24 Jul 2019 | Riposte | International | Real Estate | Projects & Infrastructure | Private Equity | Private Wealth
Investment in the US by superannuation funds and through LPs
The US 2017 tax reform included less noticed changes including one relating to foreign partners in LPs investing in the US. An important change in relation to investment by foreign pension funds in US real estate has also been developing over recent years. This Riposte briefly outlines recent important developments on these matters and the problems that can arise when they come together.
02 Jul 2019 | Riposte | Private Wealth | Real Estate
Land tax changes following 2019-2020 State Budgets
In recent weeks, the Queensland and Victorian Governments handed down their 2019-2020 State Budgets. Each Budget contained land tax changes which are mainly targeted at foreign land owners.
26 Jun 2019 | Riposte | Projects & Infrastructure | Real Estate
Update: Staples Legislation - ATO releases Draft Law Companion Ruling
With three business days before 30 June 2019, being the last day for entities subject to a cross staple arrangement to make a choice that transitional relief applies (Transitional Relief Choice), the ATO has released draft Law Companion Ruling LCR 2019/D2 in relation to ‘Non concessional MIT income’ (NCMI), to assist taxpayers in navigating the staples legislation enacted on 5 April 2019 (Staples Legislation).
18 Feb 2019 | Riposte | Real Estate
Tax Rules for the CCIV Regime
Treasury has taken another step in the protracted project to create a new tax-transparent vehicle for holding passive investments with the release of an Exposure Draft (‘ED’) of the tax rules for the Corporate Collective Investment Vehicle (‘CCIV’).
30 Nov 2018 | Riposte | Real Estate
Federal Court confirms ATO view on foreign income tax offsets
In the case of Burton v Federal Commissioner of Taxation, the Federal Court confirmed the ATO’s position in that a foreign income tax offset is reduced to the extent that the assessable portion of a foreign capital gain is reduced by the CGT discount or capital losses. However, it would seem that a FITO will not be reduced merely because the amount subject to tax in the foreign country is different because it is calculated in a the local currency.
12 Nov 2018 | Riposte | Real Estate | Private Wealth
Extension of significant global entity definition and impact for large private groups
On 20 July 2018, Treasury released Exposure Draft legislation to extend the definition of a significant global entity (SGE). As a result, the extended definition of an SGE may include members of large private groups headed by unlisted companies, trusts (including discretionary trusts), partnerships or other investment vehicles. This will have wide ranging implications for affected large private groups which were previously outside the scope of some anti-avoidance provisions, increased administrative penalties and the requirement to lodge general purpose financial statements. The change is proposed to apply for income years starting on or after 1 July 2018.
07 Nov 2018 | Riposte | Real Estate | Financial Services | Energy & Resources | Transfer Pricing
Unreal transfer pricing does not solve very real debt-equity issues
The ATO has released draft determination TD 2018/D6 on the relationship of the debt-equity and transfer pricing rules in relation to related party loans. The draft makes unreal assumptions about transfer pricing and avoids serious analysis of the debt-equity rules, with results that unfortunately are becoming common in ATO guidance – assertion without justification.
22 Oct 2018 | Riposte | Real Estate | Private Wealth
Denying deductions for vacant land – Exposure Draft
The Government has released Exposure Draft legislation, as previously announced in the 2018-2019 Budget, to deny certain deductions associated with holding vacant land incurred from 1 July 2019. These integrity measures, which are effectively targeted at private trusts, SMSFs and individuals, can apply to deny deductions where the land is not being used to carry on a business for the purpose of producing assessable income.
17 Oct 2018 | Riposte | Real Estate | Private Wealth
Circular trust resolutions – family trusts to be taxed at 47%
Following on from the Government’s announcement in the 2018-19 Budget, an Exposure Draft entitled Treasury Laws Amendment (Measures for a Later Sitting) Bill 2018 has been released which proposes to impose trustee beneficiary non-disclosure tax (currently, 47%) on the untaxed part of a circular trust distribution to which the trustee of a family trust becomes presently entitled.
15 Oct 2018 | Riposte | Real Estate | Financial Services | Energy & Resources
Source rule in treaty means what it says
The Full Federal Court has confirmed in a short but emphatic judgment that the sourcing rule in Australia’s tax treaties means what it says. It rejected the argument that tax treaties are exclusively relieving and cannot lead (indirectly) to higher tax burdens.
25 Sep 2018 | Riposte | Real Estate
Stapled structures: integrity measures
On 20 September 2018, the Government introduced a Bill into Parliament to give effect to various integrity measures aimed at foreign investors. This is another instalment in the review that was initially aimed primarily at stapled groups. In this Riposte, we focus predominantly on the changes from the exposure draft which will primarily impact real estate groups.
