In the context of a Self-Managed Super Fund (SMSF), a “related party” encompasses a broad range of individuals and entities that have a close association with the members of the SMSF. The definition of a related party for an SMSF, as outlined by the Australian Taxation Office (ATO), includes:
- Members of the SMSF: Every individual who is a member of the Self-Managed Super Fund.
- Relatives of Members: This includes a wide array of family relations such as spouses, parents, grandparents, children, grandchildren, siblings, aunts, uncles, nieces, nephews, and the equivalent relations by marriage or de facto partnerships.
- Standard Employer-Sponsors: An employer who contributes to the SMSF for a member under an arrangement between the employer and the trustees of the fund.
- Partnerships: Where a member or a relative of a member is a partner.
- Trusts: Where a member or a relative of a member controls the trust.
- Companies: Where a member or a relative of a member has a significant influence over the company, typically through a substantial shareholding.
The rules around related parties in a Self-Managed Superfund (SMSF) are designed to safeguard the superannuation system. Essentially, these rules make sure that SMSFs are always working to help members reach their retirement goals, keeping everything fair and above board.
Source – ATO
An in-house asset for a Self-Managed Superfund (SMSF) typically refers to an investment or asset that is related to, or involves, a member of the SMSF or their related parties. According to the Australian Taxation Office (ATO) regulations, an in-house asset can be:
- a loan to, or an investment in, a related party of your fund
- an investment in a related trust of your fund
- an asset of your fund that is leased to a related party.
The ATO instructs that in-house assets must not exceed 5% of the total market value of the Self-Managed Super Fund’s (SMSF) assets.
This rule is designed to ensure that SMSFs are primarily used for the purpose of providing retirement benefits to their members, and to prevent the misuse of superannuation funds for personal or related party financial dealings. Therefore, the investments and transactions made by an SMSF need to comply with this rule, among others, to meet the sole purpose test and ensure the fund is being used appropriately for retirement savings.
Source – ATO
If you are unemployed, claiming deductions for self-education expenses—including related travel and accommodation costs—can be challenging. Usually, you need to be employed and the courses should be related to your job to qualify for these deductions.
The ATO in TR 2023/D1 should corroborate this at paragraph 67 when it states:
“67. To be deductible, the expenses must be relevant to your income-earning activities at the time you incur the expense. A deduction is not available if, at the time you incur the expense, you are not undertaking income-earning activities to derive assessable income, either by employment, carrying on a business or by other means”.
Apart from that, the ATO ruling doesn’t seem to suggest it’s possible to argue that the self-education costs are deductible due to the legacy of a previous role.
It is important to note that the land tax amount is not deductible in the year you pay it. Instead, deductions must be taken in the respective income years to which the land tax liabilities related to. It’s crucial to understand that your liability for land tax is determined by the usage of the property within a given year, regardless of when the tax assessment is actually issued.
When you pay land tax for past years (known as paying “in arrears”), you can’t deduct this payment from your income for the year in which you make the payment. Instead, you can only claim a deduction for the land tax in the years that the tax was originally due for.
For an example – Imagine it’s 2024, and John receives a bill for land tax for the years 2022 and 2023 that he hasn’t paid yet. Even though John pays this bill in 2024, he can’t claim the deduction on his 2024 tax return. Instead, he should claim the deduction for the 2022 land tax on his 2022 tax return, and the deduction for the 2023 land tax on his 2023 tax return, because those are the years the tax relates to, even though he paid it later.
You can claim land tax as a tax deduction for your investment properties. However, you cannot claim land tax as an immediate deduction if your property is not generating rental income or if you are using the property for personal use.
You are eligible to deduct expenses including interest on loans, local council, water and sewerage rates, land taxes, and emergency services levies incurred during the period of renovating a property intended for rental. It’s important to note, however, that your eligibility for these deductions ceases once your intentions for the property change, such as deciding to use it for personal purposes instead.
According to GSTR 2012/6 Airbnb doesn’t fall under commercial residential premises. The definition of ‘commercial residential premises’ in section 195-1 includes the following seven paragraphs, none of which indicate anything similar to Airbnb. This distinction is crucial for understanding the regulatory and tax implications associated with offering or operating Airbnb properties.
- a hotel, motel, inn, hostel or boarding house.
- premises used to provide accommodation in connection with a school;
- a ship that is mainly let out on hire in the ordinary course of a business of letting ships out on hire.
- a ship that is mainly used for entertainment or transport in the ordinary course of a business of providing ships for entertainment or transport.
- a marina at which one or more of the berths are occupied, or are to be occupied, by ships used as residences.
- a caravan park or a camping ground; or
- anything similar to residential premises described in paragraphs (a) to (e).
Check out our Comprehensive Guide To Converting Your Long-Term Investment Property To Airbnb Or Short-Term Rental for further information.
Reference – https://www8.austlii.edu.au/au/other/rulings/ato/ATOGSTR/2012/GSTR20126.pdf
The goods and services tax (GST) does not apply to residential rents, so Airbnb hosts do not have to pay it. This also means that you can’t get a GST credit for the costs that go along with it. This is applied even if your sales are more than $75,000, which is the GST threshold.
Please check feel free to check out our Tax Consequence guide for Airbnb.
Starting your investment journey, whether as an employee or a business owner, requires careful consideration of two critical aspects: tax planning and asset protection. These are not just checkboxes on a list; they are foundational pillars that seasoned investors prioritise from the outset. The goal is not merely to accumulate assets but to do so in a way that ensures their longevity and protection.
Asset protection is all about creating a secure environment for your investments. It’s the practice of arranging your assets in a way that minimizes the risk of loss, whether through legal challenges, business debts, or other financial liabilities. The essence of asset protection lies in the foresight to anticipate potential risks and to structure your investments in a way that those risks are mitigated before they can even arise.