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Property Newsletter – February 2017
February 9, 2017 | 
Author Momentum Wealth Golden Guinea Fund
Target returns:
17.5% per annum*
*based on the total return per annum over a 24 month investment term.
INVEST WITH CONFIDENCE
Fixed price building contract and planning approval completed means reduced risk from cost variations
Backed by director – key staff members have also invested and are personally guiding the project
Preferential equity – new investors receive preferential returns over existing investors
24 month investment term
STRONG INVESTMENT FEATURES
Established area with low supply and growing demand
Strong infrastructure – Fiona Stanley Hospital and Murdoch Health Precinct, Murdoch Activity Centre, Garden City expansion, Port Coogee Marina and more
Strong market fundamentals – as at December 2016, percentage of stock on market for sale is 1.16%* and rental vacancy rate is at 2.4%* *sourced from realestate.com.au and REIWA December 2016
LOCATION
The keystone of the suburb is the large leafy reserve located right in the heart of Samson. The Golden Guinea Fund project is set directly opposite this urban oasis, providing investors with access to a well-positioned metropolitan lifestyle that has the best of both worlds.
ELIGIBILITY
This syndicate is open to anyone** who meets one of the following criteria:
Combined gross income of more than $250,000 per annum (which includes gross rent, income from other investments and business turnover)
$2.5 million in net assets
Is able to invest $500,000 or more
** must be a wholesale investor under the Corporations Act (2001)
Pendragon Capital Ltd AFSL 237549
Deals and Don’ts – Eden Hill, Edgewater, South Lake
Eden Hill
Purchase price: $430,000 Purchase date: October 2016 Block size: 669sqm Specification: 3 bedroom, 1 bathroom dwelling, zoned R17.5
Deal: This property represents a deal because of its great condition (being recently renovated) coupled with its future development potential – using the corner zoning discretion and the 5% variation its zoning could be increased to R25. The cheap price point and the fact Eden Hill is a gentrifying suburb along with the individual benefits of the property with its location opposite a park make for good long-term growth prospects.
Edgewater
Purchase price: $532,000 Purchase date: October 2016 Block size: 789sqm block Specification: 4 bedroom, 2 bathroom house built in 1984, zoned R20/40.
Deal: This property represents a deal for its strong development potential being zoned R20/40, in addition with its location on a corner block, which will allow for enhanced development designs. It is also in a highly rentable condition featuring 4 bedrooms and 2 bathrooms making it suitable for a family.
South Lake
Purchase price: $450,000 Purchase date: October 2016 Block size: 775sqm Specification: 3 bedroom, 1 bathroom house built in 1987, zoned R20.
Deal: This property represents a deal because it neighbours a park and is subject to rezoning as a draft R60. The property also presents well with a basic internal presentation that is clean and liveable.
Don’ts – Applecross
For sale price: $299,000 Specification: 2 bedroom, 1 bathroom apartment in a complex of 21 built in 1964
Don’t: This property doesn’t represent a good investment because it is located on a busy road in an aging flat-style complex with other affordable housing. The complex is dated and poorly presented with little chance of revitalisation due to the strata ownership style. A number of new large-scale apartment developments from the nearby Canning Bridge precinct will also add significant new apartment stock to the area, which will contain future capital growth.
Suburb snapshot: Cottesloe
Cottesloe was established in the 1800s with the opening of the Fremantle train line and is now one of Perth’s most prestigious postcodes.
The beach-side suburb is located in the Town of Cottesloe, approximately 10 kilometres southwest of the Perth CBD.
Growth in the area took off in the 1890s, spurred by the opening of the Perth-Fremantle railway line.
Significant development occurred during the 1910s and 1920s aided by the promotion of the beachfront.
Today, there are four train stations in the suburb on the Fremantle train line including Victoria Street, Mosman Park, Cottesloe and Grant Street Station.
Neighbouring suburbs include Swanbourne (north), Peppermint Grove (west) and Mosman Park (south-west).
Cottesloe has a population of 7,398 with a median age of 40.
