A foreign entrepreneur’s guide to starting a business in Australia Starting a business as a foreign entrepreneur can be an exhilarating way to access new markets, diversify investment portfolios, and create fresh opportunities. Many countries around the globe provide pathways for non-residents and foreign nationals to register businesses. However, understanding different countries’ legal requirements, procedures, and opportunities is crucial for success. In this issue, we will navigate the process of establishing a business in Australia to help foreign entrepreneurs looking to register a company in Australia. Key takeaways Foreign entrepreneurs can fully own Australian businesses with no restrictions on ownership. Registered office and resident director requirements are key legal considerations. ABN and ACN are essential for business registration. The application process can be done online, simplifying the process for foreign entrepreneurs. Why register a business as a foreign entrepreneur? There are various reasons why a foreigner may want to register a company in another country. These reasons include expanding into a foreign market, taking advantage of favourable tax laws, leveraging local resources, or benefiting from business-friendly regulatory environments. Before registering, conducting thorough market research to assess whether establishing a business abroad aligns with your objectives is essential. Understanding the country’s political and economic climate, legal framework, and tax system will help ensure the success of your venture. The general process for registering a business as a foreign entrepreneur While the exact requirements may differ from country to country, some common steps apply to most jurisdictions when registering a company as a foreign entrepreneur: Choosing the business structure The first step is deciding on the appropriate business structure. The structure determines liability, taxation, and governance. Common types of business structure include: Sole proprietorship: A single-owner business where the entrepreneur has complete control and entire liability. Limited Liability Company (LLC): Offers liability protection to the owners, meaning their assets are not at risk. Corporation (Inc.): A more complex structure that can issue shares and offers limited liability to its shareholders. Different countries have varying rules regarding foreign ownership, so understanding the options available is essential before registering a company. Registering with local authorities Regardless of the jurisdiction, most countries require you to register your company with the relevant local authorities. This process typically includes submitting documents such as: Company name and business activities: You need to choose a unique company name that adheres to local naming regulations. Articles of incorporation: This document outlines the company’s structure, activities, and bylaws. Proof of identity : As a foreign entrepreneur, you will likely need to provide a passport and other identification documents. Proof of address: Many countries require a physical address for the business, which may be the address of a registered agent or office. Tax Identification Number (TIN) and bank accounts After registering the company, you will typically need to apply for a tax identification number (TIN), employer identification number (EIN), or equivalent, depending on the jurisdiction. This number is used for tax filing and reporting purposes. Opening a business bank account is another critical step. Some countries require a local bank account for business transactions, and you may need to visit the bank in person or appoint a local representative to help with the process. Complying with local regulations Depending on the type of business, specific licenses and permits may be required to operate legally. For example, food service, healthcare, or transportation companies may need specific licenses. Compliance with local labour laws and intellectual property protections may also be necessary. Appoint directors and shareholders To register a company, you’ll need to appoint at least one director who resides in Australia. The director will be responsible for ensuring the company meets its legal obligations. You will also need to appoint shareholders, who can be either individuals or corporations. For foreign entrepreneurs, the requirement for a resident director is one of the key challenges. If you don’t have a trusted individual in Australia to act as the director, you can engage a professional service to fulfil this role. This ensures your business remains compliant with local regulations. Choose a company name Next, you need to choose a company name. The name should reflect your business but must be unique and available for registration. You can check the availability of a name through the Australian Securities & Investments Commission (ASIC) website. Remember that the name must meet legal requirements and cannot be similar to an existing registered company. If you’re unsure, seeking professional advice is always a good move. Apply for an Australian Business Number (ABN) and Australian Company Number (ACN) Once you’ve selected your business structure and appointed your directors, it’s time to apply for an Australian Business Number (ABN) and an Australian Company Number (ACN). These are essential for running your business in Australia. ABN: This unique 11-digit number allows your business to interact with the Australian Taxation Office (ATO) and other government agencies. ACN: This 9-digit number is allocated to your company upon registration with ASIC and serves as your business’s unique identifier. You can easily apply for both numbers online through the Australian Business Register (ABR) and the ASIC websites. Register for Goods and Services Tax (GST) If your business expects to earn more than $75,000 in revenue annually, you must register for GST. This means your business will charge customers an additional 10% on goods and services. The GST registration threshold for non-profit organisations is higher at $150,000 annually. If your company is below these thresholds, registering for GST is optional, but registration becomes mandatory once it exceeds the limit. Set up a registered office Every Australian company must have a registered office in Australia. This is where all official government documents, including legal notices, are sent. You can use your premises or hire a foreign company registration service to provide a virtual office address. Common challenges for foreign entrepreneurs While the process is relatively simple, there are a few hurdles that foreign entrepreneurs may encounter when registering a company in Australia: Resident director requirement: You’ll need a director residing in Australia. If you don’t have one, you’ll need to engage a service provider to fulfil this role. Understanding local tax laws: Australia has a corporate tax rate of 25% for small businesses with annual turnovers of less than $50 million. However, larger companies with turnovers exceeding $50 million are subject to a standard corporate tax rate of 30%. Foreign entrepreneurs must also understand the implications of the Goods and Services Tax (GST) and payroll tax. Compliance with Australian regulations: Navigating Australia’s various regulations and compliance requirements can be time-consuming. An accountant or adviser can help you in this regard. FAQs Can I register a company in Australia as a foreigner? Yes, foreign entrepreneurs can register a company in Australia. The only requirement is to have a resident director. Do I need to be in Australia to register a company? No, you can complete the registration process online. However, you must appoint a resident director. Do I need an Australian bank account to start a business in Australia? You will need an Australian bank account to handle your business’s finances and transactions. Can I operate my Australian company from abroad? Yes, you can operate your company remotely, but you must comply with all local tax laws and regulations.

Do bucket companies help build wealth at retirement? Bucket companies are familiar with wealth-building strategies, particularly as individuals approach retirement. By distributing profits to a bucket company, individuals can benefit from reduced tax liabilities and enhanced investment growth opportunities. This essay explores how bucket companies influence wealth building at retirement, their impact on age pension eligibility and tax positions, and strategies to maximise economic outcomes. Understanding bucket companies A bucket company is used to receive distributions from a family trust. Instead of distributing profits directly to individuals, which may attract high marginal tax rates, the trust distributes income to the bucket company, which is taxed at the corporate tax rate (currently 30% or 25% for base rate entities). The company can then retain the after-tax profits for reinvestment or distribution. Impact on wealth building at retirement Tax efficiency and compounding growth Using a bucket company can result in significant tax savings compared to personal marginal tax rates, reaching up to 47% (including the Medicare levy). Retained earnings within the bucket company are taxed lower, allowing more capital to compound over time. Example of Tax Efficiency: Income DistributedPersonal Marginal Tax (47%)Bucket Company Tax (25%)Savings $100,000$47,000$25,000$22,000 Over 20 years, if the tax savings of $22,000 per year are reinvested at an annual return of 7%, they would accumulate to approximately $1,012,000. Age pension and means testing The age pension is subject to both an income test and an assets test. Holding wealth in a bucket company can impact these tests: Income Test: Distributions to individuals count as assessable income. Retained profits within the company do not. Assets Test: The value of the bucket company shares is counted as an asset, which may affect pension eligibility. Strategic use of the company can help individuals control their assessable income, potentially increasing their age pension entitlement. Strategies to maximise economic outcomes Timing of Distributions By deferring distributions from the bucket company until retirement, individuals can benefit from lower marginal tax rates or effectively use franking credits. Dividend Streaming Using franking credits from company-paid tax can reduce personal tax liabilities when distributed dividends. Investment within the Company Reinvesting retained earnings within the bucket company in diversified assets can enhance compounding returns. Family Trust Distribution Planning Strategically