper claims of GIC remission after a payment plan is concluded. The ATO’s guidelines, specifically PS LA 2011/12, outline the conditions under which GIC remissions are appropriate, focusing on factors like whether the taxpayer had control over the delay and took steps to minimize the payment duration.

Support and Resources for Compliance

The ATO offers numerous services to aid taxpayers, particularly small businesses, in maintaining compliance. Keeping lodgments and payments up-to-date is crucial not just for avoiding penalties but also for ensuring that the ATO can provide timely assistance when a business is genuinely struggling. The ATO encourages taxpayers to engage with these services rather than avoiding contact, which can lead to misunderstandings about a taxpayer’s circumstances.

Practical Tips for Taxpayers

Taxpayers are advised to:

• Review their eligibility for payment plans and ensure they only apply if there is a genuine need.
• Accurately report repairs and maintenance for rental properties, distinguishing between deductible repairs and capital improvements.
• Keep accurate and comprehensive records to facilitate correct tax return preparation and to substantiate claims if reviewed by the ATO.
• Consult with registered tax agents to ensure compliance and optimization of tax obligations.

Understanding and complying with ATO guidelines is crucial for all taxpayers. With the ATO tightening regulations around payment plans and rental property deductions, it is more important than ever to ensure that all tax affairs are in order. By adhering to these regulations, taxpayers can avoid penalties and ensure they are using all available benefits correctly.

Next Steps

Review your tax strategies and ensure they align with the latest ATO guidelines. Consider consulting a tax professional to review your circumstances and ensure your tax filings are accurate and optimized. Remember, proactive engagement with the ATO can prevent many issues before they arise, keeping your financial obligations smooth and manageable.

We’re Here to Help

Elevate your property financial strategies with Chan & Naylor Pymble. Our team of highly experienced business and property accountants is here to guide you on your journey to financial growth and generational wealth. With our expertise and tailored solutions, we can help you navigate complex tax regulations, optimize your investment portfolio, and unlock the full potential of your business and property investments. Don’t wait any longer to secure your financial future. Contact Chan & Naylor today to schedule a consultation and start building the path to success.

About Chan & Naylor

Founded in 1990, we have partnered with thousands of property investors and businesses all over Australia. Choosing Chan & Naylor Pymble means you’re not just selecting a service provider; you’re gaining a partner aligned with your financial goals. You’ll have access to a dedicated client manager supported by a team of accountants who specialise in tax and investments.

Disclaimer

This article serves as general information only and may not account for the unique circumstances of individual readers. For personalized and strategic solutions tailored to your specific situation, we invite you to seek professional advice from Chan & Naylor. Our highly experienced team is dedicated to helping you navigate the complexities of Australian taxation, ensuring that your financial strategies align with the latest regulations. Contact us today to embark on a path of informed and customized tax planning for your property investments.

221st MONTHLY EDITION

May 2024 

"Queensland’s Cruising Comeback Reaches Extraordinary Milestone"

Good morning Fellow Members,

Do I need to say more Queensland’s cruising industry is flourishing, marking an extraordinary milestone as it continues to grow in the Sunshine State. On Saturday, the arrival of P&O’s Pacific Encounter brought the 1.5 millionth passenger to the Brisbane International Cruise Terminal since its opening less than two years ago.

This milestone translates to about 2,000 passengers per day since the terminal officially opened on June 2, 2022. Considering that some days have no arrivals or departures, this is an impressive achievement for a facility that was inactive during the pandemic.

With the 300th cruise ship set to visit the port in two weeks, the terminal has already contributed an estimated $300 million to the Brisbane economy.

Port of Brisbane CEO Neil Stephens hailed it as a remarkable achievement in the terminal's short history. “To have more than 1.5 million passenger movements through our world-class terminal speaks to just how significant the cruise tourism industry is to Brisbane and South East Queensland,” he said.

“In Brisbane alone, we have over 160 cruise calls from 16 cruise lines scheduled for the full 2023-24 season. Many of these ships will also call at other Queensland ports, creating opportunities for regional communities. Each vessel visit brings a mini economic boom, contributing almost $1 million to the Queensland economy.”

As discussions continue about the viability and demand for a second berth at the terminal, work is already underway to expand the existing onsite parking by 340 bays.

Mr. Stephens highlighted the facility's economic impact. “The BICT is supporting many jobs, with around 130 staff working from across our partners for every vessel call, making it a seamless experience. This includes ground staff, baggage handlers, stevedores, retail and café assistants, cleaners, security staff, and our own Port of Brisbane team,” he said.

“These fantastic achievements for the BICT wouldn’t be possible without our cruise industry partners and, of course, Queensland’s cruising community who are enthusiastically starting their cruise holidays from Brisbane.”

