The Carbon Tax Repeal and Your Small Business

REIANEWS ISSUE 38: SEPTEMBER 2014

ALSO IN THIS ISSUE

THE CARBON TAX REPEAL AND YOUR SMALL BUSINESS

PARLIAMENTARY GROUP ESTABLISHED FOR CITIES

SOCIAL HOUSING AND NEGATIVE GEARING

LATEST HOUSING DATA NOW AVAILABLE MORE WANT TO FIND OUT ABOUT PROMOTING YOUR BRAND IN REIA NEWS?

CONTACT REIA MANAGER COMMUNICATIONS ZOE DAVIES ON 02 6282 4277 OR AT [email protected] FOR FURTHER INFORMATION. PRESIDENT’S REPORT

1 REIA President, Peter Bushby with Ken Nichols from the Australian Property Institute 2 REIA President, Peter Bushby with Peter Howman Managing Director of Defence Housing Australia, which recently joined as REIA’s newest member 1 2

strongly supports foreign investment Friendship Group for Better Cities. WELCOME in Australia but believes there needs This is an exciting new development FROM REIA’S to be more monitoring of existing and I am proud that REIA is one regulation rather than new measures of the founding members of the that would unfairly burden the sector. PRESIDENT group. The group will provide a new I was also in Canberra recently to meet forum for diverse stakeholders to with various politicians, Government come together and identify ways representatives and industry leaders that we can create better cities. Hello and welcome to the September including Ken Nichols, acting National edition of REIA News. It has been Operations Director of the Australian This month REIA also released its a busy month for REIA and for the Property Institute and Peter Howman Housing Affordability Report which broader sector with significant from our newest members, Defence showed a concerning trend with media attention turned towards Housing Australia. Accompanied by first home buyers still staying away the Foreign Investment Inquiry REIA CEO, Amanda Lynch, and as part from the market in large numbers. and the recent increase in house of our ongoing conversation with prices in Melbourne and Sydney. It would seem the removal of first Government and the industry, we also home buyer grants in many states and REIA Board member and CEO of First raised various matters including our territories is having a negative impact National Real Estate, Ray Ellis, recently campaign to retain negative gearing in by lessening their confidence to enter spoke at the House of Representatives its current form. We believe negative Standing Committee of Economics the sector. For further information gearing plays an important role in Inquiry into Foreign Investment in Australia’s real estate sector and helps about the report, click here. Australian Real Estate. During the keeps downward pressure on rents. public hearing, Mr Ellis said that foreign investment would benefit from Whilst in Canberra I was also able to Mr Peter Bushby greater scrutiny by Government. REIA attend the launch of the Parliamentary REIA PRESIDENT

This article is brought to you by REIA Chief Executive Officer, Amanda Lynch

With all the recent media Some media articles have even for real estate at a total value of attention on foreign suggested that foreign investment $51.9 billion out of a total foreign levels are influencing Australian investment level of $135.7 billion. investment in Australia, property prices. These media claims Around half of the approved coincided with the recent public it timely to step back and applications related to vacant land hearings as part of the House of access whether foreign development, new dwellings, off- Representatives Standing Committee the-plan dwellings and property investment is a helpful on Economics Inquiry into Foreign redevelopments. The remaining driver or hindrance to Investment in Australian residential approvals related to existing real estate which saw REIA represented Australia’s real estate sector. residential property and these are by board member, Ray Ellis. And if there are problems, the properties that are attracting then what changes can be The 2012-13 Foreign Investment significant media attention with claims Review Board Annual Report noted that foreign nationals are pricing implemented to ensure that 94 per cent of proposals receiving Australians out of the market. foreign investment approval were it does yield benefits. However, the current foreign investment regulations stipulate that temporary Australian residents can acquire property only for their residence. The regulations also state that they cannot buy established dwellings as an investment and when they leave Australia, they must sell the property within three months. This measure was established for the very reason of mitigating any risk of foreign nationals negatively impacting on the ability of Australians to purchase an existing home. REIA strongly supports foreign investment in Australia as it has been demonstrated to increase housing supply at a time when Australia Discussing foreign investment in Australian real estate, REIA Board member and First National CEO Ray Ellis speaks with Chair of the Foreign Investment Inquiry, Kelly O’Dwyer MP is suffering from a chronic under

