Friday, 24 January 2014

Australia Income Tax (Frequently Asked Questions - FAQ)

Australia Income Tax (Frequently Asked Questions - FAQ)

1)Are you a resident for Australian Income Tax?

Generally, the Australian Taxation Office (ATO) considers you to be an Australian resident for the tax purposes if you have:

-Always lived in Australia or you have come to Australia and live ,or

-Actually been in Australia for more than half of the financial year – unless your usual home is overseas and you do not intend to live in Australia.


2)What is a tax file number (TFN) ?

A tax file number is a number issued by the ATO to an individual person, a company, Trust, Partnership or Superannuation Fund. Each TFN is unique to every particular taxpayer.

3)Why do you need a tax file number?

Your TFN is your personal identification number for taxation and related purposes.  You will need a tax file number when you:

- are lodging a tax return
-are asking about your personal tax affairs
-are making a TFN declaration (for employment)
-have savings accounts or investments that earn income (for example, interest or dividends)
-are a non-resident living outside Australia with business interests in Australia.

4)Application or Enquiry for a Tax File Number – individual

-Get in touch with an accountant.

5)What is Rental income?

Rental and other rental income is the full amount of rent and associated payments that you received when you rent out your property. You must include the full amount you earn (gross rent) in your tax return.

Gross rent means the total amount paid by the tenant, either to you or to your agent.

6)Rental related income:

You must include rental bond money as income if you become entitled to retain it. If you receive a reimbursement or recoupment for deductible expenditure you have incurred that amount as income.

7)Rental expenses:

You can claim a deduction for some of the expenses you incur for the period your property is rented or is available for rent/ However, you cannot claim expenses of a capital or private nature.

When you claim a deduction for expenses incurred in gaining your gross assessable rental income, there may be situations where the expenses need to be apportioned between deductible and non-deductible expenses. Examples include:

-If the property is not available for rent for the full year, you may need to apportion some of the expenses on a time basis.
-If only part of the property is used to earn rent, you can claim only that part of the expenses that relates to the rental income.
-If you combine travel to inspect or maintain your rental property with travel for private purposes , you may need to apportion your travel expenses.

Expenses that you may be able to claim include:

-advertising for tenants
-bank charges
-body corporate fees
-cleaning
-council rates
-electricity and gas
-gardening and lawn mowing
-insurance; building, contents and public liability
-interest on laons.
-Land tax
-legal expenses *
-lease costs: preparation, registration and stamping
-pest control
-property agent’s fees and commission
-quantity surveyor’s fees
-repairs and maintenance
-Secretarial and book keeping fees
-Security patrol fees
-Servicing costs- such as servicing a water heater
-stationery and postage
-Telephone calls and rental
-tax-related expenses including registered tax agent fees.
-Travel and car expenses: rent collection, inspection and maintenance of property
-Water charges.

You can claim a deduction for these expenses only if you have actually incurred the expenditure.

8)Expenses that you are not able to claim include:

-stamp duty on conveyance of a rental property
-expenses not actually incurred by you such as water or electricity charges borne by your tenants
-expenses that are not related to rental of a property, such as expenses connected to your own usage of a holiday home that you rent out for part of he year.

9)Acquisition and disposal costs:

You cannot claim a deduction for the costs of acquiring or disposing of your rental; property. However, if you acquired the property after 19 September 1985, these costs may form part of the cost base of the property for capital gains tax purposes.

10)Borrowing expenses:

These are expenses directly incurred in taking out a loan for the property. They include establishment fees, valuation fees, title search fees and costs for preparing and filling mortgage documents. Interest expenses do not qualify as borrowing expenses.

The total cost of these items is amortized over 5 years or the term of the loan, whichever is the lesser.

11)Negative gearing:

A rental property is negatively geared when it is purchased with the assistance of borrowed funds and the net rental income, after deducting other expenses, is less than the interest on borrowings.

The overall taxation result of a negatively geared property is that a net rental loss arises. In this case, you may be able to claim a deduction for the full amount of rental expenses against your rental and other income such as salary, wages or business income when you complete your tax return for the relevant income year. 

For further information, contact the accountant.

12)Capital gains tax:

If you acquired your rental property, or plant used in relation to your rental property, after 19 September 1985, capital gains tax may apply when you dispose of the property and the plant.

The law relating to the treatment of capital gains tax was amended with effect from 21 September 1999. The amendments and proposed amendments alter the way in which capital gains and losses are, or will be, treated for taxation purposes.

The 2012-2013 budget paper proposed changes to non-resident eligibility to 50% CGT discount on capital gains accrued after 7:30pm (AEST) on 8 May 2012.


For further information, contact the accountants.

SMS 'AusAccount’ & YOUR NAME TO (+65) 91259978 to get in touch with an Australia Accountant in Singapore.