The median house price in the suburb is $1.7 million and features a mix of dwelling types consisting of 70% houses, 11% semi-detached and 19% flats and apartments.
66% of properties are either owned outright or being purchased, with 32% of properties being rented.
A massive 43.6% of residents identify as professionals, which is twice as high as the state and national averages at 19.9% and 21.3% respectively.
The suburb’s main features include the Cottesloe Beach, Sea View Golf Club, Cottesloe Central Shopping Centre and North Cottesloe Primary School.
The popular Claremont Quarter is also nearby, as well as the Swan River and Allen Park.
The suburb is bound by the Indian Ocean in the west, North Street in the north and Stirling Highway in the east, and features Stirling Highway and West Coast Highway as its main arterial roads.
Specialist medical loans – not so special?
Are you a medical professional seeking finance? Some lenders offer special deals for those in the medical industry, such as doctors, physiotherapists and dentists, among others. But are these exclusive loans all they’re cracked up to be?
A wide variety of lenders offer special rates and fee packages for medical professionals, including GPs, specialists, surgeons, vets, physiotherapists and dentists, among others.
While some of these deals might seem great, it’s important to examine the lending requirements and structures more closely before signing on the dotted line.
Cross collateralisation risks
Some lenders will require such special loans to be cross collateralised, which can tie you to a particular lender and restrict your lending capacity in the future.
This might not be specified upfront, so it pays to ask, and the lender may require security over your business.
This can create problems when it comes time to review your loan, and in the event that one of your properties underperforms, you may not be able to secure finance again or could even be forced to sell your property.
No LMI loans
Some lenders also offer a ‘no lenders mortgage insurance loan’, which can be an advantage for some borrowers and help them purchase their property sooner.
However, in some cases, the total cost of the loan over the period of time (including rates, charges etc) is higher than the saving, meaning it’s not a better option in the long term.
One 100% loan – or is it?
There are also 100% loans on offer to medical professionals, meaning you’ll require no deposit or lenders mortgage insurance.
In some instances this can actually be 2 loans though, consisting of an 80% loan with one lender and a 20% loan with a second lender. The second loan is usually at a higher rate though (presently about 8%).
In these circumstances it may be better to save a 10% deposit and apply for a 90% loan – with no lenders mortgage insurance – rather than pay the extra costs.
Obtaining a specialist package can be beneficial, but it’s essential to compare your options and understand the fine print before committing.
A good finance broker will be able to assist you with this, and recommend packages that suit your individual circumstances and work for you now and into the future.
Should I undertake my own development or join a development syndicate?
Many investors aspire to undertake a residential property development at some point in their investment journey, but is it better to complete your own project or join a development syndicate?
Whether developing yourself or through a syndicate, when done right there is no question that the end result can be highly lucrative.
More often than not, though, aspirational developers only hear about the big profits on offer and don’t understand the amount of time and effort required to complete a residential property development themselves.
As such, if you want to undertake a development on your own, it’s advised to engage a project manager, who can oversee the build on your behalf.
A good project manager will be able to guide you through the entire process, from designs and approvals, to selecting a builder and tendering work, as well as monitoring the progress of the project to completion.
This option allows you to have a high degree of control over the project, while having peace of mind and conviction in your decisions as you’re being advised by a professional.
Comparatively, a development syndicate is a much more passive means of property development.
Investors have little input into the process as the syndicator manages the project and has final say on all aspects of the development. That includes the final designs and fittings and fixtures to choosing the builder and trades etc.
Investors are kept up to date with regular progress reports, but it’s as simple as investing your funds and waiting for the syndicator to hand back the profits at the end of the project.
If you ask anyone who has completed a property development themselves, they’ll confirm that it’s essentially a full-time job, as you need to manage a vast array of consultants and the builder through the entire process.
This is why engaging a project manager to help you or choosing to invest in a development syndicate can be a much wiser option than developing on your own.
What’s the best type of investment property to buy?