»» article continues COVER STORY CONTINUED

supply of housing. Yet REIA also and that the Australian Bureau of to verify the identity of the clients wants to ensure that Australian Statistics, Foreign Investment Review they represent and reflect the client’s real estate remains affordable Board and Reserve Bank need foreign residency status while filling with the express aim of seeing an comprehensive data to better in the form in an online workspace. understand the extent of non- increase in home ownership. While e-Conveyancing will reflect the compliance. We believe the current foreign paper versions of the transfer of land investment regulations strike the There is currently an $85,000 fine in each state and territory and the data right balance between allowing for for breaching the regulations but the fields completed by conveyancers will much needed foreign investment in Foreign Investment Review Board be the same, the platform will store Australia while ensuring appropriate has apparently not prosecuted a data electronically. With 85 per cent of checks and balances are established. single foreign buyer for breaching all property transactions over the next foreign ownership rules. This fact two years expected to be completed So why is the media filled with alone should highlight the fact that electronically, e-Conveyancing has claims that the system is not the regulations don’t need to be a capacity to reflect the number of working? The question needs to strengthened but better enforced. transactions involving foreign buyers be asked, are the regulations being and, therefore, may help improve REIA believes the introduction of properly enforced? In REIA’s recent monitoring and compliance activity. submission to the Inquiry into e-Conveyancing could improve this Foreign Investment we called on much-needed monitoring and is One last point to remember as part the Government to better monitor encouraging the Government to of this issue is that the 2012-13 and regulate foreign investment in explore the possibility of using the Foreign Investment Review Board Australian real estate and have also new online platform to improve Annual Report also details the origin compliance through greater spoken directly to the Government of foreign investment in Australia. inter-departmental and agency The largest source countries of about utilising the emergence of communication, such as with the proposed investment in real estate, e-Conveyancing as an existing Department of Immigration. by value are China, Canada and mechanism that could facilitate this. the USA, accounting for 11.4 per While it is important to stress that At the hearing Ray Ellis said that the cent, 9.5 per cent and 8.5 per cent the new online platform is heavily problem with foreign investment in respectively of all approvals. regulated with a keen focus on Australian residential real estate is protecting the privacy of individuals, This is a particularly interesting fact not that it occurs, but that it requires it will be capturing a rich set of data to note as media articles on foreign greater scrutiny by Government. including identification where the investment are frequently dominated Mr Ellis stated that he believed this transaction involves foreign nationals. by stories highlighting only one issue requires regulatory attention Lawyers and conveyancers will have particular source country, China. THE CARBON TAX REPEAL – HOW IT WILL IMPACT SMALL BUSINESS

The Hon Bruce Billson MP Minister for Small Business

On 17 July 2014, legislation repealing the carbon tax was passed into law and applies retrospectively from 1 July 2014.

The Government believes the repeal savings in regulated sectors, namely In the first instance, you should ask your of this legislation will reduce cost of the electricity, natural gas and synthetic supplier about the prices they are charging living pressures on households and greenhouse gas (SGG) sectors. you and how they are passing on any cost cost pressures on businesses, including savings from the repeal. Businesses that Companies that supply electricity, natural small businesses. Companies that were remain concerned can contact the ACCC via gas and SGGs are required to pass on all subject to the carbon tax typically will its website at www.accc.gov.au/contact-us. cost savings associated with the repeal have passed on part or all of this cost of the carbon tax. Electricity producers In relation to energy prices, businesses to their customers, smaller businesses and retailers and natural gas retailers, can also shop around for an energy and households, which experienced as well as bulk importers of SGGs are market contract that sets the price and higher prices as a result of the tax. The required to substantiate their pricing conditions most suited to their needs. Government further believes that the to the ACCC to demonstrate whether repeal will reduce the administrative carbon tax cost savings have been passed Need more information? and compliance burden on business. through. In addition, the ACCC has broad Information on the carbon tax repeal, enforcement powers to take action against Where should I see cost reductions? including fact sheets, is available on all businesses in the economy that make the Department of the Environment’s Abolition of the carbon tax should false or misleading representations about website www.environment. place downward pressure on electricity the effect of the carbon tax repeal on gov.au/carbon-tax-repeal. and natural gas prices. Treasury has their prices or engage in misleading or Information about the role of the estimated that, on average, retail deceptive or anti-competitive conduct. ACCC as part of the carbon tax repeal electricity prices should be around 9 per Businesses and other entities that is available from www.accc.gov. cent lower in 2014‑15 than they would made claims about price impacts at au/business/carbon-tax-repeal. otherwise have been with a $25.40 tax the time the previous Government on carbon. Similarly, retail natural gas introduced the carbon tax should Businesses can also contact prices should, on average be around ensure that these impacts are reversed the Australian Government via 7 per cent lower in 2014-15 than they with the repeal of the carbon tax. business.gov.au by calling 13 28 46. would have been under a carbon tax. What can I do if a supplier does »» Sourced from the office of How will the Government ensure not pass on cost savings from the Hon Bruce Billson MP, that price reductions are passed on? the carbon tax repeal? Minister for Small Business In addition to its existing powers, the The Government expects all Australian Competition and Consumer businesses should endeavour to pass Commission (ACCC) has been given on the savings they have received new powers to monitor prices and from the carbon tax repeal to other enforce the pass through of cost businesses down the supply chain. BUY TICKETS NOW TO AVOID DISAPPOINTMENT

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Silver Sponsors: Proudly hosted by: PROPERTY INVESTORS WARNED BREAKING ABOUT ATO NEWS CRACKDOWN

