Tony van der Westhuysen

Taxes and Houses

The Henry Recommendations

• Substantial increases in the maximum rates of rent assistance for income support recipients.

• Rent assistance rates should be linked to movements in market rents

• Public housing rent concessions should be replaced by rent assistance.

• A new form of assistance for high-needs tenants to improve equity and work incentives.

The Henry Recommendations

• Land tax should be extended to residential property - integrated over time with property rate assessments.

• Stamp duties on property should be reduced, and ultimately removed, with the revenues replaced by efficient taxes, preferably an annual land tax.

The Henry Recommendations

• Concessions for investors in rental property who use their own funds rather than borrowed funds. – This was recommended to reduce the

disparity between investors who use savings to acquire rental properties rather than negatively gear the investment.

• A reduction in the CGT discount for investors who use negative gearing from 50 percent of the gain to 40 percent of the gain.

Issues for Housing

• Taxes and affordability• GST and supplies of residential land• GST and property development• GST and short term accommodation

Taxes and affordability

• Negative gearing– Quarantining– Non-commercial loss rules

• Main residence exemption• 50% CGT discount

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GST and supplies of residential land

Examples of taxable supplies of housing:

• Sales of new residential premises• Sales of vacant land

Tax Reform After Henry

Input taxed supplies

• Sales of houses that are not “new”• Leasing of houses• “to be used predominantly for

residential accommodation”

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Meaning of “residential premises”

Residential premises means land or a building that:

(a) is occupied as a residence or for residential accommodation; or

(b) is intended to be occupied, and is capable of being occupied as a residence or for residential accommodation (regardless of the term of the occupation or intended occupation) and includes a floating home

Tax Reform After Henry

Issues

• Vacant land– Vacant land of itself can never have

sufficient physical characteristics to mark it out as being able to be or intended to be occupied as a residence or for residential accommodation. GSTR 2000/20

• Land and buildings where the buildings are demolished after purchase

• Predictions as to buyer’s intention

The “Toyama” decisionToyama Pty Ltd v Landmark Building Developments Pty Ltd [2006] NSWSC

83

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GST and property development

“New residential premises” defined in s 40-75• Not previously sold as residential premises• Not previously been the subject of a long

term lease• Created through substantial renovations• Built to replace demolished premises on

the same land• Note s 40-75(2) - premises stop being new

residential premises after 5 years

Tax Reform After Henry

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Commercial Residential Premises

(a) a hotel, motel, inn, hostel or boarding house;

(b) premises used to provide accommodation in connection with a school;

(c) a ship that is mainly let out on hire in the ordinary course of a business of letting ships out on hire;

Tax Reform After Henry

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Commercial Residential Premises

(d) a ship that is mainly used for entertainment or transport in the ordinary course of a business of providing ships for entertainment or transport;

(da) a marina at which one or more of the berths are occupied, or are to be occupied, by ships used as residences;

Tax Reform After Henry

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Commercial Residential Premises

(e) a caravan park or a camping ground; (f) anything similar to residential premises

described in paragraphs (a) to (e).

Tax Reform After Henry

The Marana Holdings decision

Marana Holdings Pty Ltd v Commissioner of Taxation (2004)

214 ALR 190.

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GST and short term accommodation

GSTR 2000/20 para 51 - 52– A strata titled unit or suite cannot, by itself, exhibit

the characteristics of commercial residential premises.

– This is why an individual unit only takes on the character of commercial residential premises when it is aggregated with others and run by an entity who has acquired the interests necessary to let the rooms in its own right, rather than on behalf of the owners, in the same manner as a hotel, motel, inn, or hostel.

Tax Reform After Henry

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Commercial Residential Premises

(a)a hotel, motel, inn, hostel or boarding house;

……..(f) anything similar to residential premises

described in paragraphs (a) to (e).Macquarie Dictionary: “similar” means

“having likeness or resemblance, especially in a general way”.

Tax Reform After Henry

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“..anything similar…”

The relevant factors are:– commercial intention; – multiple occupancy; – holding out to the public; – accommodation is the main purpose; – central management; – management offers accommodation in its own

right; – services offered; and– status of guests

Tax Reform After Henry

Predictions as to buyer’s intention

Questions