Welcome
Members were welcomed, apologies and proxies noted, and no conflicts of interest were declared.
Claiming interest expenses presentation and discussions
A presentation providing insights into observations on the tax implications of mixed purpose loans, manifesting in the population, was delivered to gain a better understanding of how the Australian Taxation Office (ATO) and members can better work together to address this.
Member comments
There is member interest in the detail behind the case studies presented, including if the same agent was used during the entire ownership period, as one case was over 30 years. Members confirmed that interest calculations lodged today require an understanding of the history, and that incorrect apportionment can have a significant and long-standing impact.
An ATO investigation showed that approximately 30% of residential rental property owners have a mixed purpose loan which was surprising to members.
There is a general lack of understanding about loan products (notably the differences between offsetting accounts and redraw facilities), which highlights low levels of financial literacy in the community. It was noted we could utilise education products to articulate the tax consequences of loan types earlier in the process, that is via banks at loan application rather than via tax agents at tax time to address this.
ATO officers requested ideas for other intermediaries or influencers to engage. Lawyers and conveyancers were identified as a key group, and utilising banking apps was also mentioned.
A suggestion that one or 2-page information sheets would be useful when explaining to clients. Included examples of different loans for the same circumstances could assist clients understand how the loan structure makes a difference to the tax treatment. Other topics suggested for education products were matching the names on mortgage documents and names on the property title, and the related topic of 'tenants in common' versus 'joint tenants' and the impact on the tax treatment.
Information on the use of residential investment property loan data, specifically that is not suitable for prefill was provided. Members noted this data might be useful as a prompt for conversations with clients, as is currently the case with crypto asset information, so there could be a case for including it without prefilling in returns.
Around the grounds
Changes to the foreign resident capital gains tax withholding legislation have now passed and will apply to contracts entered on and after 1 January 2025.
Member comments
Members requested to see the updated examples which they had provided feedback on, before they are published and would like to see a prototype of the interest calculator.
Members felt future discussions on the following important topics would be useful:
- effectiveness of the working group in ‘shifting the dial’
- sharing economy, short-term rental accommodation
- 6-year rule.