The Australian Taxation Office (ATO) MINING TAX REPEAL had issued a warning that they will IMPACTS SMALL BUSINESS be paying particular attention to tax returns by owners of rental properties for the 2013-2014 financial year. The Federal Government has repealed the Mineral Resource Rent Tax (MRRT) following a deal reached with the Palmer United Party. From 1 July, thousands of Australian However as part of the deal, several other measures were also property investors will be axed and these measures will adversely impact small businesses. submitting their tax returns and it is really important that they ensure These measures include the abolition of the loss-carry back everything is in proper order. provisions for small business, reducing the instant asset write-off threshold from $6,500 to $1,000, and axing accelerated vehicle The ATO has highlighted a number depreciation. of common errors made by rental property owners that include: Small businesses can call the ATO for advice about the changes on 13 28 66. The ATO will be working closely with • Claiming rental deductions for tax practitioners and industry on the administrative changes properties not genuinely available so they can provide assistance and advice to their clients. for rent • Incorrectly claiming deductions for As a result the following dates may affect taxpayers: properties only available for rent part • Abolition of the company loss carry-back from 1 July 2013; of the year such as a holiday home • Reduction of the instant asset write-off from 1 January 2014; • Incorrectly claiming structural • Abolition of accelerated depreciation for motor vehicles improvement costs as repairs when from 1 January 2014. they are capital works deductions, The repeal of the MRRT will be prospective. This means that such as remodelling a bathroom or entities will not accrue further MRRT liabilities from 1 October building a pergola, and overstating 2014. The ATO will be consulting with industry to implement the deduction claims for the interest on administrative approach. For further information call 13 28 66. loans taken out to purchase, renovate or maintain a rental property. Building a successful property portfolio is a key objective of most mum and dad property investors when they purchase their first investment property and it is very important that taxation issues are properly addressed right from the start. It’s not just a home loan. It’s the start of something bigger.

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THE FINANCIAL SYSTEM INQUIRY: RAISING SMALL BUSINESS AND HOUSING AFFORDABILITY CONCERNS

REIA recently submitted its response to streamlined financial services The Interim Report raised the to the Interim Report on the Financial regulation. These reforms underpinned question as to whether the risk System Inquiry, also known as the Australia’s economic stability and weights for insured loans should be Murray Report. REIA feels this inquiry growth over the past thirty years. decreased as this could improve the provides an important opportunity competitive position of authorised In the sixteen years since the last for the real estate sector to highlight deposit–taking institutions (ADIs) financial system inquiry, the financial how Australia’s financial sector can and non-bank lenders, maintain sector has been transformed by a be strengthened to benefit small broad access to mortgage loans and range of factors including domestic and business as well as potentially provide more capital in the system. international economic and financial improve housing affordability. crises, a substantial regulatory reform Overall, more than one-quarter of The inquiry, established by the agenda, the growth in superannuation Australian housing loans are covered Treasurer Joe Hockey in December and broader macroeconomic trends. by mortgage insurance with this last year, is charged with examining figure nearly three times as high for Given the importance of this inquiry, how the financial system can be first home buyers. The additional REIA has and continues to be fully enhanced to best meet Australia’s mortgage repayments resulting from engaged with the inquiry process. evolving needs and support mortgage insurance are around $16k Our most recent submission to the Australia’s economic growth. for a 30 year mortgage of $500k with Interim Report made the following a loan to value ratio of 90 per cent. Australia has held only two previous recommendations: reduced risk financial system inquiries, including the weights for insured loans; the According to Genworth, nearly Campbell Report in 1981 and Wallis retention of negative gearing; the three-quarters of first home buyers Report in 1997; both of which were development of a database to reduce in the 6 month period to March 2014 catalysts for major economic reforms information asymmetries between had less than 20 per cent deposit. with the Campbell Report leading to lenders and borrowers; and that With first home buyers finding it the floating of the Australian dollar the current arrangements regarding increasingly difficult to enter the and the deregulation of the financial leveraging by superannuation housing market and home ownership sector while the Wallis Inquiry led funds remain unchanged. in Australia declining after four

»» article continues decades of stable levels, any measure highlighted in the Henry Tax Review, that finance is higher than for larger that improves housing affordability these arrangements place downward enterprises. The most significant is fully supported by the REIA. To the pressure on rents. Importantly, the impediment is identified as being extent that reducing the risk weights majority of property investors are information asymmetries where for insured loans achieves this, this ordinary ‘mums and dads’ who have lenders have only a limited knowledge approach is supported by the REIA. only one investment property, often about a new borrower’s financial as part of a retirement plan, which is There has recently been much complementary to superannuation. position, the financial performance speculation as to whether negative of the business and the financial gearing for property investment should The current negative gearing behaviour of the business owner. be abolished. The Interim Report arrangements therefore are noted that the asymmetric treatment complementary to the goals of REIA fully concurs with that finding of interest costs and other expenses Government in addressing the and in its submission highlighted a (which are fully tax deductable) and supply of rental accommodation. further information asymmetry in capital gains tax (which is taxed at REIA further believes that the that lenders have limited knowledge a concessional rate) encourages removal of negative gearing would about the industry sector of specific leveraged investment, particularly increase demand on social housing, small businesses and that there are in housing. This has implications for an area that governments have quite large geographic differences. lender risk which in turn creates a been struggling to address. systemic risk for the financial system This lack of understanding was most REIA also noted in its submission that which should be considered. noticeable in the finance sectors it believes any changes to negative response to the global financial crisis. While REIA recognises that this inquiry gearing arrangements will not is focused on the financial system, in improve housing affordability due to The Interim Report suggested the our submission we noted that it was a supply side response. This in turn development of a database to reduce disappointing that this focus prevented would further exacerbate the current information asymmetries between the inquiry from more broadly imbalance between the supply and lenders and borrowers and REIA examining the benefits of negative the demand for housing. Given this, believes this would go some way gearing and whether the arrangements REIA believes that the benefits of towards alleviating this problem. are equitable across all asset classes. negative gearing far outweigh the negligible risk to the financial system. Given the significance of the REIA firmly believes that negative gearing increases the supply of The Interim Report also highlighted outcomes of this report on the real rental accommodation with almost the structural impediments for estate sector, REIA will continue to 1.9 million of Australians investing small-to-medium sized enterprises fully engage with the inquiry and in the residential property and, as to access finance and that the cost of ensure our voice is well heard. This article is brought to you by REIA Chief Executive Officer, Amanda Lynch