When searching for your first investment property, investors are spoilt for choice, whether it be a house, apartment or villa. But what’s the best type of investment property to buy?
The answer to this question will largely depend on your own unique circumstances because the different types of properties offer different pros and cons.
Smart investors understand that they must acquire properties that work in tandem with their own investment goals, financial capacity, life circumstances and risk profile.
For example, if you have a high risk tolerance you may prefer a development site. If you don’t have a high disposable income, a villa that is neutrally geared might suit you better, and so on.
So what are the advantages and disadvantages of different types of investment properties?
Here’s a quick overview of the different benefits and disadvantages that are typically offered by houses, apartments and villas.
Houses
Benefits
- Usually better capital growth prospects compared to apartments and villas
- Relatively easy to add-value to through renovations/redevelopment
- Greater control over the asset
Disadvantages
- Lower rental yields compared to apartments and villas
- Greater maintenance required, which often means higher expenses
- Higher price point
Apartments
Benefits
- Higher rental yields compared to houses
- Often better rental returns, meaning lower or no holding costs
- Less maintenance required
Disadvantages
- Usually lower capital growth prospects compared to houses and villas
- Strata fees can be high, particularly if the complex has large common areas, such as pools and lifts
- Less control over the property with limitations for renovations due to strata bylaws
- More competition for tenants and buyers, particularly in large complexes and in areas where apartments are highly prevalent (i.e. CBDs)
Villas/townhouses
Benefits
- Relatively good capital growth prospects (not as good as houses though)
- Relatively good rental yields (not as good as apartments though)
- Ability to renovate the property (unless it’s restricted in the bylaws),
- Lower price point than houses
Disadvantages
- Strata restrictions can limit what you can do with the property
- Less control in terms of renovation options
- Fairly homogenous, similar to apartments, meaning there can be more competition when selling or leasing
Investors should also consider other investment options like development sites, commercial property as well as development and commercial syndicates in their investment plans, which are often part of the portfolio for more experienced investors. First time investors should generally start by looking at houses, villas or apartments, but again, individual risk appetites and circumstances apply.
Why you need to start your property investment portfolio in 2017
If you haven’t yet kicked off your property portfolio, here’s why you should start your property investment in 2017.
Most people are aware that property investment can be a great wealth creator, however many of us fail to act.
The reasons for this are varied, but typically centre on short-term matters.
For example, when property markets are booming people are typically concerned about property bubbles – they don’t want to buy at the peak and be part of a market ‘crash’, so no action is taken.
On the other hand, when the market is in a slump many are not imagining any recovery, believing that prices will only continue to fall, and again no action is taken.
While it would be great if property prices rose steadily in a straight line, the cyclical nature of property markets – as demand and supply drivers move up and down – means that this is not the case.
Although there are ebbs and flows in the property cycle, history has shown us that property prices in Australia’s capital cities have continued to rise over the long term.
Therefore, investors need to take a long-term view when considering investing in property and put the short-term matters into context.
So why should you start your property investment in 2017?
Two reasons.
1) the earlier you start the better, and;
2) the stats are indicating that 2017 will be the year to invest.
Get in as early as you can
The sooner you start the more time you’ll have in the market to capture compound growth on your property (i.e. you’ll have more time to create greater personal wealth).
So a $500,000 property acquired today that achieves 5% per annum growth over 10 years will be worth $818,334. That’s an additional $318,334 from the initial purchase price.
But hold that property for 20 years and it will be worth $1,339,341. That’s an additional $839,241 from the initial purchase price.
By holding the property for 20 years (instead of 10 years), the property can make a further $520,907.
Therefore, the sooner you start investing the more opportunity you’ll have to capture compound growth.
As the saying goes, it’s about time ‘in’ the market, not ‘timing’ the market.
While starting your property portfolio sooner rather than later is beneficial to achieve greater wealth, investors need to ensure they acquire high-quality properties that will outperform the market over the long-term.
2017: The year to invest
An increasing number of experts, media and recently released statistics have suggested that the Perth residential property market is primed for investment in 2017.
