Navigating Tax Changes in 2023: Updates to Remote Work Claims, Renting And Victoria’s New Tax Grab 

Talking Property Tax with Julia Hartman: Episode 4

In our first episode for 2023, we’ll be exploring the latest tax updates from across Australia, including: 

Changes to working from home Expense claims: What expenses can you now claim on your 2023 tax returns and how to navigate these changes while maximising your tax deductions.

CGT Affects Most of your Assets – even Gifting Jewellery! Yes, the newest changes to CGT mean even giving away items such as jewellery can now trigger this tax! We’re covering everything you need to know and how to reduce this tax liability. 

Renting a room out to an International Student: With Australia expected to receive an influx of international students in the coming months as we find a new normal post-COVID, we’ll be covering considerations and gains from renting out a room to an international student. 

2 Hectares: Changes to what’s considered your main residence and with it CGT concessions have changed. So how can you manage this new change? 

And lastly, the New Windfall Tax in Victoria: Finally, we’ll discuss land ownership and the new windfall tax in Victoria. We’ll explain what this tax is and who it affects, as well as offer strategies for minimising your tax liability.

Tune in now for an informative and essential episode where we break down the latest tax updates to help you stay ahead of the curve.

Check out Julia’s Home Office 2023 Spreadsheets here >> (Please note: These are only free for Empower Wealth clients. If you are a client, please reach out to the Empower Wealth Tax Advisory Team, and they will be able to share that spreadsheet with you. For non-clients, please purchase it through the Bantacs website 😊 )

See the previous Episodes here: 

• Ep 1: The Top 5 Tax Rules Every Property Investor Must Understand
• Ep 2: (Part 1) Tax Planning Tips to Maximise your Returns
• Ep 2: (Part 2) Tax Planning Tips to Maximise your Returns
• Ep 3: Your Ultimate Guide To Reducing Tax on Vehicles, Private Insurance & Land

For more, check out Julia’s Blog >> or read the full articles below:

• Warning: Start a Diary of Your Home Office Use Now!
• CGT Now Affects Most of Your Assets, Even Gifting Jewellery…
• Mapping Out Your Property to Make the Most of CGT Concessions

And if you’re interested in our free and no-obligation initial consultation, you can learn more about it here or simply fill in the form below and one of our qualified tax accountants will get in touch with you soon.

Transcript

(Please note that this is an automated transcription and as such there might be typos/inaccuracies in the transcript below.)

Ben Kingsley

Hello, I’m Ben Kingsley, the managing director and founder of Empower Wealth. And as a valued Empower Web client, I’d like to welcome you to episode four of Talking Property Tax with Julia Hartman. Now, if you’re new to this and this is the first in the series that you’re watching of talking property tax, this is our tax education series, led by Julia Hartman, who’s one of Australia’s leading tax experts when it comes to all things property investment and personal tax matters.

Now, Julia is the founder of BanTacs, a tax cooperative group of which Empower Wealth tax and personal accounting, is a member. Julia is also our Chief Technical Tax Advisor here at Empower Wealth. So welcome to episode four with Julia. Welcome to the show, Julia.

Julia Hartman

Thank you for having me back.

Ben Kingsley

Okay. In this episode, we’re going to be covering off on the following topics. I’m really interested in where we’re going to take conversations because there’s some really interesting stuff in here. So let’s quickly run through what we’re going to be talking about. So firstly, we won’t be talking about the changes to working from home tax claim expenses. That’s a biggie.

So we’re going to spending a little bit of time on that. Then I’m going to look at the capital gains tax effects that most of your assets, including even gifting jewelry so that might be new news to a lot of people out there. So stick around for that. Then we’re going to be talking about, you know, with all of these international students arriving, could you rent out your room to international students?

And what sort of tax implications will there be there? Then there’s some interesting topics on those people who have a little bit more extra land. So there’s a couple of things that are happening in terms of two hectare property. So we’re going to be talking about the main residence exemption and capital gains concessions associated with those. And we’re going to finish off the show talking about the the new windfall tax that we’re seeing here in Victoria for those two-hectare properties as well.

So there is a hope to get through in today’s show. So let’s get straight into the show now. Julia and I want to start with obviously this big announcement that’s come out of the recently around the changes to working from home claims. So can we firstly start with what was the current set up that we were dealing with during the pandemic period where we did see a massive shift of people working from home?

