Some Common tax-related questions that we get:

Can I claim interest on land and construction of the house which will be used to earn rental income once it is ready?

The short answer is Yes. If you buy a vacant land with the intention of building a dwelling which will be used to earn Rental income, then you can claim the interest costs, council rates etc. to be entitled to a deduction, one must demonstrate that steps have been undertaken to build the dwelling and make it available for rent as soon as it is completed.

he interest expenses on borrowed funds used to acquire land that will be solely used in income-producing operations. As your intention throughout is to build an income producing building and there is no private or domestic purpose for holding the property. And the length of time between the purchase of the property and commencement of construction is not considered to have been so long that the necessary connection between outgoings and the assessable income is not lost. You would be entitled to a deduction for the interest expense under section 8-1 of the tax act.

Changes from 1^st July 2019. he Government says it will deny deductions for all expenses associated with holding vacant land. This so-called integrity measure will “address concerns that deductions are being improperly claimed…where the land is not genuinely held for the purpose of earning assessable income”. This measure will not apply to expenses associated with holding land that is incurred after: (i) a property has been constructed on the land, it has received approval to be occupied and is available for rent; or (ii) the land is being used by the owner to carry on a business, including a business of primary production. Interest deductions denied can form part of the CGT cost base

What expenses related to rental home can I claim if I am a sole trader and I have just started a business

If you have a designated area in your home set aside for business purposes i.e it is only used for income earning activities and it is a place of business (area is clearly identifiable as a place of business, not readily suitable for use for private or domestic, used exclusively for business purposes and used regularly for visits of clients read Para 11-13), then you can claim that the percentage of the house expenses. It can include Rent, electricity, gas, depreciation on plant & equipment etc. For example, if you have a room set aside in your property for income earning activities which is roughly 10% of the house, then you can claim 10% of rent, electricity, gas etc. if you don’t have a designated area in your home, then you can claim home office expenses based on 45 cents per hour.

You should also note that under in order to claim any expenses related to your business against your employment or other income, you need to pass one of the four tests under non-commercial losses. You should seek some advice from a qualified accountant/tax agent on this matter or book a free consultation

You can also claim the internet based on a work-related percentage which can be calculated as per Example 2 of PSLA 2001/6. You can base your calculation on the basis of the four-week period of measurement

What are the requirements in terms of HELP/HECS repayment if you have moved overseas, how to calculate and report to ATO?

In the May 2015 budget, the Australian federal government introduced new laws requiring expats and non-residents, to report their worldwide income to the Australian taxation office.

The purpose of that was if the income exceeded the minimum HECS/HELP debt repayment thresholds of $54,869 (From 1^st July 2019, the threshold has been reduced to $45,889), then a compulsory HECS/HELP debt repayment will be levied by the ATO.

You are obligated to report the income to the tax office if your income exceeds $13968 even though you don’t have to pay back any HECS/HELP debt.

You can report your income using ATO myGov’s facility or you can appoint us as your tax agent, and we can lodge an Australian tax return on your behalf

There are three methods to calculate your worldwide income

Simple Method- Steps to calculate your worldwide income
1. Add up all your worldwide income between 1^st July- 30 June (convert that to AUD based on ATO forex rates) and add that to Australian sourced income (interest, dividends, capital gains etc)
2. ATO works out the standard deduction based on occupation listed in the lodgement

Once the return is lodged, ATO will issue of Notice of overseas Levy that you will be required to pay

Overseas Assessed method – Steps to calculate your worldwide income
1. Take the taxable income from your foreign tax return and convert that into Australian dollar
2. Add that figure to Australian sourced income if any
3. Report that income to the ATO

There are some limitations to this method like you did not receive a tax assessment from foreign tax authority, you received multiple assessment from different tax authorities.

Comprehensive method: Steps to calculate your worldwide income
1. Add up all your worldwide income between 1^st July- 30 June (convert that to AUD based on ATO forex rates) and add that to Australian sourced income (interest, dividends, capital gains etc)
2. Add up all allowable deductions similar to how you would complete and Australian tax return. You need to keep all receipts and calculations
3. Subtract Deductions from income and report that in your tax return

How is the capital gain calculated on an investment property?

In order to work out the capital gain, you have to adjust the cost base of the property for buying costs like Stamp duty, Conveyancing fees etc. You also have to adjust the cost base of the property for depreciation and capital works deduction claimed over the years. You can also include the non-deductible interest costs on loans used to finance.

Similarly, the sale proceeds of the property are adjusted for selling costs like agent commissions, Marketing costs etc

We have created a calculator that you can use to work out the capital gain made on an investment property.

It does not take into account any exemptions that you might be eligible for. For example, It was primary place of residence for some duration or you acquired this pre Capital gains tax introduction. Please talk to your accountant or speak with us if you need help in working out capital gains tax

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