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Property and tax should never have met, but they did.
Property and Tax
It isn’t actually as bleak as the title suggests. Property and tax – thanks to unlimited negative gearing, property might be the white knight in your tax return. Or it might completely wreck your tax position.
As a high value asset often involving large amounts of money, any tax issue usually is about large amounts of money as well.
In this episode Bob Deutsch, Tax Counsel of The Tax Institute shares some insights about property and tax. Here is what we learned but please listen in as Bob explains all this much better than we ever could.
To listen while you drive, walk or work, just access the episode through a free podcast app on your mobile phone.
Main Residence Exemption for Foreign Residents
Australian expatriates are the ones who will suffer most from the recent changes. If you have lived in Australia for some time and then moved offshore but retained what was previously your main residence in Australia, you might now face a huge tax bill when selling your former main residence.
If you sell that main residence after the 30th of June 2020, you will not be able to claim any CGT exemption, even though the house had been your main residence for a large part of the ownership period.
Now that is a deliberate legislative change of the current government. The Tax Institute fought against it as did many others. Unfortunately it all came to nothing. The legislation has passed. And the effect is that people who are in this position need to sell their property before the 30th of June 2020 in order to secure the benefit of the CGT exemption.
Let’s say you purchased a property in 2000 and live in it until July 2020, but then move offshore. You now pay tax on half of the capital gain since you bought it.
This change in the main residence exemption is the biggest issue around property and tax at the moment. There are three other topics – vacant land, travel expenses and a land tax amnesty – but less significant.
Vacant Land
From the 1st of July 2019 expenses such as council rates and interest cost connected with vacant land are no longer deductible.
Travel Expenses
Since the 1st of July 2017 travel expenses to retail properties are not deductible.
Land Tax Amnesty
In New South Wales there is a three month amnesty for land tax errors. It expired on the 31st of January 2020. There was some talk at some stage that it is going to be extended but no extension has happened yet.
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This is a short summary of what we learned in this episode, but please listen is as Bob explains all this much better than we ever could.
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Disclaimer: Tax Talks does not provide financial or tax advice. All information on Tax Talks is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.
Last Updated on 16 March 2021
Tax Talks spoke to Bob Deutsch - Senior Tax Counsel at The Tax Institute - for more details.