Julia Hartman

Well, you know, the ATO allowed you to have $0.80 an hour working from home. You could be husband and wife sitting at the kitchen table and they both got the $0.80 an hour. Must have been must really hit the relief funds pretty. But they also they changed and it’s worse than what it was before any of this came in.

Ben Kingsley

Alright, so what are the new changes that we’re seeing when it comes to the 1st of March? So this is we’re obviously recording I mean early to mid March year. So can you just take us through what is the current set up that we that we had prior to these new changes?

Julia Hartman

Okay. Prior, when we had COVID, the ATO said $0.80 per hour that you could claim for working from home and it could be two people in the same room and they both got the $0.80 an hour. It’s very generous. Trouble was, it must have really put a generous.

Ben Kingsley

These people were claiming it. Yeah.

Julia Hartman

So that knocked that back to $0.67 an hour. But there’s no leniency in there. They’re saying you’ve got to keep a diary for the whole time, for every hour has to be recorded.

Ben Kingsley

So that is massive. What ultimately it means that in the previous arrangement, did you have to keep the diary for everything or is this a completely new sort of more detail push in terms of trying to to restrict the number of claims that are coming through?

Julia Hartman

Yeah, you were previously on, you had to keep a sort of full wake represent example you could use your rosters and the like.

Ben Kingsley

So this is a big change. So we’ve gone from $0.80 in, I’ve heard you correctly, we’re talking about now $0.67. But is that I mean, how many people are going to actually, you know, choose to do this in terms of and record every hour in terms of what they’re actually doing?

Julia Hartman

Well, how many people know they should be doing it? Good question. Till next year, they go to their tax agent and they’re already missed all that time in doing it. But there is an alternative and that’s the actual cost method. But you still need to keep your four week diary. So they still need to do something before the 30th of June.

Ben Kingsley

And have you got an example that you might want to take us through in terms of how to explain how that all works?

Julia Hartman

Right. Well, with the actual cost method, you have to, for example, record how much electricity you’re using, and then it’s a question of having a separate route. So you turn everything else up in the house, turn on your stuff in that room and work out with the electricity bill, how much it’s costing you per hour and do it that way.

Julia Hartman

Record a full week diary and then you can claim your actual stationary, your phone, which is very much at $0.67 an hour. You’re probably not getting a very good return on your phone because you don’t get to claim your mobile. So with your phone, you’d need to have to keep a full week diary. And I recommend you do that by taking recent calls.

Going through there is, of course, take a month, download it on a piece of paper and just put work or private and that gives you the ratio. Then you’ve got to collect all your bills for the year and apply that ratio across the board to them. You get to claim your furniture, your Internet’s a bit of a nuisance because you’ve got to take into account how everyone else in the house is using that internet, which is horrors.

Can you imagine trying to get your kids to keep track of how many hours.

Ben Kingsley

The streaming services, the gaming services that they’re all out? Yeah, that’s quite difficult.

Julia Hartman

Yeah. So really, I think I’d give up on the Internet if.

Ben Kingsley

So, sorry. But if you then do more detailed record keeping, does that give you a greater chance of making a more significant claim?

Julia Hartman

I think it would, because if you you should if you claim, you know, you find bills, probably over 1200 dollars and $0.67 an hour for 48 weeks only gives you a now seven days at five days only gives you a claim of about 1200 dollars. So I’d think it would pay you better unless you’re only working from one day a week or something like that.

But if you lose using your phone a lot, you might be better just claiming your phone or trying to use the actual cross method.

Ben Kingsley

I think it’s a it’s a really good example. And obviously for our value clients, one of the things you’ve done for us, which is amazing, is you’ve created a spreadsheet that will allow for for you to actually make more detailed tracking for that. Can you tell us a little bit about what’s in the spreadsheet that’s available for our for our clients?

Julia Hartman

Everything you need. So you’ve got both the actual method and the $0.67 an hour method. So you can keep that whole diary for the whole year, but it also has all the instructions. So I well, we’ve just been brief here. Yeah, copies of everything. It’s got a spreadsheet for everything. You need an introduction.

Ben Kingsley

So and so that also the itemization of all of the things that I mean obviously I can see here in our show notes in terms of a list of all those different areas of claim. So you just then add those areas in. So you’ve done effectively all the heavy lifting. No one needs to create a spreadsheet and that’s obviously available If you reach out to the Employer Wealth Tax Advisory Team, they will be able to share that spreadsheet with you as a value client.

