NEWSLETTER MARCH 2013

The Housing Industry Association (HIA) recently released its December 2012 quarter housing affordability index, showing another surge in affordability with the eighth consecutive quarterly increase in the index. They say this was driven by interest rate cuts, earnings growth and weak price developments. Other commentators note that the median house price is still relatively high and that affordability is still below the long-term average, but agree that it has certainly improved.

Changes to Superannuation Guarantee obligations

For a long time, the rate of compulsory superannuation contributions from employers has been 9% but in 2010 the government announced that this rate will gradually increase to 12% between 2013 and 2019. Accordingly, in April the ATO will begin sending information out to employers with superannuation guarantee obligations to inform you about your new super obligations.

Specifically, from 1 July 2013 employers must:

• Increase the minimum rate for compulsory super payments on behalf of their employees from 9% to 9.25%
• Start making super guarantee contributions for employees aged 70 years and over (the existing upper age limit will be removed after 30 June 2013).

Upcoming Due Dates

• March 21 : February 2013 monthly BAS due date for lodging and paying (only for those on monthly reporting cycles).
• April 21 : March 2013 monthly BAS due date for lodging and paying (only for those on monthly reporting cycles).
• April 28 : March 2013 quarterly BAS due date for lodging and paying (only for those lodging using paper forms).
• April 28 : March 2013 quarterly IAS due date for payment (lodgement only required if you are varying the instalment amount).
• April 28 : March 2013 quarterly superannuation contributions due for payment to funds.

In Tax News

Australian residents aged 16 and over can now apply for a Tax File Number (TFN) online, and authenticate their proof of identity documents at participating Australia Post offices.

To use this service:

1. Go to www.ato.gov.au/TFNapply and complete the online form
2. Attend an interview at your nearest participating Australia Post office (check the list of participating outlets. The service will continue to be rolled out to more outlets by June 2013).
3. Bring 3 proof of identity documents.

GST and Selling Real Property

Real property is a term referring to land, interests in land and anything fixed to the land (such as buildings) that you would transfer with the property were it sold.

Even if you are not registered for GST, you may still be required to register and pay GST if your real property dealings have the appearance of a business. Whether or not you are carrying on a business requires examination of the activities surrounding the commencement, duration and termination of the transactions. Even if you only sell one property, that transaction can still have the appearance of being an enterprise and if your turnover from that one transaction was over the GST registration threshold of $75,000 in a single year then you will need to register for GST.

In our November 2011 newsletter we outlined some determining factors for carrying on a business. In the real property context, whether or not you are a business for GST will hinge largely upon whether you hold property as trading stock or as investments. When property is held as an investment the intention is to earn rental income, and the rental income is usually not the income you rely on to meet your everyday living expenses. If you become desperate, or the value appreciates enough then you may sell it later but that was not your intent when you purchased it. When property is held as trading stock, it is bought with the intention of selling it at a profit, and generally "flipping houses" is what you are doing as a primary source of income. It's not always cut and dried, and a private ruling from the ATO may need to be sought before you can determine whether or not you are carrying on a real property business and need to register for GST.

If you sold real property and you are not carrying on a business, then you do not pay GST on the sale of the property, although there would probably be a Capital Gains Tax calculation to be made (which is a topic for another newsletter).

If you sold real property as part of carrying on a business, then you need to check whether you made a GST-taxable supply. GST is applied differently depending on whether the property is residential or commercial.

Residential properties are not generally GST-taxable: you don't pay GST on the rental income you earn from them, but neither can you claim back the GST you paid on rental expenses or purchases and when you sell a residential property you generally don't pay GST on the sale. The exception to this is when it is a new residential property, which are those that have not previously been sold as residential premises, or were created through substantial renovations or complete rebuilds, and have been continuously rented for fewer than 5 years. New residential properties are taxable supplies; you must pay GST on their sale and can claim input tax credits on their construction. You may be eligible to use the margin scheme to work out the GST on the sale (more on the margin scheme later).

Commercial properties are also GST-taxable, and you can claim GST credits on expenses related to selling your property, eg GST on the real estate agent's fees and conveyancing fees. When it comes to claiming GST on the actual purchase cost of the property itself then you must meet 2 criteria before claiming GST on the purchase:

• the seller was GST-registered and the sale was not a GST-free sale of a going concern, and
• the seller did not use the margin scheme to work out the GST included in the sale.

If you have any feedback or suggestions for our newsletter please email us at newsletter@adaptive.net.au

Until our next contact
Good Health & Good Luck