REIA HELPS FORM PARLIAMENTARY GROUP TO FOCUS ON BETTER CITIES

REIA recently helped launch The forum was co-convened by As the key national body collectively a new Parliamentary Jane Prentice MP, Member for representing around 80% of Australian Ryan, Andrew Giles MP, Member Friendship Group focusing real estate firms and licensed agents, for Scullin and Adam Bandt MP, REIA sees the future of our cities as on creating better cities. Member for Melbourne. a critical investment. We recognise The invitation-only launch The group brings together key political that Australians have an intrinsic at Parliament House was and industry figures in a forum setting connection to their homes but also attended by around 75 where ideas and thought-provoking understand that homes are greatly members of Parliament discussions can be explored with influenced by the cities they are part and industry leaders at the aim of making Australian capital of. Residents will obviously enjoy their and major cities more liveable, more Parliament House on homes more if the city that they reside resilient and more productive. in is well designed. If people think Wednesday 27 August 2014. REIA is a founding member of about the times that they have viewed the group with other industry potential property purchases, they members including the Australasian will probably recall not only thinking Railway Association, Bus Industry about the style of the home but Confederation of Australia, the access to transport options and green Property Council of Australia, Cycling spaces as well as the close proximity Promotion Fund, International to schools and other amenities such as Association of Public Transport restaurants and employment options. Australia and New Zealand, National Heart Foundation of Australia REIA also sees its involvement in this and the Australian Institute parliamentary group as an excellent of Landscape Architects. avenue through which it can further

»» article continues Launching the new Parliamentary Friendship Group for Better Cities, Member for Ryan Andrew Giles MP, Member for Scullin Jane Prentice MP, Member for Melbourne Adam Bandt MP and REIA President Peter Bushby

reach out to politicians and decision REIA is very excited to be part of the makers on key issues affecting the real friendship group and help inform estate sector. As our members would decisions about creating better cities. be aware, in many of our submissions It was great to see so many diverse to Government on policy matters, interests coming together at the the recurring issue of housing supply launch in support of the concept of better cities. It will be interesting emerges. There is currently a chronic to see how the friendship group under supply of housing in Australia progresses as there is no shortage and there has been for some time. of significant issues to be worked This supply-side issue impacts on through with the next function to affordability and REIA has been very focus on housing affordability. But concerned in recent years by the by coming together and sharing sharp decline in first home buyers ideas, concerns and solutions, I do entering the market. New housing believe we can collectively work stock also needs to be considered with all levels of Government to in the context of infrastructure spearhead a renaissance in our cities. needs, which can greatly shape the character of a neighbourhood. REAL ESTATE SECTOR FORMALLY OPPOSES REA TRADEMARK GRAB

REIA has joined eight other groups The opposition period to REA Group’s Data from the Australian Bureau in sending a clear signal to the trademark application, which closed of Statistics shows that as at June REA Group that it will oppose any late last month saw nine real estate 2013 there were 35,019 real estate attempt to trademark generic businesses and member organisations services businesses operating in terms widely used by many lodge their objection with IP Australia. Australia. A substantial proportion Australian real estate businesses. of those businesses use the phrase These groups included ABCRealEstate. “real estate” as part of their branding com.au, Martin Morris & Jones, First to assist consumers identify the National Group of Independent Real industry and range of services Estate Agents, Professionals Global, that those businesses provide. both the Real Estate Institutes of Victoria and WA, Fairfax Digital “REIA encourages competition through quality service delivery. REA once and Realestateview.com.au. again appears to be making a technical The REA Group, which owns the grab for control of those things that website realestate.com.au, recently belong to the industry at large. It has lodged a trademark application in the past tried to prohibit others for the term ‘realestate.com’ in from using the words “real estate” in relation to the REA web portal. their domain names,” said Ms Lynch. REIA believe that if granted, the “It is very simple to see why many trademark application will preclude businesses are concerned by the others in similar businesses from actions of a large corporation over using a name or mark that contains such a generic term,” said Ms Lynch. the phrase ‘real estate’ in relation to “If this trademark is approved then the advertising of real estate property it could harm or negatively impact services provided through a web portal. on many small businesses.” REIA CEO, Amanda Lynch has called on Ms Lynch went on to add: “It is a totally REA Group to withdraw the trademark unnecessary move by REA Group application and said “that everyone that not only does nothing to instil deserves the right to accurately sector confidence in the REA Group identify the type of goods or services but also results in businesses having it sells. To allow a single company to to waste time on lodgement fees with claim trademark rights to a generic IP Australia as well as lawyers.” term would impoverish the language “Our members already feel they are and unfairly hamper competition.” being squeezed by this company’s tactics.” Get your customers moving into their next property

Deposit Power is Australia’s leading provider of Deposit Guarantees and has assisted more than 750,000 Australians purchase their home or investment property. Deposit Power Guarantees substitute the cash deposit and are ideal for asset rich cash poor buyers. Deposit Power is suitable for both auction and private treaty transactions, first homebuyers, investors and anyone needing to sell and buy simultaneously. Guarantor: Deposit Power Guarantee is issued by CBL Insurance Ltd. Deposit Power Pty Ltd For more information on how to get your customers moving, go to ABN 49 160 226 442 as Authorised Manager for CBL Insurance Ltd. Deposit Power® is a www.depositpower.com.au or call the Deposit Power Helpline on 1800 678 979 registered Trademark of CBL Insurance Ltd This article is brought to you by REIA Research Officer, Evgeniya Hawthorne Evgeniya can be contacted at [email protected] SOCIAL HOUSING AND NEGATIVE GEARING