The latest data released by the Real Estate Institute of Western Australia (REIWA) shows that Perth’s preliminary median house price for the December 2016 quarter did not change from $520,000, which is a positive sign, as historically once all sales have settled this preliminary median generally increases, so Perth could in fact record an increase in price over the quarter.
Sales activity is increasing with the preliminary dwelling sales for the December quarter 2016 five per cent higher than the same time in 2015. For the week ending 31st of January 2017, property listings were down about 2% year on year, indicating that some of the excess supply in the market is starting to be absorbed.
Great time to buy right
Buying strategy is just as important as timing in order to maximise the benefits of any approaching upswing. Investors who examine potential demographic, social, infrastructure and planning changes will have the best chance in purchasing a property that will outperform the market.
For example, in 2007, our research team identified the City of Belmont as an investment-grade suburb with strong short and long term growth drivers exposing many of our clients to the rapid price growth that occurred in this area.
Posted in 
Finance Newsletter – February 2017
Some interest rates drop while others are going up?
Do you have the best rate available for your home and investment loans?
You may have noticed a Difference between home loan and investment loan rates? You might be able to save thousands per year in interest by reassessing your current loans. It costs nothing to find out.
If your interest rate is over 3.71% variable then you may be able to save by changing loans and or banks. I have access to a major bank that is currently offering customers a 3.71% variable rate (3.72% comparison rate) .This NOT a honeymoon rate, discount is for the life of the loan. Conditions apply – owner occupied homes only, principal and interest payments, minimum loan $150 000, 80% LVR maximum – No application fee, monthly or annual fees. If you are interested in saving thousands per year call Mercia finance to see if we can show you how to benefit from a better rate. We can also show you some great fixed rates and investment loan discounts. An example of what the above may mean to you – an average mortgage of $450 000 at the average big bank discounted rate of 4.4% = an annual interest saving of $3 105 per year. I may cost you little or nothing to get this rate for your mortgage – find out today.
Investors will have read that most banks are increasing the rate on investment loans. This includes current investment loans. If you are a property investor check your rates and find out if these increases apply to you. If you are not sure, ask Mercia finance for an obligation free loan check. Some institutions are not increasing the rates for investors. So this is a good time to make sure you have the best loan for your circumstances.
If you have questions regarding any type of loan, call Dan Goodridge on 04144 233 40. Our service is free of charge to you the borrower and we have access to all the major lenders in WA. Call us anytime. After hours is OK.
Taxation Newsletter – February 2017
ATO priority on settling cases – but not at any cost
The ATO has advised that it places a high priority on resolving tax disputes early, including through reaching settlements where appropriate, but that it will not settle disputes at any cost. It says “the sensible use of settlements” is part of its commitment to earlier and more effective dispute resolution. In this regard, the ATO has advised that in 2015–2016, it settled 1,362 cases (31% more than in the previous year) and that the increased number of settlements can be attributed entirely to settlements finalised as part of Project DO IT (Disclose Offshore Income Today).
TIP: The ATO’s stated policy of “placing a high priority on resolving disputes early, including through settlements where appropriate” is something that should be kept in mind in any dispute with the Commissioner, whether large or small. A settlement may provide a great opportunity to finalise a difficult or long-running dispute.
ATO develops work-related expenses risk profiles
The ATO has developed work-related expenses risk profiles to help it identify how work-related expense deduction amounts compare for similar taxpayers. The ATO said improvements in data analytics and modelling have allowed it to create a risk profile for tax agents’ practices based on comparing their clients’ work-related expenses claims with those made by similar taxpayers.
The ATO has said it will share these risk profiles with some tax professionals where their clients’ claims appear higher than expected.
TIP: The ATO’s increasing capacity to monitor the often difficult issue of work-related expenses claims means taxpayers and tax professionals need to take care when preparing returns. Contact us if you would like to discuss which of your work-related expenses may be tax deductible.
