Posted on August 23, 2021 by admin
As a property investor, you might find yourself implementing repairs and renovation work onto a property to ensure that you are maximising its value on the market. However, though both can be claimed on your tax return, it’s of paramount importance that you know how to claim them. Getting it wrong can be both costly, and unlawful.
A rental property improvement is a renovation where something is improved beyond its original state and must be claimed with depreciation. This means that you are claiming a deduction for the decline in the value over the effective life of the renovation. For example, a rental property improvement that could be claimable by a property investor could include a bathroom getting retiled.
Maintenance and repairs however can be claimed differently, with all records kept containing accurate information on that work. This will assist in working out the depreciation of assets of the property.
A depreciation schedule is a report that outlines all available tax depreciation deductions for a residential investment property or commercial building. These depreciations can be claimed in your tax return each financial year and could help you to save thousands.
Investors who renovate and lodge their tax returns prior to ensuring that they have updated their tax depreciation schedule correctly could get caught out in making a mistake between the two types of work. Those who fail to properly record rental property improvements in a tax depreciation schedule risk making inaccurate claims and inviting the scrutiny of the Australian Taxation Office (ATO).
Your tax obligations and entitlements when renovating your property may change depending on how you go about it. Depending on whether you are a personal property investor, engaged in the profit-making activity of property renovations or carrying on a business involved in renovating properties, you will have to abide by certain requirements outside of maintaining the depreciation schedule.
As a personal property investor engaging in renovations to a property:
Consider yourself a ‘flipper’ of properties? You will be required to:
If you are carrying out the business of renovating or flipping properties:
In this instance, CGT does not apply to assets held as trading stock. Similarly, the CGT concessions (such as the CGT discount, small business concessions and main residence exemption) will not be applicable to the income gained from the sale of the properties.
If you are concerned about any of the topics discussed above, or want to know more about claiming property improvements on your tax return, you can come and speak with us for further information and advice.
Posted on April 14, 2024 by admin
For businesses in Australia, providing fringe benefits to employees can be a valuable way to attract and retain talent, as well as incentivise performance.
However, employers need to understand their obligations regarding Fringe Benefits Tax (FBT). The Australian Taxation Office (ATO) administers FBT, a tax on certain non-cash benefits provided to employees in connection with their employment.
Let’s explore the types of fringe benefits subject to FBT to help businesses navigate this complex area of taxation.
One common type of fringe benefit is the provision of a car for the private use of employees. This includes company cars, cars leased by the employer, or even reimbursing employees for the costs of using their own cars for work-related travel.
Employers may provide housing or accommodation to employees as part of their employment package. This can include providing rent-free or discounted accommodation, paying for utilities or maintenance, or providing housing allowances.
Expense payment fringe benefits arise when an employer reimburses or pays for expenses incurred by an employee, such as entertainment expenses, travel expenses, or professional association fees.
If an employer provides loans to employees at low or no interest rates, the difference between the interest rate charged and the official rate set by the ATO may be considered a fringe benefit and subject to FBT.
Providing employees with property, such as goods or assets, can also result in fringe benefits. This can include items such as computers, phones, or other equipment provided for personal use.
When employers provide allowances to employees who need to live away from their usual residence for work purposes, such as for temporary work assignments or relocations, these allowances may be subject to FBT.
Entertainment fringe benefits arise when employers provide entertainment or recreation to employees or their associates. This can include meals, tickets to events, holidays, or other leisure activities.
Residual fringe benefits encompass any employee benefits that do not fall into one of the categories outlined above. This can include many miscellaneous benefits, such as gym memberships, childcare assistance, or gift vouchers.
Employers must understand their FBT obligations and ensure compliance with relevant legislation and regulations. This includes accurately identifying and valuing fringe benefits, keeping detailed records, lodging FBT returns on time, and paying any FBT liability by the due date.
Fringe Benefits Tax (FBT) is an essential consideration for businesses that provide non-cash benefits to employees.
By understanding the types of fringe benefits subject to FBT, employers can ensure compliance with tax obligations and avoid potential penalties or liabilities.
Seeking professional advice from tax experts or consultants can also help businesses navigate the complexities of FBT and develop strategies to minimise tax exposure while maximising the value of employee benefits. Why not start a conversation with one of our trusted tax advisers today?