WILL SOCIAL The issue of social housing has been a 28 per cent increase between 2008 challenging policy area for Australian and 2023 from 337,888 to 431,277. governments. Those who cannot H O U S I N G B E Australian Housing and Urban rent privately are forced to stay on Research Institute notes “It is long waiting lists with the number ABLE TO COPE increasingly evident that governments of applicants mounting. Demand for are unwilling and/or unable to inject IF THE CURRENT social housing in Australia exceeds adequate equity into maintaining supply. In Victoria, particularly, and expanding conventional public ARRANGEMENTS demand exceeds supply by 30 per housing to meet the growing need cent. However, the system does not for affordable housing in Australia.” FOR NEGATIVE offer the type of housing that many G E A R I N G O F tenants need as the public sector is Provision of social housing is expensive generally less efficient in managing and those who call for removal of PROPERTY rental property than the private negative gearing arrangements should sector with a large proportion of consider the potential negative INVESTMENT stock in disrepair yet on valuable land. impact it will have on an already Overall, financially social housing strained social housing system. ARE CHANGED is unsustainable for government. The Productivity Commission’s Report OR ABOLISHED? From the late 1970s, public housing on Government Services 2014 shows was redirected towards households considerable expenditures on public such as single parent families, the housing from the governments. In long-term unemployed and those 2012-13, the Federal Government with health issues. The most recent provided $1.7 billion to State and Census in 2011 found that 4.1 per Territory governments for housing cent of occupied housing stock was and homelessness services and in rented from State or Territory Housing 2011‑12, Australian, State and Territory Authorities providing accommodation Governments’ total expenditure on for 3.9 per cent of Australian social housing and homelessness households. Demographic changes services was $3.9 billion. According are expected to result in further to Master Builders Australia (MBA), growing demand for public rental over the three financial years up accommodation with the research by to and including 2011-12, Federal, McDonald and Temple projecting a State and Territory Governments

»» article continues spent more than $23.6 billion on that changes to negative gearing 30 per cent in both countries, the social housing. For comparison, will lead to investors leaving the proportion of dwellings rented from Moody’s Analytics estimates that residential property market. the UK Government is considerably negative gearing cost the Federal higher – 17 per cent for England The Australia’s Future Tax Government around $4 billion a year. compared to 4 per cent in Australia. System Review, informally Furthermore, MBA notes that over known as the Henry Tax Review, Given that governments have not the past decade, the average cost of acknowledged that negative gearing detailed a clear strategy to address providing public housing dwellings applies downward pressure on the chronic under-funding of social housing, it would seem imprudent to increased by around 25 per cent rents. It warns that amendments remove the incentive that helps keep in real terms while 21 per cent to the taxation of rental housing rents lower and prevents a further of the public housing stock was should only be adopted following swelling of social housing waiting lists. being used inefficiently in 2012. reforms to the supply of housing. History suggests that rents will A comparison of rental markets in increase if negative gearing is Australia and the UK clearly shows removed and this in turn will place the importance of negative gearing an even greater strain on social for investors. While the share of the housing. It is highly anticipated rental market is similar and is around

T I C K E T S AVAILABLE BUT SELLING FAST INDUSTRY ARTICLE

TAX AND MARRIAGE

»» Edited extract from the Cleland McFarlane Selth Beans and Business Newsletter Cleland McFarlane Selth – Charter Accountant/Business Advisers Ph: (08) 8407 1300

There are many things to think spouse in accordance with their if the property will be partly funded about preparing for that special day, relative ownership share, which in by existing cash and partly by debt. but taxation matters are probably the absence of any specific evidence If one spouse is on a high marginal not high on the list. When a couple would normally be half each as rate they could borrow to fund their become married or de facto spouses, joint tenants. This can sometimes share of the property whether as their taxation status can change in lead to unintended consequences, joint tenant, or tenant in common, a number of areas. Understanding where an asset may be purchased and claim the interest solely against those changes upfront can avoid any in joint names, but the cost of the their share of rental income. unwelcome surprises at tax time. asset is met mainly by one spouse. The ownership interest will also Ownership of assets held prior to An example of this is with a jointly held determine what share of a capital marriage does not change after rental property. It is common to acquire gain each spouse will be liable for, marriage. Income from bank accounts, a rental property using borrowed so this should be considered also, as shares and other investments such funds, therefore the interest charged circumstances can change over time. as a rental property will continue on the loan can be significant, and One asset that couples generally to be assessable to the legal owner often contributes to the rental property purchase as joint tenants is their as before, as would any capital gain generating a tax loss. However it is the principal place of residence. Any from their disposal. Ownership of ownership interest of the property, gain or loss on sale of the family assets between spouses can either and not the loan that determines the home is usually not subject to be as joint tenants, which is more allocation of the income or loss. capital gains tax if it has been the common, where both spouses are couples main residence for the taken to own the asset equally, without If spouses have significantly different ownership period. There is no actual a separate identifiable interest. incomes, such that one spouse is paying tax at the highest marginal rate, whilst definition of “main residence” in In the event of the death of one the other is at the other end of the the legislation, but is based on such member of the couple, the asset passes scale, the tax benefit of that tax loss factors as time of occupancy, use to the surviving spouse directly. Where will also vary significantly. An exception as an address for correspondence, an asset is held as tenants in common, to this is where one spouse borrows to connection of utilities and the like. each ownership interest is separately fund their share of the acquisition of The main residence exemption recognised and can be disposed of the property; provided the loan amount from capital gains tax becomes less independently of the other owners. is commensurate with their share of straightforward when there is more Income, (or losses), from investment the property, the interest on their loan than one property involved. It may assets acquired in joint names would be deductible to them solely. be that one or both of the spouses after marriage is allocated to each This could be a tax planning opportunity already owned a property that has