distributing income to lower-income family members before reaching the bucket company can reduce overall tax. Winding Up or Selling the Company Carefully planning an exit strategy to wind up the b ucket company or sell its assets can minimise capital gains tax liabilities. Example of a retirement strategy with a bucket company Assume that John and Mary, aged 65, have distributed $100,000 annually from their family trust to their bucket company over 20 years. Corporate tax paid: 25% Annual return on reinvestment: 7% After-tax reinvested earnings annually: $75,000 YearAnnual ReinvestmentTotal Accumulated Amount (7% p.a.)5$75,000$435,30010$75,000$1,068,91420$75,000$3,867,854 At retirement, they can distribute dividends with franking credits to minimise personal tax and supplement their income while potentially qualifying for some age pension benefits due to strategic income timing. FAQ What is a bucket company? A bucket company is a corporate entity that receives trust distributions, taxed at the corporate rate rather than personal marginal rates. How does a bucket company impact my age pension eligibility? While retained earnings do not affect the income test, the value of the company shares is considered an asset under the assets test. Can bucket companies help reduce tax during retirement? Yes, by using franking credits and strategic distribution timing, bucket companies can minimise tax liabilities. Are there risks associated with using bucket companies for retirement planning? Yes, risks include changes in tax laws, corporate compliance costs, and potential capital gains tax upon winding up the company. Should I consult a professional before using a bucket company? Absolutely. Professional advice is essential to ensure compliance with tax laws and optimise wealth-building strategies.

Personal super contribution and deductions

Don’t let taxes dampen your holiday spirit! Just like Santa carefully checks who’s naughty or nice, businesses need to watch the tax rules when spreading Christmas cheer. Hosting festive parties for employees or clients can lead to Fringe Benefits Tax (FBT). FBT is a tax employers pay when they provide extra perks to employees, their families, or associates. It’s separate from regular income tax and is based on the value of the benefit. The FBT year runs from 1 April to 31 March, and businesses must calculate and report any FBT they owe. With a bit of planning—just like Santa’s perfect delivery route—you can celebrate while keeping your tax worries in check! FBT exemption: A little Christmas gift from the taxman The tax rules include a “minor benefit exemption”—like a small stocking stuffer. If the benefit given to each employee costs less than $300 and isn’t a regular thing, it’s exempt from Fringe Benefits Tax (FBT). Christmas parties fit perfectly here because they’re one-off events. Businesses can avoid FBT hassles if the cost per employee stays under $300. Remember: the more often you give out perks, the less likely they’ll qualify for this exemption. Thankfully, Christmas only comes once a year! Christmas parties at the office If you host your Christmas party at your business premises during a regular workday, costs like food and drinks are FBT-free, no matter how much you spend. However, you can’t claim a tax deduction or GST credits for those expenses. If employees’ family members join and the cost per person is under $300, there’s still no FBT, but again, no tax deduction or GST credits can be claimed. However, FBT will apply if the cost is over $300 per person. The good news is that you can claim both a tax deduction and GST credits in that case. FBT check for Christmas parties at the office Who attendsCost per personDoes FBT applyIncome tax deduction/Input Tax Credit available? Employees onlyUnlimitedNoNoEmployees and their familyLess than $300NoNoMore than $300YesYesClientsUnlimitedNoNo Think of it like this: at your Christmas party, the food and drinks are like Santa’s bag of gifts – no dollar limit exists for employees enjoying them on business premises. But if you add a band or other entertainment, the costs can add up quickly, and if the total cost per employee exceeds $300, FBT kicks in. Keep it under $300 per person, and you’re in the clear. Christmas parties outside the office If you hold your Christmas party at an external venue, like a restaurant or hotel, it’s FBT-free as long as the cost per employee (including their family, if they come) is under $300. But remember, you can’t claim a tax deduction or GST credits in this case. FBT will apply if the cost exceeds $300 per person, but you can claim a tax deduction and GST credits. Good news: employers don’t have to pay FBT for taxi rides to or from the workplace because there’s a special exemption. FBT check for Christmas parties outside the office Who attendsCost per personDoes FBT applyIncome tax deduction/Input Tax Credit available? Employees onlyLess than $300NoNoMore than $300YesYesEmployees and their familyLess than $300NoNoMore than $300YesYesClientsUnlimitedNoNo Clients at the Christmas party If clients attend the Christmas party, there’s no FBT on the expenses related to them, no matter where the party is held. However, you can’t claim a tax deduction or GST credits for part of the costs that apply to clients. Christmas gifts Many employers enjoy giving gifts to their employees during the festive season. If the gift costs less than $300 per person, there’s no FBT, as it’s usually not considered a fringe benefit. FBT check for Christmas gifts Who attendsCost per personDoes FBT applyIncome tax deduction/Input Tax Credit available? Entertainment giftsLess than $300NoNoMore than $300YesYesNon-entertainment giftsLess than $300NoYesMore than $300YesYes However, FBT might apply if the gift is for entertainment. Entertainment gifts include things like tickets to concerts, movies, or holidays. Non-entertainment gifts—like gift hampers, vouchers, flowers, or a bottle of wine—are usually FBT-free if under $300. So spread the festive cheer, but keep an eye on the taxman to avoid surprises!