Onus on taxpayers to show no fraud or evasion: Full Federal Court
Several taxpayers have been unsuccessful in their appeals to the Full Federal Court in which they challenged tax assessments that dramatically increased their assessable income for certain income years. In each case, the Court confirmed that where the Commissioner of Taxation has issued an amended or default assessment out of time on the grounds of taxpayer “fraud or evasion”, the taxpayer bears the responsibility of proving that such fraud or evasion does not exist.
No disclaimer of trust interest: unsuccessful appeal
A beneficiary of two trusts whose assessable income was increased from some $70,000 to some $13 million in light of her entitlement to distributions from the trusts has been unsuccessful in claiming on appeal that she had “disclaimed her interests” in the trusts. Instead, the AAT found that she could not argue she had disclaimed her interests in the distributions. This finding was on the basis that she did not bring up having made “disclaimers” when she originally objected to amended assessments that the Commissioner of Taxation issued in 2013. Additionally, in any event, the AAT found that the disclaimers were legally ineffective because of the significant period of time between the distributions being made (in 2006 and 2007) and the disclaimers being made (in 2015).
TIP: Any attempt to disclaim an interest in a trust for tax purposes must be legally valid first – and the key consideration is that there must not have been behaviour that indicates implied acceptance of the interest. In this case, the taxpayer’s behaviour was problematic because she did not act until well after she received the distributions and they were assessed as part of her income.
Admin penalties of 75% for failing to lodge FBT returns
The AAT has confirmed that 75% administrative penalties were rightfully imposed on several companies for their failure to lodge FBT returns over a four-year period. The AAT found that the Commissioner of Taxation was obliged to impose a 75% administrative penalty because the FBT returns were not lodged, and that the “safe harbour” provisions did not apply to such an administrative penalty.
The AAT also found that it was not appropriate to exercise its discretion to remit the penalties in part or whole under the circumstances. The AAT relied on the criteria in Practice Statement Law Administration PS LA 2014/4 in arriving at its decision.
New ATO data-matching program: ride-sourcing
The ATO has announced a new data-matching program involving ride-sourcing providers. Under the program, the ATO will acquire data to identify individuals who may be engaged in providing ride-sourcing services during the 2016–2017 and 2017–2018 financial years. Details of all payments made to ride-sourcing providers from accounts held by a ride-sourcing facilitator will be requested from the facilitator’s financial institution for the 2016–2017 and 2017–2018 financial years. The ATO estimates that up to 74,000 individuals (ride-sourcing drivers) offer, or have offered, the services.
TIP: If you work as a driver for Uber or a similar ride-sourcing facilitator, the money you make is assessable income that needs to be included in your tax return. Contact us for more information about how the ATO’s data-matching program may apply to your circumstances.
Taxation ruling on commercial website deductibility
A new taxation ruling from the ATO sets out the tax deductibility of expenditure incurred in acquiring, developing, maintaining or modifying a commercial website for use in carrying on a business.
Broadly, the ruling explains that acquiring or developing a commercial website for a new or existing business is considered to be a capital expense, and is therefore not deductible. On the other hand, maintaining a website, including remedying software faults, is generally a revenue expense, so may be deductible.
Taxation determination on deductions for bad debts: trust beneficiaries and UPEs
In a new tax determination, the ATO states that a beneficiary is not entitled to a bad debt deduction for an amount of unpaid present entitlement (UPE) that the beneficiary purports to write off as a bad debt.
It says this is because the amount of UPE is not included in the beneficiary’s assessable income. Instead, the entitlement is used to determine how much net income of the trust is included in the beneficiary’s assessable income. This means that the the debt amount cannot be included in the taxpayer’s income in that year or in an earlier income year, which is a requirement for writing off a bad debt.
Taxpayer failed to prove that payments were “loans”
In a recent case, the Full Federal Court has found that several taxpayer companies had not discharged the onus of proving that assessments the Commissioner of Taxation issued to them were excessive. The amended assessments took into account income of some $4 million that the Australian companies received from overseas sources. The taxpayers had claimed that the payments were loans.