11 Sep 2018 | Riposte | Real Estate | Private Wealth
NSW land tax: property developer liable for land tax under property development agreement
The Civil and Administrative Tribunal of New South Wales decision in Australia Avenue Developments Pty Ltd as trustee for the SOP Site 3 Partner Trust v Chief Commissioner of State Revenue  NSWCATAD 144 demonstrates the importance of considering land tax implications when structuring property development arrangements.
21 Aug 2018 | Riposte | Real Estate | Financial Services | Employment & Superannuation
Trust the PDS
The Full Federal Court decision in Aussiegolfa Pty Ltd (Trustee) v Commissioner of Taxation  FCAFC 122 highlights the importance of statements in offer documents to the interpretation of underlying legal documents - here a trust deed - and the borderline as to when distinct trusts will be created through the use of separate classes of units.
13 Aug 2018 | Riposte | Real Estate | Private Equity | Private Wealth
Tax Law Bites Trust Law on Franking Credits
The High Court of Australia has restored sanity in a long running saga in which a trustee purported to separate franking credits from the underlying dividends in allocations to beneficiaries. The court held (as the parties now accepted) that this was not possible and that a contrary decision of the Supreme Court of Queensland in its trusts jurisdiction to which the Commissioner of Taxation was not party did not bind the Commissioner.
25 Jul 2018 | Riposte | Real Estate | Employment & Superannuation
Payroll tax on service contracts – integrated workers
Recent NSW cases have shown that the concept of an “employment agency agreement” under which payments are subject to payroll tax is different to its ordinarily understood meaning.
02 Jul 2018 | Riposte | Real Estate | GST
Happy New (Financial) Year! Welcome to GST Withholding...
The GST Withholding regime commenced on 1 July 2018, so purchasers exchanging from now on will be required to withhold an amount for GST when they acquire most new residential premises and potential residential land.
Due to the transitional provisions, GST withholding will not apply where the contract was entered into prior to this date and the first payment (other than any consideration paid as a deposit) is provided before 1 July 2020.
20 Jun 2018 | Riposte | Real Estate
Queensland Budget 2018-19: Increases to land tax rates
From 1 July 2018, Queensland land tax payers will be required to pay an additional 0.5% of land tax on the portion of aggregated landholdings above a total taxable value of $10 million.
19 Jun 2018 | Riposte | Real Estate
Exposure Draft released containing technical amendments to the AMIT regime
The Government has released an Exposure Draft containing a number of technical amendments to the AMIT regime. While a number of significant issues with the existing legislation have been brought to the attention of Treasury, only a handful have been addressed in this draft legislation leaving significant issues facing a number of taxpayers.
28 Mar 2018 | Tax Brief | Real Estate
Stapled structures: integrity measures
Following on from the Australian Taxation Office’s concerns in TA 2017/1, the Government has proposed sweeping changes to the tax laws that will impact on a range of stapled and non-stapled structures. The measures will: (i) apply a 30% withholding tax rate to most income derived from cross-stapled arrangements; (ii) treat ownership of agricultural land as a trading business, even if used for rental purposes; (iii) expand the thin capitalisation rules to require gearing to be calculated on a look-through basis for interests of 10% or more; and (iv) limit the exemptions currently enjoyed by foreign sovereign entities and pension funds.
This Tax Brief focuses on the impact of the measures on the real estate sector. A separate Riposte addresses the impact on the infrastructure sector.
Generally, the measures should not affect stapled groups that do not have material cross-staple dealings.
Tax Brief - Stapled groups integrity measures 28 March 2018 (261 kb)
21 Mar 2018 | Riposte | Real Estate
Who is an Associate in a Stapled Group?
The ATO has argued that entities in a stapled group can be associates, mainly on the basis that the trust side of the stapled group is “sufficiently influenced” by the company side. This has tax consequences including raising the risk of s974-80 applying to cross staple loans. However, the recent AAT case of MWYS casts some doubt over the ATO’s position. Although the case deals with dual listed companies, the principles outlined in the case would suggest that the trust side of a stapled group is not an associate of the company side.
14 Feb 2018 | Riposte | Real Estate
Affordable residential housing MIT measures
On 8 February 2018 the Government introduced the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 2) Bill 2018 into the House of Representatives. The Bill will enact the announcement in the May 2017 Budget about managed investment trusts investing in affordable residential housing. Individuals will also be eligible for an increased CGT discount where they invest in affordable residential housing. The Bill does not include the announced prohibition on holding residential property in a MIT. We understand however that this is not because the Government has changed its mind but rather because it is still considering its policy. It is expected that the Government will announce its position regarding MITs investing in residential property at a later time.
