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[av_heading heading=’The News Brief_20201104′ tag=’h1′ style=’blockquote modern-quote modern-centered’ subheading_active=’subheading_below’ show_icon=” icon=’ue800′ font=” size=’6vw’ av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’20’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=’custom-color-heading’ custom_font=’#000000′ icon_color=” margin=’0′ margin_sync=’true’ padding=’0′ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kh173z8b’ admin_preview_bg=’rgb(34, 34, 34)’][/av_heading]

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[av_heading heading=’JobKeeper update’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kh174ivq’ admin_preview_bg=”][/av_heading]

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New alternative decline in turnover test 

To claim JobKeeper, you must have suffered a significant decline in turnover. 

Generally, this is measured by comparing a relevant quarter in 2020 (called the turnover test period) with the equivalent quarter in 2019. However, there are alternative decline in turnover tests that apply in certain situations, such as:

An additional alternative decline in turnover test has been added – this applies to businesses that temporarily ceased trading for some or all of the relevant comparative period.

The new decline in turnover test requires the entity to have suffered the necessary decline based on its actual GST turnover for the September 2020 and/or the December 2020 quarter and not its projected turnover. 

JobKeeper rates

The standard rate of JobKeeper of $1,500 per fortnight has been replaced with a two-tiered rate of JobKeeper from 28 September 2020. The higher rate of JobKeeper from 28 September 2020 to 3 January 2021 is $1,200 (per fortnight) and the lower rate is $750 (per fortnight). 

On 4 January 2021, the higher rate of JobKeeper reduces from $1,200 to $1,000 (per fortnight) and the lower rate reduces from $750 to $650 (per fortnight). 

Whether the higher rate of JobKeeper applies is based on whether the individual worked 80 hours or more in the ‘reference period’. The higher rate will apply to:

The lower rate will apply to all other eligible employees/business participants.

The JobKeeper scheme is scheduled to end on 28 March 2021.

JobKeeper overpayments

The ATO has published on its website a useful guide explaining what happens if you have incorrectly self-assessed yourself (or your employees) as eligible for a JobKeeper payment. 

If the ATO considers it was an honest mistake, you may not have to repay the payment if:

If the ATO considers the mistake was not an honest one – which could include where the ATO has contacted you about a claim potentially being ineligible and you have not taken reasonable steps to check the eligibility before making future claims – the ATO will contact you and advise: 

There is a third scenario – the ATO decides that another entity that directly or indirectly benefited from the overpayment is also liable to repay the overpayment.  The ATO can pursue you or the other entity for repayment (including for the whole amount).  

Tip! If you think you have received a JobKeeper payment by mistake, talk to your tax adviser or the ATO as soon as you discover the error.
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[av_heading heading=’Green shoots in Aussie housing values’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kh1753fg’ admin_preview_bg=”][/av_heading]

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Australian housing values have moved into recovery mode, according to new research by CoreLogic.

The company’s national home value index has shown positive month-on-month growth through October following five months of consistent declines in residential property values.

Nationwide, values saw a 0.4 of a percentage point rise, with every capital city, excluding Melbourne, posting an increase over the month.

“Over the month, dwelling values increased by more than 1 per cent in each of the smallest four capital cities, with Brisbane, Adelaide, Hobart and Canberra housing values reaching new record highs,” CoreLogic’s research noted.

“Although values were lower across Melbourne through October, the trend rate of decline has been easing since mid-September. With a drop of 0.2 [of a percentage point], this was the smallest month-on-month drop in values since the COVID-19-related downturn commenced in April.

“Since the announcement that private home inspections were once again permitted across Melbourne, new property listings have surged, clearance rates have lifted and buyer activity is recovering. Based on this recent trend in housing values and activity, it seems likely we will see Melbourne follow the other capital cities towards a recovery over the coming month.”

Commenting further, CoreLogic’s head of research, Tim Lawless, said it was evident there was a divergence between house and unit market performance.

“The rise in capital city housing values over the month was entirely attributable to a 0.4 [of a percentage point] lift in house values which offset the 0.2 [of a percentage point] fall in unit values. Through the COVID period so far, unit values have actually shown a smaller decline in values than houses, but this is likely to change,” Mr Lawless explained.