In allowing the Commissioner’s appeal, the Court majority held that it would not be appropriate to find that the taxpayers had provided the required proof that the payments were genuine loans; in fact, they had made inconsistent or “alternative” arguments about the nature of the payments.
Finance Newsletter December 2016/January 2017
Some interest rates drop while others are going up!
Do you have the best rate available for your home and investment loans?
You may have noticed a Difference between home loan and investment loan rates? You might be able to save thousands per year in interest by reassessing your current loans. It costs nothing to find out.
If your interest rate is over 3.59% variable then you may be able to save by changing loans and or banks. I have access to a major bank that is currently offering customers a 3.59% variable rate (3.60% comparison rate) .This NOT a honeymoon rate, discount is for the life of the loan. Conditions apply – owner occupied homes only, principal and interest payments, minimum loan $150 000, 80% LVR maximum – No application fee, monthly or annual fees. If you are interested in saving thousands per year call Mercia finance to see if we can show you how to benefit from a better rate. We can also show you some great fixed rates and investment loan discounts. An example of what the above may mean to you – an average mortgage of $450 000 at the average big bank discounted rate of 4.4% = an annual interest saving of $3 645 per year. I may cost you little or nothing to get this rate for your mortgage – find out today.
Investors will have read that most banks are increasing the rate on investment loans. This includes current investment loans. If you are a property investor check your rates and find out if these increases apply to you. If you are not sure, ask Mercia finance for an obligation free loan check. Some institutions are not increasing the rates for investors. So this is a good time to make sure you have the best loan for your circumstances.
If you have questions regarding any type of loan, call Dan Goodridge on 04144 233 40. Our service is free of charge to you the borrower and we have access to all the major lenders in WA. Call us anytime. After hours is OK.
Tax Newsletter December 2016/January 2017
Contrived trust arrangements in ATO sights
The ATO has cautioned taxpayers against arrangements that seek to minimise tax by creating artificial differences between the taxable net income and distributable income of closely held trusts. Deputy Commissioner Michael Cranston said the ATO is investigating arrangements where trustees are engineering a reduction in trust income to allow taxpayers to improperly gain favourable tax breaks, or sometimes to pay no tax at all.
Although he noted that many people use trust structures appropriately and within the law, Mr Cranston said the ATO has seen some trustees exploit the differences between trust net income and distributable income to have the net income assessed to individuals and businesses that pay little or no tax, and allow others to enjoy the economic benefits of the net income tax-free.
TIP: The ATO has identified problematic arrangements through the Trusts Taskforce’s ongoing monitoring and reviews, and will continue to look for similar arrangements using sophisticated analytics. Please contact our office for further information.
GST and countertrade transactions
The ATO has issued a Practical Compliance Guideline which sets out the Tax Commissioner’s compliance approach, in the context of GST, to entities that enter into countertrade transactions as part of carrying on their enterprise. “Countertrade” refers to the direct exchange of things by one entity for things provided by another entity, and does not include transactions where any of the consideration is monetary.
Each entity to a countertrade makes a supply and an acquisition. The Commissioner is aware of various practical problems in the context of these transactions and notes that the compliance and administrative costs may be unnecessarily burdensome where such transactions have no net revenue effect. Accordingly, the Guideline seeks to apply a practical compliance approach for certain countertrade transactions that are GST-neutral.
TIP: The Practical Compliance Guideline is only applicable in relation to GST – not for any other purpose or in relation to any other tax obligations and entitlements. It also only applies in specified circumstances, including where the countertrade transactions account for no more than approximately 10% of the entity’s total number of supplies.
Companies held to be resident and liable to tax in Australia
In a long-running saga, the High Court has unanimously dismissed the appeals of four corporate taxpayers. The Court confirmed the taxpayers were Australian residents for income tax purposes, and therefore liable to tax in Australia on the profits they made from share trading activities on the Australian Stock Exchange. In making this decision, the Court rejected the taxpayers’ contention that because Justice Perram had in the first case found that the directors of each taxpayer were resident abroad, and because meetings of those directors were held abroad, then Justice Perram and the Full Federal Court should have held that the central management and control of each company was exercised abroad, and therefore that the companies were not residents of Australia for income tax purposes.