So that’s obviously a great story there, but it really does highlight that and it’s pretty consistent with you. Obviously, the car claims, right? You have the different methods and the best method to get the most the biggest claim is usually the full tracking record as opposed to the cents per kilometer flat rate that they charge. This is another good example.

If you want to get money back, you want your your money to work out for you. You really going to have to track everything, aren’t you?

Julia Hartman

Yes, I think that tried to set the bus to High Line. So let’s let’s beat at this guy and do it properly.

Ben Kingsley

Yeah, I think that definitely working on this whole initial idea that people just won’t do it and hence, you know, they won’t be climbing as much tax back. But look, it’s important to you for those people who are working from home. And and we know obviously in our business, a lot of our staff now work from home. So really good record keeping is another a perfect example.

And what Julia is passionate about is, you know, really strong record keeping not only for the annual claims, but also for anything like capital costs and all of those other things, because at the end of the day, they are what you will be able to claim at some point in the future as well. So thank you very much for putting that that awesome spreadsheet together for our people.

And I think that’s a really good, important point. Now I want to move on to the capital gains affects most of your assets. And what was interesting about that, even gifting jewelry is the example that you use here. So of course the logical question that I want to ask is what does this mean? Julie So if I’m gifting an asset to someone, is there a capital gain event associated with that gifting?

Julia Hartman

Yeah. At market value, yes, it cost you more than $500. So that would be jewelry, wedding ring, engagement ring, that sort of stuff that you might hand down. You’ve got to pay capital gains tax when you give that to a family member. And can you imagine that over generations it would be a huge amount of tax that this ring or whatever we’re talking about here is still.

And you’ve got to work a couple of weeks to earn the money to buy the same thing regardless because inflation. But meanwhile, the tax man’s come along and say, well, I’ll only cost you $500, but ten years later it’s worth 100,000. Sorry, 40 years later it’s worth about 100,000. So we’re going to text you on $99,500 worth of capital Guy.

Ben Kingsley

Wow. And I suspect there’ll be a lot of people watching or listening to potentially the audio version of this going. But I’ve got my grandmother’s diamond ring and I’ve got, you know, so does that how does all that work? I mean, so can you take us through that example in a little bit more detail in terms of, you know, again, we’ve got some information in sort of show notes here, so let’s step through that.

We’re talked about, you know, a potential jewelry piece of jewelry that’s being transferred. So step aside that.

Julia Hartman

Okay, Well, the example I give in the show notes is the engagement ring that, let’s say it was pretty far I’ve given to the the wife and it was a gift there in that transaction, but was priority four. And even if it was he might have bought it in the daylight, given it to her. So it didn’t really matter.

There was much change in value. But if he takes too long, will they? Just proposing and handing over the ring then trigger a capital gains tax? And they were I was I pretty thought that his wife dies and he so the wink ring comes back to me he inherits all his wife’s assets and he doesn’t want ring he gives it to his daughter.

Ah well fortunately because it was pretty five and he’s got saints then he gets market by the date of her death if he gives it to her quickly. But when there’s no change that’s alright. But then the daughter ten years later gives it to her son to propose with. So the daughter’s got to pay capital gains tax on the increase in value.

Now from what it was when her mother died and then thought and now that’s the son. Yeah. The son has a cost base of that value, that market value. So as long as he proposes quickly, yeah, that’s pretty bright. But if he takes a year, if she gives it to him too early and he takes a few years to find what will be, he’s going to have to pay capital gains tax when he gives of that rate.

But then so many, many, many years later, the son or the grandson of the original giver.

Ben Kingsley

Yeah. So that That’s right. The grandson of the original father who gave it to the daughter. Who gave it to the son. Yeah. Yeah. Right. Yeah. I’m following.

Julia Hartman

Yeah, Yeah. So he’s what dies and he decides to give it to his daughter. Well, I mean, we’re talking 40 years, things like $100,000. And all we did was move it up through the ranks and only pay tax when the mother got it. So that’s probably another 30 years with, again, huge amount of tax because the cost base is very, very little.

No indexing for inflation. Yeah, you get 50% capital gains tax discount, but you’re taxing being a tax the inflation because that rate is still relatively work. The same amount of hours of work right here.