Carnival Australia, the terminal’s most frequent visitor, remains committed to Brisbane. Senior Vice President Peter Little expressed their long-term commitment, saying, “We look forward to welcoming more Queenslanders on board our ships, with P&O’s Pacific Encounter based at the Brisbane terminal all year, and CCL’s Carnival Luminosa returning for her third summer homeporting season in November.”

Friends Emily Schmalz and Joel Lehmann from Germany, who arrived in Brisbane on Saturday morning from their 12-day P&O cruise, shared their positive experience. Ms. Schmalz, experiencing her first cruise, said, “I loved it.”

The continued success of the Brisbane International Cruise Terminal reflects the growing popularity of cruise tourism in Queensland, providing significant economic benefits and creating numerous job opportunities.

Let's get the party started :)

New Queensland Rental Laws Passed:

"What Every Property Investor Needs to Know"

Good morning Fellow members 

On 24 May 2024, the Stage 2 Rental Reform Laws were passed by the Queensland Parliament. These laws will be implemented in two stages on dates to be advised.

Many changes will impact how we manage tenancy applications, break leases, bond refunds, and entry into tenanted properties.

The most significant change is that the 12-month rent increase limit, imposed last year, will now apply to the property rather than the tenancy. This means that even if a tenant moves out, the rent cannot be increased unless a full 12 months has passed since the last rent increase.

Our industry, led by the Real Estate Institute of Queensland (REIQ), raised serious concerns about this and many other reforms in our submissions to the government. While we managed to enact changes to some reforms before they became law, many issues remain that we believe may have unintended consequences for both lessors and tenants.

Over the next few weeks, our entire team will attend in-depth training conducted by the REIQ to equip us with the right knowledge and strategies to assist our lessor clients in maximizing their investment properties.

We will also be expanding on key elements of these changes in future editions of the Investor Update so you can stay fully informed of all the details.

Until next time, stay Healthy, Wealthy & Wise!

220th MONTHLY EDITION

April 2024

"House price growth is outstripping the average national wage with Gold Coast locations leading the way."

‘The secret’s out’:

Suburbs where prices have more than doubled in four years!

Good morning Fellow members,

The past four years in the property market have been incredibly volatile, with prices surging, before falling sharply and then rising rapidly once again.

Despite the ups and downs, prices are higher than four years ago in almost every Australian suburb, PropTrack data shows, with the pandemic boom and the surprising run of growth over the past year largely outweighing the dent in the market caused by rising interest rates.

In most suburbs, including Coomera where your property portfolio started at a purchase price of $145,000 has exceeded all expectations.  The data shows that even the price growth over the past four years has massively exceeded that of the previous four years.

Those who hung on through the pandemic's ups and downs have largely come out well ahead.

After holding onto our property portfolio for 25 to 30 years, it's time to contemplate divesting the oldest assets and reinvesting the proceeds into enhancing our lifestyle as we transition into retirement. Several members have already invested in The FIRM International Cruise Lines, offering a 5% ROI (Return on Investment). We are living the Life, Touring the Globe in total comfort. Waking up each morning in a new destination certainly has an appeal. Feel free to reach out to me for further information. 

In the meantime, I look forward to hearing your comments.

Stay safe, Healthy Wealthy & Wise!

219th MONTHLY EDITION

March 2024

The Cost of Living in Retirement

Good morning Fellow members, 

If you plan to keep enjoying your current lifestyle when you retire, it's generally suggested that, if you own your own home, you'll need to save enough to provide you with at least 70% of your current annual income.

For the majority of The FIRM's members, this was considered two decades ago, prior to retirement, allowing them to now unwind and delight in their enhanced property portfolio tailored for them.

The full Age Pension, if you're eligible, can provide you with $28,514 per year for a single income ($1,096.70 per fortnight - maximum basic rate including supplements). Read more on Services Australia's website.

However, research by the Association of Superannuation Funds of Australia (ASFA) indicates that relying solely on the Age Pension will not be enough for a comfortable retirement.

How much do you need to retire?

Most people want a comfortable retirement - whatever that looks like for them.

While this will mean different things to different people, everyone wants to be able to afford a good standard of living, with enough to spend on things like leisure activities, private health insurance and household goods.

Comfortable retirement around age 67

According to the Association of Superannuation Funds of Australia (ASFA), to achieve a comfortable retirement age of around 67, you need:

Single

$51,278.30 per year

Couple

$72,148.19 per year

On a fortnightly basis, a single person needs roughly $1,954.57, while a couple needs around $2,749.80 for a comfortable retirement.