The High Court held that, as a matter of long-established principle, the residence of a company is a question of fact and degree to be answered according to where the company’s central management and control actually occurs. Moreover, the Court emphasised the answer was to be determined by reference to the course of the company’s business and trading, rather than by reference to the documents establishing its formal structure and other procedural matters.
The High Court further held that the fact the boards of directors of the companies were located in overseas countries was insufficient to locate the companies as “foreign residents” in circumstances where (as found in the first case) the boards of directors had abrogated their decision-making in favour of a Sydney-based accountant, and only met to mechanically implement or rubber-stamp decisions that he made in Australia.
Payment was assessable as “deferred compensation”
The High Court has unanimously dismissed a taxpayer’s appeal and held that payments of US$160 million made to him pursuant to an incentive “profit participation plan” after termination of his employment was income according to ordinary concepts. In particular, the Court found that the payments were “deferred compensation” for the services the taxpayer performed in his employment. At the same time, the Court dismissed the taxpayer’s claim that the amount was assessable as a capital gain on the basis that it did not represent the proceeds for the future right to receive a proportion of company profits he was entitled to.
ATO data-matching programs continue
The ATO has advised that it will continue with the following data-matching programs.
Share transactions
Data about share transactions will be acquired for the period 20 September 1985 to 30 June 2018 from various sources, including stock transfer companies. The ATO will collect full names and addresses, purchase and sale details, and other information. The program aims to ensure that taxpayers are correctly meeting their tax obligations in relation to share transactions. It is estimated that records relating to 3.3 million individuals will be matched.
Credit and debit cards
Data about credit and debit card transactions will be acquired for the 2015–2016 and 2016–2017 financial years from various financial institutions. The ATO will collect details (such as name, address and contact information) of merchants with a credit and debit card merchant facility and the amount and quantity of the transactions processed. The program seeks to identify businesses that may not be meeting their tax obligations. It is estimated that around 950,000 records will be obtained, including 90,000 matched to individuals.
Online selling
Data will be acquired relating to registrants who sold goods and services to an annual value of $12,000 or more during the 2015–2016, 2016–2017 and 2017–2018 financial years. The ATO said data will be sought from eBay Australia and New Zealand Pty Ltd. The data will be used to identify those apparently operating a business but failing to meet their registration and/or lodgment obligations. It is estimated that between 20,000 and 30,000 records will be obtained.
Tax debt release applications refused
The Administrative Appeals Tribunal (AAT) has recently refused the applications of two individuals who sought to be released from their tax debts under the tax law.
Case 1
An individual suffering from Parkinson’s disease had received income protection policy payments and sought to be relieved from the related tax debts, which totalled $130,416. He said he was unable to dispose of his home or an investment property to pay the debts, as there were mortgages over the properties in favour of his wife. The individual also argued that selling the properties would compound his illness and make it more difficult to meet his living needs. Although the AAT accepted that serious illness was a consideration, after reviewing the circumstances it held that the taxpayer would not suffer serious hardship if he was required to pay his tax liability. The AAT said the taxpayer did not make proper provisions to meet his tax liabilities and preferred to pay his other debts. Accordingly, relief was not granted.
Case 2
A Sunshine Coast real estate agent sought to be relieved from his tax debts, which totalled $437,681 as at 11 August 2016. He argued he had an outstanding compliance history and that his circumstances were the result of a catastrophic financial event in 2005, among other things. The Commissioner pointed to the taxpayer’s “unusually high level of discretionary spending, including on holidays, dining out and entertainment, which could be reduced”. The AAT said the taxpayer had a “poor compliance history” and agreed with the Commissioner’s description of his discretionary spending. The AAT was of the view that the taxpayer “simply gave priority to other matters and ignored his tax obligations”. The AAT accordingly refused the application for relief.