Ben Kingsley

Julia So the obviously everyone will be sitting on this. The answer to this next question, if I don’t gift it to them but I lend it to them or I allow them to use it, but I still hold ownership of that. Is that is that a means by which I’m not in breach of any ruling? See?

Julia Hartman

Oh, well, it would be a question of fact and I think what most people replied to me when I tell them this is I say, how’s the tax office going to know? But and possibly not. But you think about your list, your documents, the probate. Yeah, I would say if they were in the making. Yeah. Really.

Ben Kingsley

Well, that is a really good point about the probate. Yeah. You are listing your, your, your, your items in the will. And so normally you know during that obviously very difficult time for the family and all those assets are being allocated out. Is that a time where the ATO can identify and potentially put in a claim for any of those assets that obviously we know we’ve talked about the family home, but let’s talk about, you know, what are we talking really here about heirlooms.

So jewelry, anything, you know, any scarce asset that might be appreciating. So maybe stamp collection, coin collections, all those types of things, Is that is that where we run into difficulties here?

Julia Hartman

Yeah. Not if they’ve gone from the deceased to someone through the will. Yeah, that’s alright because it’s a rollover in that it’s when the wills says everything to my husband and the husband says oh here you got daughter or the father you know.

Ben Kingsley

Yeah.

Julia Hartman

Yeah, yeah, I’ll give you this. So the passing on death is okay, but if you, if you divvy up the assets differently to the will in other words, you’re gifting, you’ve inherited them and GST.

Ben Kingsley

What’s also another great reminder about the importance of having that will in place right that last will and testament that rollover provision does protect you. If you don’t have something like that in place, that’s potentially when you know the trustee or whatever who’s settling the affairs. There may be a tax liability as part of that because it may not have been organized.

Ben Kingsley

Is that is that a fair statement?

Julia Hartman

Well, as long as it passes on death. But what should have happened is on her deathbed, the wife should have changed to will decide, I want to give my engagement ring to my daughter. Yeah.

Ben Kingsley

That’s that’s a that’s a nice step down in terms of what that looks like. And and hopefully when you are planning these, you know, these terrible events and thinking about who you do ultimately want to see, it passed onto and having that really clearly defined in your will is going to be helpful there. So that that is really interesting in terms of, you know, there’s often conversations around if I, you know, pass, if I give a gift of cash to my son or daughter after to buy a property or something along those lines.

Ben Kingsley

And that’s where getting that advice is going to be really important before you actually do anything in terms of talking to your tax accountant.

Julia Hartman

Well, yes, but not so much capital gains tax on that cash because cash is not.

Ben Kingsley

Subject to cash. Yeah, yeah.

Julia Hartman

Next. But there are things and ways you can do all traps. You can get yourself into ways you can make sure preserve the main residence exemption. But that is a topic for another time.

Ben Kingsley

Yeah, that is. But thank you. That’s really helpful. Just a little reminder that it’s obviously that the Tax Office has the right to make a claim against any any asset that has that’s an appreciating asset they can potentially come after. So that’s why it’s really important to be planning and talking to your accountant about that. Or let’s change pace a little here.

And, and Julia, the reason why I wanted to add this one for our topic of discussion today was obviously the Chinese government recently said if you’re going to be, you know, studying abroad, you need to get abroad because you need to learn in that location because otherwise we won’t recognize your qualifications. So that is meant obviously a huge influx of additional international students arriving in Australia as we record and we’ve got record low vacancy rates and that’s putting a lot of pressure on rents.

And so there might be a lot of people out there who are thinking, well, you know, our kids are now adult children, they’ve left the home and and now, well, why don’t we, you know, sort of talk to our local university about putting a couple of our rooms available for rent. And so what I wanted to talk about is, you know, what are the what are the tax consequences associated with potentially renting out a room in this example I’m using as an international student.

So, you know, firstly, but my first question is what sort of is allowable as part of that particular story?

Julia Hartman

Well, you don’t want to trigger the fact that your home is being used to produce income. Yep. Now, to reset the cost base to market value, you’re going to have to keep records for the rest of the time you own it. And of course, you’d have to pay tax on the income and then deduct portion of the portion of electricity and the rest of it.

But generally, when you do write your place out to students, the Education Institute has organized what they call homestay and they come and evaluate what they think it’s going to cost you to have that student in your home. And they set the amount. And as long as this amount is only covering the actual share of food and electricity and the share of time, which just isn’t an issue these days, but that’s what the ruling says, then you’re not using your home to produce income, so you don’t get to negative gearing, you don’t trigger the capital gains tax provisions.