6-year rule

Aged care strategies Considering evolving policies and retirement needs, this issue navigates tax strategies, funding and transitions to aged care and discusses key considerations for this transition. Key Superannuation Strategies for Aged Care Superannuation is critical to funding aged care services in retirement. Proper planning around accessing superannuation can minimise tax impacts and optimise retirement income. Some of the key strategies are as follows: Transition to Retirement (TTR) Strategy If you’re between the preservation age and 65, you can access part of the super while working through a Transition to Retirement (TTR) income stream. This can provide an income boost or a way to gradually reduce working hours while receiving a steady income from super. Earnings on assets supporting a TTR pension are tax-free if you are 60 or over. Also, from age 60, withdrawals from the superannuation income stream are tax-free. Re-contribution Strategy: If the superannuation balance includes taxable and tax-free components, you can withdraw a lump sum and re-contribute it as a non-concessional (after-tax) contribution. This can reduce the taxable portion of the super, which can lead to lower taxes on super death benefits to non-dependents (such as adult children). Downsizer Contributions: If you’re 55 or older (since 1 January 2024), you can make a one-off, non-concessional contribution of up to $300,000 (per person) from the sale of the primary residence. This can help increase super savings and fund future aged care needs. Downsizer contributions are not subject to the usual super contribution caps and don’t require meeting a work test. Age Pension and Superannuation: Once you reach the pension age (increasing to 67), the superannuation balance will be counted in the assets and income tests for Age Pension eligibility. Effective super management may allow you to receive a partial Age Pension alongside superannuation income. Tax Considerations for Aged Care Various costs are involved in residential aged care, such as accommodation payments, means-tested care fees, and basic daily care fees. Proper planning is essential to manage these costs tax-efficiently. Accommodation Payments: Refundable Accommodation Deposits (RADs) are lump-sum payments to aged care facilities. They are not subject to tax. However, if you choose a combination of RAD and Daily Accommodation Payment (DAP), the DAP is paid from income and superannuation, which may have tax implications. Means-Tested Care Fees: Means-tested fees depend on assets and income, which includes superannuation. Careful planning can help reduce these fees by efficiently structuring income and asset withdrawals. Gifting: Assets to family members may reduce the assessable assets and income, helping to minimise aged care fees or increase pension eligibility. However, gifting rules apply, meaning you can only gift $10,000 per financial year or $30,000 over five years without affecting the Age Pension or aged care fees. Pension Income: If you’re receiving a pension from the super fund, income drawn from a tax-free pension account (for individuals aged 60 and over) will not be taxed. This can help manage tax obligations while covering aged care costs. Rental Income: If you rent out a family home to pay for aged care fees, rental income may be taxable. However, you may be able to offset some of this income through deductions for expenses such as interest on a mortgage, repairs, and maintenance. Using Super for Aged Care Costs: Drawing down superannuation in lump sums or as an income stream to cover aged care costs may be a tax-effective way to manage expenses, mainly if you are over 60 and withdrawals are tax-free. Retaining or Selling the Family Home When transitioning to residential aged care, one of the most significant decisions is whether to sell the family home or rent it out to fund the Refundable Accommodation Deposit (RAD) or other aged care fees. Selling may free up cash to pay a RAD, while renting may provide ongoing income but could have tax implications (assessable income) and impact Age Pension. Aged Care and Centrelink When calculating aged care fees or pension eligibility, superannuation and other assets will be assessed using Centrelink’s means tests. Deeming rates apply to financial assets, including superannuation income streams and bank accounts, to calculate income for Centrelink purposes. Lowering assessable income can help reduce aged care fees or increase government support. Home as an Exempt Asset: While you remain living in the home, it is exempt from Centrelink’s asset