The document discusses various tax considerations related to owning property in Australia, including the main residence exemption from capital gains tax, the distinction between residential and commercial property ownership, allowable deductions for rental properties, and personal tax deductions. It provides examples and explanations of topics like the main residence exemption rules, when a property owner would be considered a developer, common rental property deductions, and some lesser known personal tax deductions.

1. You, Your Property & Tax
Presented by:
Craig Seddon

2. Contents
1. Main residence
2. Property developer
3. Rental properties
4. Personal tax

3. 1. Main residence
On disposal of a property:
 An exemption from Capital Gain Tax (CGT) for any capital gain
or loss;
 In relation to a dwelling (or interest in a dwelling); and
 Is the person’s main residence.

4. 1. Main residence (cont’d)
Conditions to be met:
1. Must be an individual;
2. Dwelling was their main residence throughout the ownership
period;
3. Must have an ownership interest; and
4. Interest not passed on from a deceased estate.

5. 1. Main residence (cont’d)
Factors to consider:
 Length of time lived;
 Place of residence of family;
 Address where mail is delivered;
 Address on Electoral Roll;
 Location of personal belongings; and
 Intention.

6. 1. Main residence (cont’d)
Full exemption categories:
1. 6 year rule;
2. 2 main residence;
3. Holding land to build; and
4. First practicable time to move into.

7. 1. Main residence (cont’d)
Example – 6 year rule
John purchases his main residence in Mandurah in July 2007. John travels
to Nedlands for work during the week. After 5 months, John becomes tired of
travelling and purchases an investment property (Cottesloe), to live in
through his Trust.
John charges himself rent (at market rates) from the Trust and claims all
related costs. John rents the Mandurah property until it is sold in March
2010.
The Mandurah property is sold tax free as it has been John’s declared main
residence for the past 6 years.

8. 1. Main residence (cont’d)
Example – 2 main residence
Scott has a main residence in Peppermint Grove. Eventually, Scott
grows tired of his residence and makes an offer on a property in
Mosman Park in April 2007.
The offer is accepted and settlement occurs in September 2007.
Scott later sells his first residence in October 2007.
Scott is not liable for any capital gains tax on his first property as it is
disposed within 6 months.

9. 1. Main residence (cont’d)
Partial exemption categories:
1. Adjacent land (separate disposal);
2. Different residences (individual and spouse); and
3. Income producing purposes.

10. 1. Main residence (cont’d)
Did you know?
 Exemption may not be applied where an individual is “in the
business” of moving into properties for short periods of time
while they renovate them for sale?
 Adjacent land may be fully exempt where:
– Its used for primarily for private purposes; and
– Maximum area is less than 2 hectares (inc. dwelling).

11. 2. Property developer
An individual or entity is considered a property developer when
the property is held as past of the business.
If so, the following issues are considered: -
• Application of trading stock rules;
• Application of ordinary income rules on disposal; and
• Installment sales contracts or off-the-plan development sales.

12. 2. Property developer (cont’d)
Trading stock
Property will be held as trading stock by property developers or
traders whose business involves dealing in land. For an item to be
trading stock:
• Property must be held for the purpose of resale; and
• Business activity that involves dealing with land should have
commenced.
[example]

13. 2. Property developer (cont’d)
GST on development
When a developer builds a house on sub-divided land, the
business must be registered for GST.
For example:
Gill owns a property in Mount Lawley, which sits on 900 sqm. Gill decides
to bulldoze the existing house and build 3 houses on the now triplex
block. Gill will live in the front house.
Gill is considered to be in the business of dealing in land and must be
registered for GST. Therefore, the sale price will include GST.

14. 3. Rental properties
What is rental income?
 Rental income earned;
 Bonds – when entitled to retain;
 Insurance payments;
 Letting fees; and
 Reimbursements and recoupment.

15. 3. Rental properties (cont’d)
What are allowable deductions?
 Advertising;
 Body corporate fees;
 Insurances;
 Quantity surveyor’s fees;
 Rates and taxes [council, water, land];
 Repairs and maintenance;
 Travel – inspection;
 Etc, etc, etc.

16. 3. Rental properties (cont’d)
Specific deductions.
 Capital allowances [depreciation]
Improvements to the property or asset replacements, such as:
 Hot water systems;
 Landscaping.
 Capital works [building write-off]
Claiming the cost of the construction of the building over a 25 year
period.

17. 3. Rental properties (cont’d)
Common errors on claiming deductions;
 Claiming renovations costs as deductions for repairs;
 Claiming deductions for legal expenses which are capital in
nature;
 Including the cost of land in the capital works deduction;
 Overstating interest deductions that relate to private borrowings
[generally on refinancing]; and
 Claiming private expenditure as deductions [i.e. Plasma TV].

18. 4. Personal tax
General deductions.
 Motor vehicle – travel for home opens and inspections;
 Travel – conference and training events;
 Uniform – purchases and maintenance;
 Home office – usage and consumables;
 Advertising and sign recoupment; and
 Income protection insurance.

19. 4. Personal tax (cont’d)
Did you know?
1. That you can claim a pair of sunglasses each year [no
threshold] if you drive your car for work;
2. You can salary sacrifice a laptop each year [Acton gets a full
deduction and you claim depreciation over its useful life]; and
3. Ladies may claim or salary sacrifice a handbag each year as
a deemed briefcase [without any FBT implications].

20. 4. Personal tax (cont’d)
Question time.
Craig Seddon
Westcourt Consulting Chartered Accountants
Level 1, 45 Royal Street
East Perth WA 6004