You don’t have to put the income in. Of course, the catch is if you get too much, so you’re doing it privately and you’re trying to make a profit, please consider the consequences. It may not be worth it.

Ben Kingsley

So that obviously what you’re talking about there, the consequences of resetting the cap, the cost base, and then ultimately that’s going to significantly impact any capital gains exemption that you may be entitled to as your principal place of residence exemption. So so that is our big flag here. We love the idea that, you know, your you get a cultural exchange.

It’s a wonderful way to obviously, you know, show them the joys of the culture of Australia. If you’re you, you know, renting out your room in your home. I would say the tip here is definitely do it via the universities or tax or whatever. So, you know, you are making sure you’re staying on the right side of the law.

And the other big takeaway from from what you’re saying there, Julia, is that you can’t profit from this. So we have seen, you know, private rulings, evidence of private rulings where there was what one might consider a moderate gain of ten odd thousand dollars for three international students. But the ATO rejected that claim on the grounds that they were profiting from renting out those rooms.

Julia Hartman

Yeah, and then they have to pay tax on it. The trigger this they don’t get their main residence exemption over all of the property and it’s more the recordkeeping, not me.

Ben Kingsley

So, so think about it like this It may not it’s not going to be a cash windfall. It’s definitely going to be something that’s going to be something that’s going to be subject to, you know, tax review. So but you will you know, if you’re a house of two and you’re living there full time and you’re running air conditioning and heating, and then you have one or two extra students in there, we’re talking about covering the board, covering electricity, utilities and that sort of thing.

And Julia did make mention it doesn’t cover any mortgage interest payments. They’re not they’re not there to cover those costs, just the household operating and running costs. That will be part of that. So there might be a moderate to small benefit in terms of reducing your outgoings from a household point of view. But it’s certainly something you can’t consider to profit from.

Julia Hartman

You wouldn’t be doing it for the money. You’d be doing it for the cultural exchange, that’s for sure.

Ben Kingsley

Yeah. Fantastic. So I think we’ve done that one nicely. Let’s move on now to talk about topic number four, and this one’s a really interesting one because you’ve recently had a case there that you advised a client on Julia around two hectare properties and those two hectare properties which in the old terms, for those of you a little bit old, like me in Acres, that’s around five acres, those five acre properties, that main residence.

Tell us about any risk towards that principal players or residents concessions and the capital gains implications if you are doing something that’s not just living in and enjoying the quiet enjoyment of that property and you might be looking to adjust or something along those lines. So unpack that story for us.

Julia Hartman

Okay. The clear rules about your main residence is an exemption is it can only cover up to two hectares and those two hectares cannot be used to produce income. So if you’ve got a seven hectare property, sorry, a seven acre property or Yes.

Ben Kingsley

Five, five or six, seven, I’ve got.

Julia Hartman

It in the old school. Two. But you’re going to have to keep capital gains tax records, There’s no doubt about that, because some of that property is going to be subject to capital gains tax and the best tax, not scam tax deduction tax strategy. That’s the wa it works. It’s that strategy a lot, which is good recordkeeping. That’s what all my spreadsheets are about. Let’s get these recordkeeping right. And the tax office is can crawl all the way to the bank. So I need to then right from the time they buy the property, if it’s more than five acres, they need to keep track of all the rights, the stashing costs and that and they need to divvy it up, in my opinion, right from the start and say, well, that two acres, they’re out of the seven, that’ll be exposed to capital gains tax.

Now, once you’ve done that, you’re going to pick that two acres carefully. Now, if you’ve got flood land and the back of no value now and no value when you sell it, that’s where you kick your two acres, too. Now that you can say, all right, yes, you can wear your capital gains tax on that, but let’s say it was worth nothing when I bought it.

Cost me this much to slash it. Do I get a capital loss? Thank you very much. Okay. So with nothing, when you sell what you can do to mess it up is stop using the tie that you should try to protect the private purposes. So the local farmer comes in and says, Can I adjust my profit? My cattle on your property?

You’ve just blown it because that that pot is being used to produce income. So it’s not being used for private purposes only. Let them on that two acres of floodlight land. It’s not so bad if you use it in a business. Now, agistment is not considered a business agistment. You can’t even use that to negative gear the property.

