Tax & Property 2016 AN A TO Z GUIDE TO TAX AND PROPERTY DEVELOPMENTS... 1

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1 AN A TO Z GUIDE TO TAX AND PROPERTY DEVELOPMENTS Revenue versus capital making the correct distinction is crucial What is a property development business? What is a profit-making scheme? What is a mere realisation of a capital asset? When do land subdivisions cross the line from mere realisation to a business or profit-making scheme? Is the sale of a property held over the long-term for rental purposes always on capital account? A guide to taxing profit-making schemes Step 1: Calculating net profit Step 2: Calculating the capital gain/loss Step 3: Reducing the capital gain by the net profit Tax issues affecting property development businesses Development costs that are immediately deductible How is land held as trading stock valued? What is the cost of land held as trading stock? Starting and ceasing to hold property as trading stock Boutique issues for property developers Income derived under vendor-financed sales What is the tax treatment of a forfeited deposit? THE ESSENTIAL GUIDE TO GST AND PROPERTY Key GST issues affecting property developers Identifying NEW residential premises GST sting where new residential premises are leased Can GST apply to isolated property transactions with a profit-making purpose? Tips and traps when applying the margin scheme When can the margin scheme be applied? How is GST payable under the margin scheme calculated? Can the margin scheme apply to subdivided and amalgamated land? National Tax & Accountants Association Ltd: March April

2 3. Property and the going concern exemption When can a property be sold as a going concern? Major danger for property acquired as a going concern GST consequences of using residential premises for business purposes Can ITCs be claimed for businesses carried on from residential premises? TAX-EFFECTIVE STRUCTURING FOR PROPERTY DEVELOPERS NTAA practical guide to the do s and don ts when structuring for property developers Checklist of factors to consider when deciding on a structure to undertake property development Is there a preferred structure for undertaking property developments? Using joint ventures in a property development NTAA guide to the do s and don ts with JVs in undertaking a property development When should JVs be used as a structure for a development? Structuring alternative: Profit-sharing arrangements THE NTAA S RENTAL PROPERTY TAX ROADMAP Tax-related rental property structuring and financing issues Deciding on the right legal ownership Deciding on the right financing structure Avoiding and/or solving a mixed purpose loan problem Tax issues relating to interest capitalisation Offering advice on home loan reduction schemes Correctly allocating purchase costs Depreciating assets included in the purchase price Cost base (first element) Claiming the Division 43 capital works deduction Deductible expenses Tax treatment of common purchase costs Maximising ongoing deductions Checklist of common deductions National Tax & Accountants Association Ltd: March April 2016

3 3.2 Claiming GST on rental property expenses Paying a related party for repairs and maintenance Recent developments on body corporate expenses Securing negative gearing benefits Renting to related parties Holiday homes ATO audit hotspot warning Classifying repair and renovation costs Distinguishing between a repair and an improvement Claiming a deduction for demolished capital works Rental property sale implications When are cost base adjustments required? Apportionment of the capital proceeds Rental Property CGT exemptions CGT implications of a mortgagee in possession sale Claiming ongoing shortfall interest expenses NEW withholding regime from non-resident vendors CGT PLANNING WITH THE FAMILY HOME Introduction Summary of main residence exemption rules Overview of the main residence exemption What is a dwelling? Ownership of a dwelling by an individual When is a dwelling a taxpayer s main residence? Key rules for maximising the exemption Moving into a dwelling (after acquisition) Changing main residences the six-month rule Building, repairing or renovating a main residence the four-year construction rule When the main residence first becomes income producing the market value rule National Tax & Accountants Association Ltd: March April

4 3.5 Maximising the main residence exemption using the temporary absence rule Applying the exemption where a dwelling forms part of a property settlement on a relationship breakdown Other key issues in applying the exemption Using a main residence to carry on business Where spouses have different dwellings TAX TREATMENT OF COMMERCIAL LEASES Leasehold improvements Depreciating assets Capital works Tax issues when entering into a lease agreement When are the costs of preparing a lease deductible? Tax treatment of lease incentive payments Tax treatment of lease premium payments Tax consequences when a lease comes to an end Tax consequences for lessor at the end of a lease Tax consequences for lessees at the end of a lease SMSFs AND PROPERTY Introduction Understanding the fundamentals of SMSFs and property ownership NTAA Guide to the do s and don ts of SMSFs holding property A hands on guide to the income tax, CGT and GST issues for property held in an SMSF Tips and traps associated with selling or transferring business premises into an SMSF Meaning of real property The 'Business Use Test' Incorporate an SMSF into a business structure to achieve asset protection and maximise tax savings Transferring property as an in-specie contribution When can property be leased to a related party? National Tax & Accountants Association Ltd: March April 2016

5 3. A guide for SMSFs borrowing to buy property An overview of the LRBA requirements Borrowings that are applied in repairing/maintaining versus improving an acquirable asset Use related party lenders and maximise investment returns What are the key issues where a property is purchased through a related entity? Dangers with the in-house asset rules When will a unit trust/company qualify as a non-geared unit trust/company? Dealing with unpaid present entitlements between the non-geared unit trust and the SMSF Alternative structure: The SMSF acquires the property as tenants-in-common with another party Maximise access to the pension asset exemption with property and save $ 000s Trap where property is used to support pension National Tax & Accountants Association Ltd: March April