14 Feb 2018 | Riposte | Real Estate
The Review of Tax Treatment of Bare Trusts and Similar Arrangements
The Board of Taxation has today released a report into its review of the tax arrangements applying to bare trusts and similar arrangements. The Board has considered whether, and how, to legislate the current industry practice of looking through such trusts for income tax purposes. The treatment of bare trusts has been considered in reviews into the tax system by Governments in the past and although similar recommendations had been made, no changes to the Tax Law have followed. Let’s hope that this time the Government makes the recommended changes and aligns the Tax Law with industry practice.
22 Jan 2018 | Riposte | Real Estate | International
Changes to Victorian Absentee Owner Surcharge for Trusts
The Absentee Owner Surcharge (AOS) exemption has been extended to trusts and changes have been implemented for the calculation of AOS for trusts that are part of a chain of trusts.
09 Jan 2018 | Riposte | Real Estate
Corporate CIV Regime takes shape
The government has released draft legislation for the tax aspects of the new regime for corporate collective investment vehicles.
21 Dec 2017 | Riposte | Real Estate
New fees on vacant residential property
The Government has introduced new vacancy fees on foreign owners of residential property vacant for more than six months of a year. A similar Victorian vacancy tax is also being imposed on owners of residential property situated in inner and middle suburban Melbourne.
09 Nov 2017 | Riposte | Real Estate | GST
Purchaser withholding on new homes
Draft legislation to combat phoenixing on new homes has been released, putting the onus on purchasers to withhold and pay to the ATO 1/11th of the price of their new home.
02 Nov 2017 | Riposte | Real Estate | Employment & Superannuation
Payroll tax on service contracts – integral vs incidental functions
The recent decision in JP Property Services Pty Limited v Commissioner of State Revenue  NSWSC 1391 said contracts for service to perform integral functions in a client’s business invoke the employment agency payroll tax rules, but not contracts for incidental functions.
23 Oct 2017 | Riposte | Real Estate | Projects & Infrastructure
Commissioner refreshes long term construction contract ruling
As part of Project Refresh the Commissioner has released Taxation Ruling TR 2017/D8 which is a rewrite of Taxation Ruling IT 2450 and related taxation determinations dealing with the income tax treatment of long term construction contracts.
15 Sep 2017 | Riposte | Real Estate
Government significantly limits residential REITs
The Government has released for public consultation the exposure draft legislation containing the measures to implement its affordable housing MIT proposal.. However, at the same time the Government will deny MIT status to trusts that invest in residential premises that do not constitute affordable housing.
13 Sep 2017 | Riposte | Real Estate | Employment & Superannuation | International
Housing Affordability Bills Introduced
As part of the 2017-18 Federal Budget, the Government announced several measures to assist with housing affordability. Bills to implement some of these measures were introduced on 7 September 2017.
27 Mar 2017 | Riposte | Real Estate | Projects & Infrastructure
Stapled structures consultation paper
The attack on stapled structures continues with the release of a consultation paper looking at stapled structures, the taxation of real property investments and the re-characterisation of trading income.
10 Mar 2017 | Riposte | Real Estate
A tax on vacant properties
The Victorian government is considering extending the land tax framework to impose a tax on vacant properties in some parts of Melbourne.
07 Mar 2017 | Riposte | Real Estate | Private Wealth
‘Improvements’ – pre- or post-CGT assets?
According to the ATO, any intangible capital improvements made to a pre-CGT asset may be treated as a separate CGT asset.
31 Jan 2017 | Tax Brief | Real Estate
TA 2017/1: impact on property groups
Stapled property groups need to look closely at their cross staple arrangements or risk raising the ire of the ATO.
30 Jan 2017 | Riposte | Real Estate
Inequitable taxation of 'disturbance payments'
The tax treatment of ‘disturbance payments’ in connection with the compulsory acquisition of land proposed in a recently issued ATO class ruling has the potential to disadvantage some taxpayers while delivering a windfall to others.
19 Jan 2017 | Riposte | GST | Real Estate
The meaning of 'GST' in property transactions
The McEwans case held that 'GST' can have different meanings in a contract. As a result of imprecise language, both parties to a sale of land subject to the margin scheme were left worse off.
12 Jan 2017 | Riposte | Real Estate
NSW land tax surcharge for foreign persons
Commencing from the 2017 land tax year, foreign persons will be liable to pay an additional land tax surcharge of 0.75% on residential land owned in NSW.
17 Nov 2016 | Riposte | Real Estate | GST
GST in property transactions: who bears the risk?