»» article continues SAVE TIME ONLINE WITH PRE-FILL TAX DATA

The October deadline for last financial year’s tax returns is fast approaching however lodging a tax return will be been their main residence, and easier for millions of Australians this year with the ATO either one spouse moves into the pre‑filling more taxpayer information in myTax and e-tax. other’s property and move a tenant into their property, or the couple The ATO has now received taxpayer To check the progress of a return, purchase a new home together. information from banks, employers, taxpayers can log onto myGov government agencies, share registries and click through to the ATO The main residence exemption is and other parties meaning people will online services; use the ATO app, modified to take account of these be able to lodge their return faster. the ATO’s online progress of situations and allows a choice to return tool or ring our automated be made depending on the extent Using the pre-fill option not phone service on 13 28 61 of the ownership interest. only saves time and but enables between 8 am to 10 pm local time people to lodge without making Monday to Friday or between Generally speaking if one spouse’s errors that could delay the 10 am to 5 pm on weekends. ownership interest is 50 per cent or processing of their tax return. less, they may nominate the dwelling To find out more on to be their main residence for the Since 1 July more than 1.5 million people have already lodged online • MyTax and other online whole ownership period. If it is more with the ATO’s e-tax or myTax lodgment options visit than 50 per cent, the property is services. Most individual returns are www.ato.gov.au/lodgeonline deemed to be their main residence processed within 12 business days. for half the ownership period. It is • MyGov and how to create an account and link it to the ATO, interesting to note that a taxpayer can Each year the ATO notices a number visit www.ato.gov.au/online choose to nominate their spouse’s of common errors that can delay property as their main residence the processing of a return: even though they may not have an • supplying incorrect bank account ownership interest in it. Factors such details as these mean there can be a number • spelling errors in a name of possible combinations when the • providing a year of birth rather property is sold some giving a better than a full date of birth tax outcome than others. If you think • not fully completing spouse you may be affected by this, or are details. contemplating purchasing or selling a property with your spouse, give us a call, it may make all the difference. INDUSTRY ARTICLE

DIGITAL TOOLS FOR THE ONLINE BOOM

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REIA publications use information collated from a wide variety of sources including real estate agencies, industry and government. Both raw data and analysis are published in REIA reports. The Adelaide Bank/REIA Housing Affordability Report and the Bendigo Bank/REIA Real Estate Market Facts may be purchased as single copies or by subscription. For more about the Adelaide Bank/ REIA Housing Affordability Report, click here. For more about the Bendigo Bank/REIA Real Estate Market Facts publication, click here. Also, “datacube” spreadsheets provide key information on quarterly median values, dating from the beginning of REIA data collection through to the current quarter, for all capital cities where data is available. For more information on REIA datacubes, please call 02 6282 4277. Vecto2000.com

ROC7520_REIA-Advert_A4_AW-O.indd 1 2/07/14 4:43 PM INDUSTRY UPDATE Industry news from around Australia

Shopping centres morphing Standing Committee on Economics. takeover and undisclosed debts – identity into hotels, apartments In his opening remarks, he pointed to takeover grew fastest – increasing historically low interest rates as ‘the The GPT Group has announced that it is 103 per cent from 2012 to 2013. most remarkable feature’ of the global planning to develop the air rights above ASIC has banned at least nine mortgage economy, which has led to cheaper its malls, starting with Melbourne Central. brokers for fraud since December last year. home loans for Australian borrowers. While residential development near to Melbourne-based Ms Shilpa Karandikar a centre is not new, the use of air rights Mr Stevens commented that the was the latest broker to be banned is gaining traction and popularity. most remarkable feature of the international scene at present is the on 23 July after an ASIC investigation The owners of Chadstone shopping centre exceptionally low volatility of financial found she submitted false documents in Melbourne has apartments and plans prices – the lowest observed over the to secure a home loan worth $243,000. for a hotel and offices nearby, as has past 25 years for sovereign bonds, The loan application contained false Westfield at Doncaster. GPT also has its equities and foreign exchange. payslips, false employment documents mixed use Rouse Hill mall, while Stockland and false bank statements. is revamping the Wetherill Park shopping “Yields on sovereign debt of the major centre and also has its Cammeray and countries are also very low, the lowest Balgowlah centres. But having apartments on record in some cases,” Mr Stevens incorporated into a centre is the next step. said. “Spreads on investment grade and financial corporate bonds have reached Broadband in strata: do In London, Westfield is developing multi-year lows and in Europe yields your homework – NSW apartments near its Stratford City on so-called ‘peripheral’ sovereign NSW Fair Trading Minister Matthew mall, while a preliminary development bonds have in some cases fallen below Mason-Cox is encouraging strata owners, application has been lodged in Sydney previous historic lows,” he said. to develop the air rights on the residents and managing agents to do David Jones’s Market Street site. their homework before choosing a service provider to install broadband in In 1990, Lend Lease, through its projects their strata schemes. This follows advice division, looked at building hotels in a Mortgage fraud on the rise from the Commonwealth Department number of shopping centres in a concept Brokers are being blamed for of Communications regarding issues similar to its Woden Plaza Hotel in Canberra. mortgage fraud following an increase affecting strata owners in NSW over the Source: Sydney Morning Herald in fraudulent credit applications. National Broadband Network rollout. According to Veda, credit application Mr Mason-Cox said the agreement fraud is now at its highest level since you sign is legally binding and can have 2009 with a 27 per cent increase in total significant implications for owners and Home lending increasingly credit application fraud last year. Veda’s competitive, says RBA general manager of fraud & identity residents of your strata scheme. Service providers may request that an entire The Reserve Bank has noted how low solutions Imelda Newton said there has strata scheme sign up to them and if funding costs have led Australian banks to been a trend among brokers to act in compete for home lending more actively collusion with others to defraud lenders. this occurs the contract may prohibit than in previous years. The Reserve Among the four segments of credit individual unit owners from signing up Bank Governor, Glenn Stevens spoke application fraud – false personal to their preferred provider, he said. recently at the House of Representatives details, fabrication of identity, identity MAKING NEWS General national news