“Almost two-thirds of Australian units are rented, and rental conditions have weakened, especially in the key inner-city precincts of Melbourne and Sydney. These areas have a higher concentration of unit stock and historic exposure to demand from overseas migration.

“Low levels of investment activity, relatively high supply of unit stock in inner cities and international border closures are key factors that imply units will underperform relative to houses over the medium term.”

Further, Mr Lawless noted that regional housing markets continue to outperform the capital cities.

“Broadly, CoreLogic’s combined regionals index has held relatively firm through the worst of the COVID-related downturn,” he said.

“The past two months have reversed the previous mild falls across the combined regional areas. In the seven months since March, regional dwelling values are up by 1.7 per cent while values across the combined capitals index have fallen by 2.3 per cent.”
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[av_heading heading=’Owner-occupier approvals at historical highs: ABS’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kh175rbk’ admin_preview_bg=”][/av_heading]

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The Australian Bureau of Statistics’ (ABS) latest Lending Indicators data has revealed that the total value of home loan approvals (seasonally adjusted) rose 5.9 per cent in September.

This rise was driven by a surge in the value of owner-occupier home loan commitments, which jumped 6.0 per cent to $17.3 billion in September.

Around half of the rise in September’s owner-occupier housing loan commitments was for the construction of new dwellings, which surged 25.3 per cent, following a 19.2 per cent rise in August.

The number of loans for the construction of new owner-occupier dwellings increased by 27.1 per cent over September to 5,948, while the total number of dwelling approvals rose by 15.4 per cent to be 8.8 per cent higher than a year ago.

Commenting on the trends, ABS head of finance and wealth, Amanda Seneviratne said: “Owner-occupier housing loan commitments are at historically high levels, consistent with low interest rates and government incentives.”

“For example, it is likely that the HomeBuilder grant is contributing to increased demand for construction loans.”

Across the states, only Victoria and Tasmania recorded lower home loan commitments, according to the ABS.

Victorian owner-occupier approvals fell 8.8 per cent in seasonally adjusted terms, which the ABS said reflected restricted housing market activity in July and August when COVID-19-related stage three and stage four restrictions were imposed.

“The fall in commitments for existing dwellings in Victoria was partly offset by a rise in commitments for construction of new dwellings,” Ms Seneviratne said.

In the first home buyer (FHB) segment, the total number of owner-occupier FHB loan commitments rose 6 per cent, reaching 13,040 loan commitments, seasonally adjusted.

As a share of owner-occupier new loan commitments, the value of FHBs rose 5.6 per cent to $5.3 billion.

Meanwhile, the total value of loan commitments for investor housing was $5.3 billion, an increase of 5.2 per cent.

Big 4 banks’ mortgage portfolios

The ABS data has come on the heels of figures released by the Australian Prudential Regulation Authority (APRA), which has once again revealed the gap in the performance between the major banks in their mortgage portfolios.

For the third month in a row, ANZ and the CBA have recorded multibillion-dollar mortgage portfolio growth while the other two major banks have reported a contraction

The mortgage portfolios of ANZ and the Commonwealth Bank of Australia (CBA) posted a combined total growth of around $5.3 billion over September, driven by an increase in owner-occupier lending.

In contrast, both National Australia Bank (NAB) and Westpac reported contractions in their mortgage portfolios, decreasing by $700 million each over September.

The APRA data has followed the October 2020 State of the States report from CommSec, which showed that housing finance commitments have reached above decade averages across Australia, while beating last year’s levels.
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[av_heading heading=’Budget measures now law’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kh17827r’ admin_preview_bg=”][/av_heading]

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A number of measures announced in the Federal Budget 2020–21– and which we reported in the special Budget edition of TaxWise News – are now law. These are:

Some of the measures benefiting medium businesses don’t start until the 2021–22 income year or FBT year (as appropriate) e.g. the simplified trading stock rules and the FBT exemptions for car parking and multiple work-related portable electronic devices. The immediate deduction for certain start-up costs and prepayments apply from the current income year (2020–21). 

Tip! Talk to your tax adviser about how to make the best of these new tax concessions.
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[av_heading heading=’CFS highlights potential issues with SMSF property transfers’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kh178l7m’ admin_preview_bg=”][/av_heading]

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Colonial First State executive manager Craig Day said while super funds are generally prohibited from acquiring property from a related party, one exception to this rule for SMSFs is where the asset satisfies the definition of a business real property (BRP) and is acquired at market value.

