October 2024 Newsletter

Please click on the following link to view this month's newsletter for October 2024. We would like to highlight the following articles:-

Tax consequences of sharing your home

Homeowners can generate income by renting out a room, offering short stays through platforms like Airbnb, or receiving payments from friends or family for accommodation. In these cases, rental income, including rent, bond money, or cancellation fees, must be declared as assessable income in their tax return.

You can claim immediate deductions for some expenses related to rental income, while other deductions need to be claimed over time. It’s important to note that rental expenses can only be claimed when your home is rented out or genuinely available for rent. If you only rent out part of your home, only expenses related to that part are deductible.

Payments from family or friends for food and accommodation are typically considered domestic arrangements and are not assessable income, meaning related expenses cannot be deducted. However, if the arrangement resembles an arms length rental agreement or is intended for profit, the payments may be treated as rental income.

Unlocking value: subdividing your family home’s land

Many retirees may have significant property assets but limited cash flow. For those with larger properties, subdividing and selling unused land can provide funds for income-generating investments. However, this approach comes with capital gains tax (CGT) considerations and downsizer contribution limits.

Subdividing land creates new blocks with separate titles, each treated as a distinct asset for tax purposes, triggering CGT upon sale. While selling a main residence is generally CGT-exempt if it has not been used for income, this exemption may not apply to subdivided blocks. The main residence CGT exemption covers a dwelling and up to two hectares of adjacent land used for personal purposes. Selling a subdivided block of land on a new title without a dwelling means it no longer qualifies for this exemption.

Additionally, making a downsizer contribution to superannuation requires the proceeds to come from the sale of a dwelling, not vacant land.

Payday super: policy design released

From 1 July 2026, superannuation guarantee (SG) contributions will be required to be paid on payday, the date an employer makes an ordinary time earnings (OTE) payment to an employee. Employers will have seven calendar days to ensure the contributions reach the employee’s super fund. Exceptions will apply for small or irregular payments and for new employees. The SG charge framework will be updated with larger penalties for repeat offenders.

Additional changes include:

The deadline for super funds to allocate or return contributions will reduce from 20 business days to three days.
Employer reporting through Single Touch Payroll (STP) will include OTE and super liabilities to ensure correct SG identification.
The ATO’s Small Business Superannuation Clearing House will close on 1 July 2026, with small businesses transitioning to payroll software.
Revised fund choice rules will simplify employee super fund nominations when starting a new job.
Advertising of super products during onboarding will be limited to MySuper products passing the most recent performance test.

Please do not hesitate to contact us if you have any queries in relation to your tax and accounting matters.