Strong residential building results of the current ‘standardised’ system Financial, TimberCorp, Commonwealth Recent preliminary ABS figures show of risk weight tiers to include one Bank and most recently Macquarie residential building work done continued additional 20 per cent tier for lower Bank, which have cost consumers over to strengthen in the June 2014 quarter, risk loans. This relatively small change $5.7 billion. following healthy growth in March. In the to the current approach would Choice says the problem is not just June 2014 quarter, there was $13.40 billion deliver material benefits in terms of about commissions but any kind of of residential building work done, a level competition without additional risk; payment that can influence a financial of activity that is 2.2 per cent higher than 2 Establishing a more efficient and in the previous quarter and 9.6 per cent adviser to recommend one product over staged process to assist regional higher than in the June 2013 quarter. another. This can be a bonus linked to banks achieve accreditation under sales targets or asset-based fees, which A closer look at these preliminary results the ‘advanced’ capital framework, are still common across the industry. shows that the detached house segment particularly in relation to housing; was the key driver of growth in residential Asset-based fees are paid by a client to 3 Addressing the funding cost advantage building during the June 2014 quarter. an adviser as a percentage of the total In the June 2014 quarter, new house for banks deemed ‘too big to fail’ (TBTF); funds under advice. building work contributed 1.6 percentage 4 Improving the disclosure arrangement points to the 2.2 per cent growth in for mortgage brokers to ensure total residential building work done. customers of brokers are fully aware of a broker’s ownership structure and New appointments to potential conflicts of interest; and the Takeovers Panel Regional banks call for 5 Lowering information asymmetries The Government has announced the through an improved system of more level playing field appointment of four new members collecting important financial Four leading regional banks have to the Takeovers Panel. responded to the Financial System data relating to credit histories The Takeovers Panel is a mechanism for Inquiry’s (FSI) Interim Report by of bank customers (known as peer review of takeovers activity and highlighting areas they believe would Comprehensive Credit Reporting). improve financial services and level facilitates expeditious and less formal the playing field. The response was process of regulating takeovers in issued by Bendigo and Adelaide Bank, Australia. Mr Lee Dewhirst, Mr Byron BOQ, ME Bank and Suncorp. Choice calls for financial Koster, Mr Andrew Lumsden and services fee ban The regional bank submission highlights Mr Robert McKenzie have been appointed five specific issues they believe will foster In its submission to the Financial System as new members of the Takeovers Panel. Inquiry Choice is calling for the banning of a healthy, multi-tiered banking system, These four appointees will boost the which in turn, will benefit customers by all fees, commissions and remuneration number of Takeovers Panel members to enabling fairer competition between major that create a risk of conflict of interest for 41. All members have been appointed for banks and the rest of the banking sector: financial advisers. The consumer advocate three years up to and including 1 A more risk-reflective system of setting group argues these poor practices are at 20 August 2017. regulatory capital for housing loan the heart of the steady stream of financial assets through the simple extension planning disasters including Storm POLITICAL WATCH Information and news from government

