
3 minute read
TAX
Tax update
With our constantly changing taxation laws it is important you keep up to date with any changes which may impact your tax outcome in relation to your self storage facility. The following issues are some recent changes and also some ongoing matters which we have previously addressed with SSAA Australia members.
DEDUCTION FOR VACANT LAND
Changes to legislation to limit deductions that can be claimed for holding vacant land received royal assent on 28 October 2019. These changes apply to costs incurred on or after 1 July 2019, even if the land was held before that date. The costs involved in holding vacant land will vary depending on each taxpayer’s circumstances however they will generally include – ongoing borrowing costs including interest payments on debt used to acquire the land, land taxes, council rates and maintenance costs. Certain entities will be excluded from these changes including – corporate tax entities, superannuation funds (excluding SMSF), managed investment trusts and public trusts. If you are currently claiming tax deductions for holding vacant land we suggest you review if the new laws apply to you.
SELLING YOUR SELF STORAGE FACILITY
GST Issues
Generally the vendor will be liable for GST on the disposal of the freehold self storage facility as the property is a commercial premises. This GST liability will generally be calculated as oneeleventh of the full sale price. However, this may be reduced where the margin scheme can be applied and the GST liability will reduce to one-eleventh of the margin on the sale of the property
The sale of the property may also be sold ‘GST Free’ where it is part of a sale of a going concern. A sale of a property that is part of a going concern may include: l The property is sold together with an operating business connected with the property, including a self storage facility l A fully tenanted building , where all lease agreements are included in a sale l A partially tenanted building where the vacant part of the building is being actively market
There are also other basic conditions you should be aware of if claiming your property sale as a sale of a GST Free going concern.
Capital Gains Tax
It is likely you will make a capital gain on the sale of you self storage facility, which is great news. Paying capital gains tax (CGT) on the proceeds is not such great news. If you acquired the property before 20 September 1985 its possible you will not pay any CGT otherwise the amount of CGT you pay will depend on the legal structure the property is held in. The amount of CGT may be reduced by the 50% general discount where you have held the property for more than 12 months and may be further reduced or eliminated if you can access the various CGT small business concessions (SBC). The SBC are complex and require thorough review and a comprehensive approach to ensure they are accessible. One issue in particular, we have previously come across, which may exclude you from accessing the SBC is where you are not using the standard SSAA agreement with you customers.
OWNING YOUR SELF STORAGE FACILITY IN YOUR SELFMANAGED SUPERANNUATION FUND (SMSF)
There have been significant changes in this space over the past couple of years. Many of these changes have impacted on how you need to approach an acquisition of property in your SMSF. However, we still have clients acquiring their self storage facilities in their SMSF as it continues to provide significant benefits in relation to asset protection and income tax savings. l
Disclaimer – The above is general information only and is not advice. You should not rely on the above information to make a commercial decision or to calculate your taxation liabilities. Should you be unsure of your taxation obligations we recommend you contact a trusted taxation advisor.
If any of the above matters apply to you and you would like to find out more or if you have any other tax related matters you would like to discuss please do not hesitate to call Phil Keenan of our office on (02) 4353 2333.