test. However, once you move into permanent residential aged care, the home is only partially exempt (up to a capped value), potentially increasing the assessable assets for aged care fees and Age Pension calculations. Transitioning to Aged Care – Key Considerations Transitioning to aged care in Australia is a significant life decision, and several key considerations need to be addressed to ensure a smooth and appropriate transition. These considerations include: Assessment and Eligibility Aged Care Assessment Team: An ACAT (Aged Care Assessment Team) or ACAS (Aged Care Assessment Service in Victoria) assessment is required to determine government-subsidised aged care services eligibility. The assessment evaluates the level of necessary care (home care, residential care, respite care). Types of Care: There are different care options, including: In-home care (for those who want to stay at home with support). Residential aged care (for full-time care in an aged care home). Respite care (short-term care to provide caregivers with a break). Retirement villages (offering independent living with access to services). Costs Upfront Fees and Ongoing Costs: Understanding the cost of aged care services is essential. This can include: Accommodation fees (refundable or non-refundable deposits for residential aged care). Means-tested care fees (based on financial situation). Basic daily fees (contribution toward care services). Additional services (for extra services, like premium amenities). Government Subsidies: The government heavily subsidises aged care services, but the level of subsidy is based on the individual’s financial assessment. Choosing the Right Aged Care Provider Location and Facility: Proximity to family and friends, the quality of the facility, and availability of activities and services should be considered. Visit different facilities to get a feel for the environment, staff, and overall care quality. Staffing and Services: Investigate staff-to-resident ratios, qualifications, and the quality of care services (e.g., medical care, recreational activities, and specialised services for conditions like dementia). Emotional and Psychological Impact Adjustment to Change: Moving to aged care can be an emotional process for the individual and their family. A support system is crucial to ensure the emotional well-being of the person transitioning, as they may feel a loss of independence or experience anxiety about the change. Family Involvement: Involving family members in decision-making can help ease the transition and provide emotional support. Legal and Administrative Issues Enduring Power of Attorney (EPOA): Legal arrangements for managing finances and healthcare decisions are essential. An EPOA allows someone trusted to manage financial and legal matters if the person cannot do so. Advanced Care Directives: These guide medical treatments and care preferences should the individual become unable to communicate their wishes. Health and Care Needs Medical Considerations: If the individual has specific health needs (e.g., dementia, physical disabilities, or chronic illnesses), it is essential to choose an aged care facility or home care provider that can meet these requirements with the appropriate medical care and support. Cultural and Personal Preferences Culturally Appropriate Care: Many aged care providers offer culturally sensitive services, including language support and community connections for non-English-speaking people. Personalization of Care: It’s important to consider how much the aged care provider can cater to personal preferences, such as dietary needs, religious practices, and lifestyle choices. Government Resources and Support My Aged Care: This government portal is crucial for information about aged care services, providers, and financial assistance. It helps individuals navigate the aged care system, guiding eligibility, services, and funding options. Considering these factors and seeking appropriate professional advice, the transition to aged care in Australia can be planned with care and sensitivity, ensuring the individual’s better quality of life. Superannuation Changes Reduction of the Downsizer Age to 55: Effective 1 January 2024, the eligibility age for downsizer contributions was reduced from 60 to 55. This allows more individuals to bolster their super balance by selling their family home. Legislative Cap on Superannuation Balance The government introduced a $3 million balance cap on superannuation, effective 1 July 2025. Individuals with super balances exceeding this cap will pay an additional tax of 15% on earnings on the excess. Conclusion Developing an effective aged care tax strategy involves carefully managing the superannuation, pension entitlements, and assets. Understanding the tax impacts of superannuation withdrawals, managing aged care costs, and planning around Centrelink and income tests can optimise the financial situation during retirement and aged care transitions. Consulting with a financial advisor can provide tailored advice to ensure compliance with regulations and maximise the benefits. Consulting an expert in aged care can help you make informed decisions about funding options, using assets (like the family home), and managing ongoing costs. They can also advise on government entitlements, such as the Age Pension.