Framework to safeguard airports Framework can be downloaded from organisations manage and improve equal A new framework has been developed the Department of Infrastructure and remuneration between women and men by the Federal Government to provides Regional Development website here. in the workplace. Places are limited to 15 guidance on planning requirements people per workshop. Fee: $330 inclusive for development that affects aviation of GST Registrations are now open. operations. The National Airports ACT government reviews rights Safeguarding Framework was developed of tenants and landlords by the National Airports Safeguarding The ACT government is reviewing New strata manager legislation Advisory Group, which includes the rights of landlords as part of a in Vic representatives from Commonwealth sweeping review of rules covering The Victorian Government has introduced Infrastructure and Defence departments rentals as part of a discussion paper. and aviation agencies; state and territory It is considering making smoke alarms a new bill that makes various amendments planning and transport departments, compulsory in rented houses and to several acts, including amending the and the Australian Local Government is seeking views on who should be Owners Corporations Act 2006 with the Association. It includes building activity responsible for maintaining them, such aim of better regulating the managers of around airports that might penetrate as changing the batteries and whether owners corporations. The amendments operational airspace and/or affect tenants are properly protected from follow a public review of the regulation of wrongful or “retaliatory” evictions. navigational procedures for aircraft. owners corporation managers. In summary, The Government has formulated It is looking at how landlords recoup the bill will improve the regulation of money owing in shared houses when, the framework in recognition that owners corporation managers by: responsibility for land use planning rests for example, one tenant moves out and • preventing unsuitable persons becoming primarily with state, territory and local another takes their place without signing a lease and how to solve arguments over or remaining owners corporation governments, but that a national approach bonds. It asks whether the ACT needs new managers; can assist in improving planning outcomes rules for dealing with anti-social tenants • removing unreasonable restrictions on on and near airports and under flight paths. who disturb the neighbourhood, pointing the ability of owners corporations to The aim of the Framework is to: improve out that other jurisdictions require terminate management contracts; safety outcomes by ensuring aviation tenants to sign acceptable behaviour • require managers to disclose conflicts safety requirements are recognised in agreements. It is seeking views on these of interest; land use planning decisions; improve and other questions by 12 September. • protect owners corporation’s funds by community amenity by minimising prohibiting managers from pooling the noise sensitive developments near funds of separate owners corporations airports, including through the use of Gender pay gap workshops in one bank account; additional noise metrics; and improve Many organisations wrongly assume • by allowing owners corporations to aircraft noise disclosure mechanisms. they don’t have a gender pay gap and request copies of statements for bank are surprised by the results once they’ve The Framework applies at all airports accounts that contain trust money; and in Australia and affects planning and actually crunched the numbers. • by making particular provisions for development around airports, including From October 2014, the Australian retirement villages with owners development activity that might penetrate Government’s Workplace Gender Equality corporations. operational airspace and/or affect Agency will be conducting a national navigational procedures for aircraft. The pay equity workshop series, to help THE WORLD Property news from around the world

Melbourne crowned world’s invest in India’s hospitality and property state and territory capitals, according most liveable city sectors, recently visited the country to to the RP Data-Rismark Home Value Melbourne has been named the world’s attend the launch of the Trump Tower Index. Melbourne prices rose 11 per most liveable city for the fourth year in a development in Mumbai, which is being cent, the second-fastest increase, and row, by the Economist Intelligence Unit’s built in partnership with local developer Brisbane increased 6.9 per cent. liveability survey of 140 cities. The survey Lodha Group. The Trump Organization is Walker, with $12 billion of planned rated cities out of 100 in the areas of also involved in another luxury project in property projects, said he is looking to healthcare, education, stability, culture Pune, a city in Western India. The property and environment and infrastructure. tycoon disclosed intentions to also make increase investments in the Johor region Melbourne received an overall score of “substantial investments” in the country’s in southern Malaysia which has been 97.5 out of 100, scoring a perfect rating for hotel industry, Reuters reported. tipped to see an increase in demand from healthcare, education and infrastructure. neighbouring Singapore. Residents of International auction house Sotheby’s Adelaide, Sydney and Perth also made also recently announced that it would Singapore are crossing over to Malaysia’s it to the top 10 of the list, with ratings be selling some 40 luxury properties in Iskandar region, as they seek property, of 96.6, 96.1 and 95.9 respectively. India, including private residences in often at significantly less cost. Australia’s largest city, Sydney, achieved historic Rajasthan, through an exclusive a perfect score in most areas, but was licensing agreement with Delhi-based let down in the category of stability (90) real estate advisory firm Real Pro Infra US home builders more and culture and environment (90.4). Pvt Ltd. Sotheby’s and Real Pro Infra had confident in August Around the world, Melbourne narrowly signed a 25-year franchising agreement, US home builders grew more optimistic beat Vienna, in Austria, which scored 97.4 according to the Times of India. in August as an improving job market per cent, and Vancouver in Canada, which The Indian government has also allowed and falling mortgage rates boosted rated 97.3 for the top spot. Damascus the market listing of real estate investment the outlook for home sales. in Syria was the lowest scoring city in the survey, with an overall score of trusts in order to help developers to get An index of builder confidence in the 30.5.Also at the bottom end of the table more financing, as well as to promote market for single-family homes rose was Dhaka in Bangladesh with 38.7 and foreign investment in the property sector. two points to 55 this month according Port Moresby, in Papua New Guinea and to the National Association of Home Lagos in Nigeria, both scoring 38.9. Builders. It was the gauge’s second Developer attention shifts from Sydney to Malaysia consecutive month over 50, a level that indicates more builders generally see Australian billionaire and property Foreign investors set sights conditions as good rather than bad. on India’s property market developer Lang Walker has reportedly said A regional breakdown of the data showed International property investors are that home prices in Sydney and Melbourne capitalising on India’s new government have climbed too much, and he is turning the gains were unevenly distributed policies to pursue real estate ventures his focus to his investment in Malaysia. with builders feeling more confident in the country. Dwelling prices in Sydney jumped 14.8 in the Northeast and Midwest but American billionaire and real estate icon percent in July from a year earlier, the less so in the South and the West. Donald Trump, who announced plans to fastest growth among all Australian REIANEWS

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