But if you use some of the area inside the two acres that you’ve got an excess in a business, then you might get the small business concessions that will eliminate the capital gain anyway to have to use it in the business for at least half the time you own it, or seven and a half years, which is the shortest period.

So the idea is to go on Google Maps, get a satellite picture, divvy it up, make a plan right from the day you move there and beat the taxman and make it.

Ben Kingsley

I think this is great advice. I mean, obviously, we saw through the pandemic that, you know, there was a flight to, you know, the tree change and and certainly move out to hobby properties and those types things where you’ve got a little bit more acreage. So this is a timely reminder that, you know, a small percentage of the population who are doing that that they think clearly about that five acres and ring fence that around, you know, their property and you know where the capital gain is going to happen there.

And to Julia’s point, if you’ve got 20 acres and some of it is covered in thick bushland and so forth, well ultimately that is not, you know, in terms of its productive use and its ultimate valuation in the future is going to be poorer in terms of whereas the actual part of the land that’s that is acquired enjoyment and you’re adding value, making nice gardens, improving the that property there, it’s basically really clear that that needs to be in your circle of your five acres, all your two hectares in terms of how you do that.

But to Julia’s point, clean record keeping and to my point that I always make in these episodes is talk to your tax accountant, you know, get a plan in place, you know, understand the record keeping that you need to make and document them clearly and then put them into the digital filing cabinet of the future and keep them there ready to go.

And your accountant’s aware of of the decisions that were being made and ultimately that will put you in good stead is probably how I’d summarize that. Julie, you got anything further that you want to make sure your executor knows where these records are?

Ben Kingsley

Oh, great tip. A lot of people who yes, you know, if you if your partner, your executor, all of those people don’t know where you’re storing all this information and, you know, God forbid you hit by a bus, jeez, it makes it difficult to, you know, when the taxman comes and says, I don’t have any record of of which part of this land was, you know, a provision for the main residence exemption.

And, you know, so they can and they can be difficult. So that’s a I think that’s a beautiful little tip there at the end of autumn. Number four on our on our card today, Julia. So thanks for that one. It is a good segway into the final talking point for today, which is really around this this new windfall tax that we’ve seen introduced in Victoria.

Ben Kingsley

So if I could take the floor here and we have a little bit of a chat about this recently on the podcast, but it’s it’s quite interesting in terms of what they’ve done. So using exactly the same methodology of two hectares or or just under that five acres, what we’ve seen is that this new windfall tax commences on the 1st of July 2023, but relates to contracts entered into after the 15th of May 2021 and commercial decisions made now.

So ultimately, you know, the person who’s owned the property, when that decision was made, even though the law is taking effect from the 1st of July, there’s a retrospective element of that back to the 15th of May 2021. So not just last year but the year before that. Now it applies to all resigned land in Victoria over two hectares with limited exemptions.

So there might be the odd exemption. So you might want to talk to your tax accountant about what those exemptions are. The landowner, the land owner at the date of resigning is liable for to pay the tax. The date of rezoning is determined under the Planning and Environment Act of 1987 and is not within the client’s control. So this is the interesting bit here and this is the bit that, you know, might shock a few people was like, I’m enjoying my quiet enjoyment of my property.

That’s 20 acres on the fringe of town. And yes, I see suburbia catching up to me. But all of a sudden, with the stroke of a pen, they’ve raised on my my 20 acres plus another 120 acres into residential zoning. That windfall is what they’re talking about here, and that’s where they apply the tax. So what we have seen is if the windfall is greater than 100,000 but below 500,000 as as measured by the capital improve value.

So that’s the land value. As part of that rezoning, you’re up for 62.5% tax on that amount and anything above the 500,000, you’re up for 50% in tax payable. So yes, there’s a significant uplift in the value of your land if you get rezoning. So higher productive use. We talked a lot about the value of high productive use land and that’s why it’s so expensive.

But why are we? I just wanted to keep living on my hobby farm and my, my, you know, my, my property that’s at an ad on the sticks of the town. And I’ve got now this massive tax liability. And if I don’t pay it within 30 days, I then can get a loan structure in place of which there’s going to be interest charge on me over the next 30 years until such time as up.