INVESTMENT PROPERTY TAX  Benefits, costs and key considerations If you’re considering investing in property, you must understand the tax consequences. In Australia, like many other parts of the world, owning an investment property offers potential tax benefits and costs. From claiming deductions on interest payments and holding costs to understanding the nuances of Capital Gains Tax (CGT), property investors need a comprehensive grasp on these matters to make the most out of their investments. Investing in property can be a wise financial move, but it’s essential to understand the benefits and costs involved, especially regarding taxes. Here, you’ll get an overview of how owning an investment property can impact your taxes, helping you make informed decisions. Property investment tax benefits Interest payments and holding costs Owning a rental property comes with its share of expenses. The list goes on, from interest payments, updates, upkeep, and local council fees to fees for property management. But here’s some positive news: many of these costs can be claimed as tax deductions if your property is up for rent or already rented out. For many property owners, the interest accumulating on a mortgage used to purchase a rental property can be claimed as a tax deduction. Other often-claimed deductions include fees for property management, land taxes, and upkeep-related costs. This upkeep can range from general cleaning and landscaping to insurance coverage and repairs. Learn to grow your business and better understand your finances. Schedule a complimentary consultation with us today. Claiming depreciation on rental assets When you purchase items for your rental property, such as new appliances, they lose value over time due to wear and tear. This decline in value is known as depreciation. You can claim this loss in value as a tax deduction, often referred to as tax depreciation or capital allowance, spread across the useful lifespan of that item. Claiming for construction and renovations You can claim these expenses as deductions if you’ve undertaken construction or renovation projects at your rental property. Typically, these capital works deductions are spread out throughout 25 to 40 years. The exact time frame will depend on the construction’s start date, purchase date, and intended use. Offsetting losses with negative gearing When your rental property’s expenses exceed earnings, resulting in a net loss, this is termed “negative gearing.” The upside to negative gearing is that you might be able to leverage this loss to counterbalance income from other sources, ultimately lowering your taxable income for the year. A table summarises the tax benefits of property investment in four categories: holding costs, depreciation on assets, construction/renovation deductions, and negative gearing advantages. Tax implications of property investment Owning an investment property brings with it various tax considerations. Capital Gains Tax (CGT) If you decide to sell your investment property, any profit you realise could be subject to Capital Gains Tax. We’ll discuss CGT in more detail in this article. Tax on rental income The revenue generated from your rental property is subject to taxation. This rental income is added to any other income you may have, such as wages or investment earnings, and the total is taxed according to your income tax bracket. Asset depreciation Assets such as appliances and furniture can be claimed as depreciation for tax deductions on your tax return; however, it’s essential to maintain detailed records and a depreciation schedule. Deductibility of property expenses Certain expenses related to your property are tax-deductible, while others are not. Expenses associated with the depreciation of assets or improvements to the property’s structure can be claimed as deductions at the rate allowed by the ATO. On the other hand, expenses incurred during the purchase or sale of the property are generally not eligible for tax deduction. GST considerations If you lease a commercial property to another business for rental income, you may have to pay Goods and Services Tax (GST). Tax regulations can be complex, so if you’re ever uncertain, it’s wise to consult with us or refer to the Australian Taxation Office for guidance. Tax considerations for property investment: Capital Gains Tax (CGT) Tax on rental income Asset depreciation Deductibility of property expenses GST considerations Four types of tax on investment property Income tax The income from your rental property is subject to tax, just