“The definition of BRP for superannuation purposes includes any freehold or leasehold interest in real property where the property is used wholly and exclusively in one or more businesses,” Mr Day explained.

“Therefore, the trustee of an SMSF could potentially acquire a residential property from a member or other related party where it satisfies a business use test and meets the definition of BRP.”

Mr Day said whether an entity is considering to be using a property in the course of carrying on a business depends on the particular circumstances of each case.

“In Tax Ruling 97/11, the ATO outlines the factors that are relevant when determining whether a business is being carried on,” Mr Day said.

These factors, he said, may include the keeping of business records separate to personal records; the size of the operation and the extent of capital investment involved; whether its activities are conducted continuously and systematically rather than on an ad-hoc basis; and a level of repetition and regulatory with activities constituting the business.

It could also include whether activities are carried on in a similar manner to other like businesses; whether activities are planned, organised and carried on in a businesslike manner; the scale and permanency of operations; and the existence of a business plan.

Mr Day noted that in SMSF Ruling 2009/1, the ATO provided a number of examples where residential property could be used as part of a business.

One of these examples was residential apartments being used as part of a property investment business.

“In this case, the example involved an individual who owned 20 residential apartments, personally managing and maintaining the apartments on a full-time basis and living off the rent generated,” Mr Day explained.

“In this case, the ATO confirmed, the scale of the operation together with the elements of repetition and purpose indicated the owner was carrying on a property investment business.”

He cautioned, however, that if a managing agent was used to manage and maintain the properties, this situation would likely result in the properties being considered passive investments only and not part of a business of property investment.

It also gave the example of a five-bedroom house which the owner had used to operate a B&B business for the past 17 years.

“In the example, the owner operated the business year-round, marketed the business via holiday accommodation websites, had a business plan, completed business tax returns and had employees. In this case, the ATO confirmed that a business was being carried on,” he said.

However, Mr Day also contrasted this situation with an example where, during school holidays, the owners of a large family home allowed guests to stay in their house on a B&B basis.

“In this case, the ATO confirmed the scale of the operation would not be sufficient to constitute a business,” he said.

Therefore, depending on the circumstances, residential property can qualify as BRP, Mr Day said.

“However, members and their advisers will need to carefully consider a range of issues, such as the size, scale and nature of the operations being carried on, when determining whether a property is really just a passive investment or being used in a legitimate business,” he stressed.

Mr Day noted that residential property can also qualify as an active asset under the small business CGT concessions where it is used in the course of carrying on a business by the taxpayer, their affiliate or connected entity and its main use is not to derive rent.

“A property used in a business of providing accommodation, such as a hotel, motel or resort, could potentially qualify both as a BRP and as an active asset,” he said.

“In this case, the property could be transferred to an SMSF from a related party and the small business CGT concessions could be applied to reduce or eliminate any resulting realised capital gains.”

However, Mr Day warned that there can be some uncertainty with this where the SMSF has acquired the property via an in-specie contribution.

While an SMSF can potentially acquire the property via an in-specie contribution, he said, it is unclear whether the member can also qualify for the concession in this situation.

“Under the eligibility requirements for this concession, [the member] would need to contribute the capital proceeds from the disposal to a complying super fund,” he said.

“However, the ATO has previously taken the position that the disposal that triggers the CGT event and the contribution of the capital proceeds cannot occur simultaneously.”

Therefore, Mr Day said it would not be possible to claim the $500,000 retirement concession in relation to the transfer of an active asset into super via an in-specie contribution.

“It is also unclear whether the in-specie contribution of a property that qualifies for either the retirement concession or the 15-year exemption can count towards the lifetime CGT cap,” he said.

“Taxpayers in this situation may wish to apply to the ATO for a private binding ruling, as FirstTech is aware it has issued a number of positive PBRs in relation to this question.”
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Sources: The Adviser, Real Estate Business, SMSF Advisor and CFH Partners
Disclaimer: This is general information only and is subject to change at any time. Your complete financial situation will need to be assessed before acceptance of any proposal or product. The Content provided herein has been prepared for informational purposes only. The Content does not constitute tax, legal or accounting advice and should not be relied upon as such. You should seek tax, legal or accounting advice before acting or relying on any Content.

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