HLB Mann Judd flags possible end of stamp duty in NSW
In their latest tax alert, HRIA partner, HLB Mann Judd, highlighted a number of items flagged in the In the NSW Budget handed down on 21 June 2022.
The State Government announced plans to make some transfer duty optional from January 2023. However, the scope of the proposal is quite limited at this stage. The key features announced are as follows.
• First home buyers purchasing properties for up to $1.5 million on or after 16 January 2023 will be able to choose to pay an annual property tax instead of stamp duty.
• There will be a higher rate of annual property tax for investors than for owner occupiers, with rates indexed annually to wage growth.
• The tax will be based on a financial year, unlike land tax, which is based on a calendar year.
• The existing First Home Buyers Assistance Scheme duty concessions for properties valued up to $800,000 will remain.
• The property tax will only be payable by first home buyers who choose it, and will not apply to subsequent purchasers of a property. Of course, legislation must first be enacted and the details remain to be seen, including the transitional provisions that will apply.
If the announcements become law, by next January NSW will have the existing transfer duty regime, the existing land tax regime and a new annual property tax all running in parallel.
ATO Warns Against Asset Wash Sales
With COVID-19 lockdowns and restrictions in the rearview mirrors of most of the country, the ATO is also beginning to resume ordinary compliance activity levels. One of the many areas it will be paying close attention to this tax time is “asset wash sales”.
TIP: An asset wash sale involves a person or business disposing of assets just before the end of the financial year. After a short period of time, they then reacquire the same or substantially similar assets. The ATO views these transactions as a form of tax avoidance. Although there may be legitimate reasons for selling and then reacquiring the same or substantially similar assets, a wash sale is different from normal buying and selling as it is usually undertaken for the artificial purpose of generating a tax benefit – such as a capital loss – in the current financial year. The assets involved in wash sales are not necessarily traditional assets such as shares. Taxpayers could also be disposing of crypto-assets and reacquiring them later as a part of a wash sale. With the price of many crypto-assets at a low ebb, people looking to rid themselves of these assets need to be careful they do not inadvertently attract the attention of the ATO. To stamp out this behaviour this tax time, the ATO will use analytics to identify wash sales through data from various share registries and crypto-asset exchanges. Where the system identifies a wash sale, the capital loss claimed by the taxpayer in their tax return will be rejected. The Commissioner of Taxation may then make a determination to adjust their tax situation, and compliance action and additional tax, interest and penalties may be applied.
ATO Reminder to Small Businesses
Small businesses are again in the ATO’s sights this tax time, with a focus on stamping out deductions not related to business income, overclaiming of expenses, omission of business income and insufficient records to substantiate claims. The ATO receives external data from a variety of sources, including the taxable payments reporting system for certain industries. This data can be used to data-match information included in tax returns to ensure completeness and accuracy. Businesses can only claim what they are entitled to, and the claiming method may differ depending on the
type of business structure. For example, sole traders need to claim deductions in their individual tax return in the “Business and professional items” schedule, while partnerships, trusts, and companies need to claim deductions in their respective tax returns.
For more information, go to your HRIA member portal.