like your regular income. When lodging your income tax return, you must include the rental income alongside any other earnings, such as your salary or profits from other investments. Suppose your property’s expenses exceed its rental income, creating a loss (known as “negative gearing”). In that case, you can deduct this loss from your overall income, potentially reducing your tax liability. Some investors favour this strategy over “positive gearing,” where the property generates a profit because it can decrease the taxes they owe. Fortunately, the Australian Tax Office (ATO) allows property investors to deduct various property-related expenses from their rental income, which can help maintain the profitability of their investment. Immediate deductions Immediate deductions refer to expenses you can claim as tax deductions in the same financial year. These include costs for advertising for tenants, council and water rates, land tax, interest on your mortgage, and expenditures for repairs and maintenance, etc. Long-term deductions Some costs can be spread out over multiple years. A good example is “depreciation,” which lets you subtract a portion of the property’s value each year to account for wear and tear and the aging of the building and its fixtures. Remember, not every expense is deductible. You can’t subtract costs like the initial tax paid when buying the property (stamp duty), your mortgage payments, or any expenses your tenant covers. Capital Gains Tax (CGT) Are you thinking of selling your rental property? Be prepared for the potential of Capital Gains Tax. If you make money when selling your rental property, that profit is seen as a “capital gain.” This profit needs to be reported on your yearly tax return. The extra tax you owe because of this added profit is called Capital Gains Tax or CGT. The ATO has rules that might let property investors avoid paying some or all of the CGT. Here are some of the exceptions and special rules: Main Residence (MR) Exemption This rule applies if the property is your primary home. Capital Gains Tax Property 6-Year Rule This rule allows you to treat a property as your primary residence and apply the principal residence exemption from Capital Gains Tax. Note that a family can only have one principal place of residence at any given time. The Six-Month Rule A rule that offers some flexibility when moving between properties. 50% CGT Discount The 50% Capital Gains Tax (CGT) Discount allows you to halve the capital gain on your property when calculating tax, provided the property was held for more than 12 months. This discount is designed to encourage long-term property investment. Stamp Duty Tax When you buy an investment property, you must pay a stamp duty tax. Think of it as sales tax for purchasing property. This tax is due when the property’s ownership changes hands from the seller to the buyer. That’s why some also call it transfer duty. The Australian Taxation Office (ATO) doesn’t let you claim this as a tax deduction on your income tax return, but it can be added to the asset’s cost base for CGT purposes. So, property investors should check how much they’ll have to pay before buying a property, as it can affect their rental income and expenses. Stamp duty varies depending on: The state you’re in The property’s price If you’re a first-time buyer Generally, every property transfer, even among families or different ownership structures, requires stamp duty. Only a few exceptions exist. While stamp duty is an immediate concern for property investors, you should also be aware of other tax obligations. These can include capital gains tax, land tax, and claiming various tax deductions. Land Tax Land tax is different from stamp duty. While you pay stamp duty just once when you buy a property, land tax is an ongoing charge based on the land’s value unless the property is your primary home (often referred to as Principal Place of Residence or PPOR). Every state and territory has a land tax rate based on the land’s “unimproved value.” This means that the value of buildings, walkways, landscaping, or fences on the land is not included when calculating land tax. Land tax rates and thresholds for each state or territory are available on the Revenue Office websites for each state. It’s worth noting the Northern Territory is unique because property investors there don’t have to pay land tax. If you’re a property investor, you must know these ongoing tax obligations, which can affect your rental income and expenses.

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