A modest retirement, which allows for only basic activities although is better than relying only on the Age Pension, is estimated at $32,665.66 for singles per year, and $46,994.28 for couples.

Compare different lifestyles in retirement

The below table is based on ASFA research for retirees aged around 67.

It shows the expected lifestyles for a comfortable retirement, modest retirement and retirement relying on the Age Pension alone, per year.

The Age Pension annual amounts are approximate, based on maximum fortnightly rates, including supplements, as determined by Services Australia.

As you get older, the budgets change

It's likely you'll need less money later in retirement.

This may be because you're no longer raising a family, paying tax on your income, making super contributions or paying off a home. Your priorities and requirements can also change as you age as you may spend more on assistance in or outside the home and medical expenses.

For people 85 and above, ASFA estimates the below amounts are required for a comfortable retirement³:

Single

$48,074.77 per year

Couple

$66,455.12 per year

On a fortnightly basis, a single person needs roughly $1,814.90 while a couple needs around $2,513.30 for a comfortable retirement.

The annual cost for a modest standard of living at 85 years old is $30,417.12 for singles and $43,523.83 for couples.

There you have it for another month!

Stay tuned for an exciting new announcement for The FIRM International Cruise Line's next step closer. 

Kindest regards, 

John

218TH MONTHLY EDITION

February 2024

Exploring Real Estate Trends

Good morning Fellow members,

Firstly, let’s delve into the most comprehensive state-of-the-nation report on the real estate market for the calendar year ending 2023. It’s intriguing how different research houses present varied statistics based on distinct information sources. Leveraging  Andrew Bell's over 40-plus years of experience and my role as Chairman of The FIRM for 30-plus years, I prioritise credible sources. Pleasingly, there’s consensus among industry experts.

It’s unanimously agreed that price growth surged nationwide throughout 2023, albeit with some variation in reported figures. Notably, prices saw an acceleration in the final quarter of 2023.

Rents for 3-bedroom dwellings rose by 2.6% quarterly and 13.4% annually. Meanwhile, 2-bedroom dwellings witnessed a 0.4% quarterly increase and a 16.1% annual rise, reflecting a significant demand for such properties nationwide, attributed to the overarching concern of the cost of living.

February saw an 18.5% rise in new listings compared to 2022 figures, indicating continued market activity.

As expected, home loan applications have dwindled over recent months due to higher interest rates, dissuading potential buyers. Nonetheless, there’s a noteworthy trend of cash transactions, with over a quarter of properties in New South Wales, Victoria, and Queensland purchased outright, reflecting a total cash outlay of $129.6 billion—a 1.5% increase from 2022.

Moreover, the share of mortgage-free home sales increased by 2.9 percentage points to 28.5%, underscoring the active participation of property owners capitalizing on real estate gains and the downsizing trend among baby boomers.

Locally, Mayor Tom Tate secured his fourth term in the Gold Coast City Council elections, offering stability for the city’s future. The robust property market continues flourishing, with impressive auction results and sustained migration inflows.

Looking ahead, we anticipate navigating a complex market landscape with conflicting factors influencing real estate trends. With nearly five decades of experience and access to extensive research, I’m committed to providing insightful analysis.

Andrew is excited to host the Ray White Business Meets Sports Networking Lunch, featuring esteemed guests Harry Triguboff and Anna Meares, offering invaluable insights and fostering community engagement while supporting vital beach safety initiatives.

Until next time stay Healthy, Wealthy & Wise.

217th MONTHLY EDITION

JANUARY  2024

Good morning, Fellow Members,

As the holiday season approaches, we and our team want to extend our deepest gratitude for your unwavering loyalty and support throughout the past year. Your dedication and perseverance have been commendable, and we are truly grateful for the privilege of being part of your journey.

As we bid farewell to 2023 and welcome the promise of a new year, we understand the importance of equipping oneself with the necessary tools and knowledge to navigate the cruise ship industry market effectively. 

I'm thrilled to share some exciting news with you - an Australian Government representative has approached us to provide a facility to circumnavigate Australia regularly! This collaboration marks a significant milestone for us, and we're eagerly anticipating the developments that 2024 will bring.

We want to express our heartfelt appreciation for your continued partnership and trust. We are here to support you every step of your investment journey.

We wish you a joyous holiday season filled with warmth, love, and newfound opportunities. May 2024 bring you the professional growth and success you truly deserve.

Stay tuned for more details as they become available. We're committed to keeping you updated every step of the way, and we look forward to sharing this journey with you.

Thank you for your ongoing support, and we're excited to see what the future holds.

Stay Healthy, Wealthy & Wise!!! 

Chat soon!

Kindest regards,

Annette & John