How important is it to get the details right in the particulars of a contract of sale? A recent case involving a GST clause in a real estate contract demonstrates how one word can be determinative of a tax liability.
07 Nov 2016 | Riposte | Real Estate
WHT rate cuts - but not for property sector
Two options for reducing withholding tax to 5% for certain CIV distributions are considered in a recent Treasury Discussion Paper. Unfortunately, neither option applies to income from investments in property.
31 Oct 2016 | Riposte | Real Estate
Draft ATO guidance on fixed trusts
Determining the important question of whether a trust is a ‘fixed trust’ has always been a tightrope walk between its strict definition and how the ATO might exercise its discretion. A new draft guideline considers how the ATO will use its discretion to treat a trust as a fixed trust in the context of the trust loss rules.
11 Oct 2016 | Riposte | Real Estate | Financial Services | Projects & Infrastructure
Related schemes & 974-80 ED at last
Exposure draft legislation intended to address the Board of Taxation’s recommendations concerning s.974-80 and the related schemes provisions in the debt/equity rules has finally been released. Do the proposals provide clarity to taxpayers who are not on all fours with the examples?
04 May 2016 | Riposte | Real Estate
MIT bill passed
The Senate approved the Bill to enact the specific tax regime for managed investment trusts. The MIT Regime is a welcome introduction of rules that have taken may years to formulate.
24 Feb 2016 | Riposte | Real Estate
New reporting for share and unit transactions
Share and unit transactions of listed companies, listed and unlisted unit trusts and certain other trustees are subject to new reporting requirements that enhance the ATO's data matching capabilities.
10 Apr 2015 | Tax Brief | Real Estate
The New Attribution MIT Regime
The recently released exposure draft legislation proposes a new regime for taxing income derived through “attribution managed investment trusts”. This Tax Brief considers each of the key measures of the new regime and certain other measures in the ED as well as some changes we might expect in the ultimate legislation.
The New Attribution MIT Regime (412 kb)
09 Apr 2015 | Riposte | Real Estate
New Regime for MITs
Long-awaited exposure draft legislation addressing the managed investment trust taxation regime has finally been released. The ED contains a package of eight key measures which will apply only to certain MITs and which may prove a mixed bag for industry.
26 Nov 2014 | Riposte | Real Estate
Addendum to TR 2002/14
An addendum to TR 2002/14 reaffirms the ATO's changed position on capital growth payments reflected in its recent Decision Impact Statement.
13 Nov 2014 | Riposte | Real Estate
A win for retirement village operators
The ATO has finally accepted that capital growth payments made to retirement village residents are deductible. Taxpayers can now lodge amendments to claim them.
20 Sep 2014 | External Publications | Real Estate
974-80 and stapled entities
Casey Wakely co-authored and presented "974-80 and stapled entities" for The Tax Institute's (NSW Division) 9th Annual Property Intensive conference held in Sydney on 20 September 2011.
02 Nov 2012 | Tax Briefs | Real Estate
Some Progress on Trust Tax Reform
This Tax Brief analyses Treasury's two proposals in presented in Options Paper concerning the new regime to tax income passing through trusts. It also considers what the future might look like for those managed investment trusts (‘MITs’) which will not qualify for the new MIT attribution regime, and for the trusts into which MITs and non-MIT trusts will invest.
Some Progress on Trust Tax Reform (157 kb)
05 Jul 2010 | Tax Briefs | Real Estate
New Definition of Managed Investment Trust
The definition of a “managed investment trust” was significantly amended in 2010. The definition is relevant for the application of the MIT withholding and elective CGT regimes. This Tax Brief examines the new definition and how it has changed the range of trusts that are eligible to access the MIT withholding tax and CGT election concessions.
New Definition of Managed Investment Trust (79 kb)
05 Mar 2010 | Tax Briefs | Real Estate
CGT Treatment for MITs - New Draft Legislation
The Tax Laws Amendment (2010 Measures No 1) Bill 2010 contains the proposed final form of the measures that permit eligible managed investment trusts to elect to apply the capital gains tax regime as the primary measure for taxing gains and losses on assets. This Tax Brief examines the changes from the Exposure Draft of these provisions.
CGT Treatment for MITs - New Draft Legislation (70 kb)
29 Jan 2009 | Tax Briefs | Financial Services | Real Estate
TOFA for the Property Sector
After much delay, the regime for taxing financial arrangements (‘TOFA’) now seems likely to be passed early this year. TOFA can affect both the investments made in the property sector and the financing of those investments, but just how – and how much – activity in the property sector will be affected is neither obvious nor straightforward. This Tax Brief examines some of the issues that the TOFA regime will present for the property industry.
TOFA for the Property Sector (60 kb)