So that property which could, you know, the interest is capitalizing on interest all of a sudden, you know that windfall. So it’s going to force a lot of sales and it’s going to really make an impact on a couple of livelihoods for those people who have no intention and what where an interest in making a quick, you know, financial gain in terms of subdividing their land.

But that’s that’s here in Victoria. You know, watch this space in terms of what happens across Australia. But do you have anything further that you know or any comments that you wanted to make on that particular one? Julia.

Julia Hartman

Well, we work all our life to pay off our ideal dream home or whatever, but we don’t really on it at all, do we? We don’t pay the rates on it. We’ve got like the government’s got all the rights to what’s under the thin layer underneath. You can’t chop the trees down. You got to pay tax if it goes up in value too much.

What are we working all out like for.

Ben Kingsley

Well, it’s a good question. Yes. That that whole mining one is another can of worms way is issue only eyeing the topsoil but anything under that the government owns it they want to put tunnels or or they want to mine that particular land. So it’s it really is true. Obviously, you know, there is a financial windfall that will come to those households.

But yeah, we know that the home is your castle and that land that you were just talking about, that that may not always be the case. You just can’t stop progress. And I suppose the other message here is you can’t stop taxes is one of the stories. So there we go. Episode four What we were talking about there is talking property tax with Julia Hammond.

I want to just close out a couple of things, if I can. The first one I want to talk about here is that with the previous episodes, you can view those on the Empower Wealth website or also on our YouTube channel. So check them out. And the reason why I say that is I just want to quickly run through those topics again, if you’re new to these educational tech series that we’ve been putting together.

So in episode one, we talked about the five top tax rules every property investor must understand. So starting with negative gearing and then turning your principal place of residence into an investment property, what is the six year rule renting out your principal place of residence or holiday home into an income producing asset, or turning that into an income producing asset?

And then the big tax change that’s going to happen in 2024 in terms of the stage three tax cuts, we talk about those in episode two. Part one, we were talking about tips to minimize your tax return and we looked at things like making your own super contributions. We talked about best practice of your personal tax bookkeeping. So that’s what we’re passionate about.

And coming back to Julie’s point about good record keeping and your end of year considerations for property investors in episode two, Part two, we then build on that, talking about claiming car travel expenses, travel expenses in general to inspect investment properties, the changes to the rules and the fact that you can’t make any claims there and then we also took a look at the depreciation schedule, claims that were also available back then and what’s also now available to you to claim in episode three, we double down and double click more on some of the other car expenses.

So salary sacrificing for a car is a good idea. Julia gave us a great tip about when buying an electric car, what to what to consider as part of that. And then we pivoted and talked about private health insurance in terms of is it worth it? So check out those past episodes. Finally, in terms of another sort of a recommendation for you a couple of weeks ago, Julia joined us on the Property Couch podcast, and Bryce and I took her, took her expertise and put it in place in regards to entities and structures.

So what sort of what should I consider in terms of which entity or structures should I buy my investment property? We cut it off on company tax. Smurf’s self-managed Super Fund trusts and also buying in your personal name and then percentage of ownership shares of that particular property. So that’s the the property couch episode number 434, if you’d like to check that out.

In terms of our next episode, which we’re going to do in May in preparation for that for the end of the financial year again. So we’re going to sort of talk about tax planning and double, double, double down on that in terms of what’s going to be happening around your tax planning to get that right before 30 June when your tax is then due for your tax return and compliance work to be done.

So, Julia, firstly, thank you again for your invaluable knowledge. Julia has amazing books, excellent blogs on all of these interesting topics. You can check out all of that content at the Bay and Tax website and you can follow the prompts to all of that amazing insight. She’s got some awesome spreadsheets available there as well for that record keeping as part of that. And so thank you for coming on to the show.

Julia Hartman

Thank you for having me, Ben. It’s been fun.

Ben Kingsley

Now, next time, also remember two important things. The takeaways I always say remind everyone that before you make any investment decision, it’s always best practice to make sure you keep your accountant in the loop. And we recently have the band tax conference here in Melbourne and it’s just hearing the stories of people who made decisions that are going to have big capital gains implications or no tax planning associated with them.

And we just scratch our heads the amount of money that’s just donated to the government or the tax office because of poor tax planning is a real true thing. And so that’s what we’re trying to also overcome by introducing this tax planning and tax education series with Julia. And finally, as I always say, knowledge is empowering, but only if you act on it, and so until we see you next time police I care and bye for now.