SMSFs acquiring assets from related parties
SMSFs cannot acquire an asset from a ‘related party’ (such as a member or their spouse or relative) unless it is acquired at market value and is:
- a listed security (for example, shares, units or bonds listed on an approved stock exchange)
- business real property
- an in-house asset, provided the market value of your fund’s in-house assets does not exceed 5% of the total market value of your fund’s assets
- an asset specifically excluded from being an in-house asset.
If the asset is acquired at less than market value (including any ‘in specie’ contribution value), the difference between the market value and the amount actually paid is not considered to be a contribution. Income generated by the asset will be non-arm’s length and will be taxed at the highest marginal rate.
You can refer to “ Valuation guidelines for self-managed super funds “ on the ATO’s website for further assistance in this regard.
Tips’s for Correctly Claiming Repairs and Improvements on Your Rental Property
When you make improvements or repairs to your rental property, it’s crucial to categorize these expenses correctly to avoid mistakes on your tax return. Here’s a quick guide:
- Repairs and general maintenance: These expensesare for work done to remedy, or prevent, defects, damage or deterioration from using the property to earn income. These expenses can be claimed in the year the expense occurred.
- Initial repairs: Any work done to address defects, damage or deterioration existing at the time of purchase, regardless of whether you knew about the need for repairs at the time they acquired the property. These are capital repair expenses and can’t be claimed as a deduction. Instead, initial repairs are part of the acquisition cost and included in the cost base of the property for CGT purposes, unless they are
- capital works
- depreciating assets.
- Capital works : Structural improvements, alterations and extensions to the property. They can be
- claimed at 2.5% over 40 years, with some exceptions
- can only be claimed after the work has been completed, regardless of when you pays a deposit or pays the bill as instalments.
- Improvements or renovations: Any work that goes beyond remedying defects, damage or deterioration and improves the function of the property are improvements.
- Repairs to an ‘entirety’: They are capital and can’t be claimed as repairs. Repairs to an entirety generally involve the replacement or reconstruction of something separately identifiable as a capital item, for example, a depreciating asset.
- Depreciating assets (capital allowances) must be claimed over time according to their effective life.
Do you need to lodge a TPAR
You may need to lodge a TPAR if they’ve made payments to contractors or sub-contractors who provide the following services on their behalf:
- building and construction
- cleaning
- courier, delivery or road freight
- information technology (IT)
- security, surveillance or investigation.
If you don’t need to lodge a TPAR for the 2024 income year, submit a ‘non-lodgment advice form,’ or have your tax agent do it for you. This form can also be used if you no longer pay contractors, indicating that you won’t need to lodge a TPAR in the future.
The Small Business Energy Incentive is Now Law
Great news for small businesses! The Small Business Energy Incentive is now in effect. If your business has an aggregated annual turnover of less than $50 million and you upgraded or purchased a new asset that enhances energy efficiency during the 2024 income year, this incentive could be a valuable opportunity.
Here’s what you need to know:
- Bonus Deduction: You can claim a bonus deduction equal to 20% of the cost of eligible assets or improvements to existing assets that support more efficient energy use.
- Eligibility Window: The incentive applies to eligible assets that were first used or installed and ready for use for any purpose, and for a taxable purpose, between 1 July 2023 and 30 June 2024. Improvement costs incurred during this period are also eligible for the bonus deduction.
- Expenditure Cap: Up to $100,000 of total expenditure is eligible under this incentive, with the maximum bonus deduction being $20,000 per business.
- Double Deduction: This 20% bonus deduction is on top of other existing deductions. You can claim both the ordinary deduction for the expense as well as the bonus deduction.
Important Considerations:
- Accurate record-keeping is essential. Make sure you keep evidence of the expenditure claimed and document how different assets were compared when upgrading or making improvements.
- While the ATO intends to cover a broad range of eligible expenditures, some items are excluded from this incentive, including:
- Assets and expenditure on assets that can use fossil fuels
- Assets primarily for generating electricity (e.g., solar panels)
- Capital works
- Motor vehicles and related expenditures
- Software development pools
- Financing costs
Additional Opportunities:
If your business is checking its eligibility for the Small Business Energy Incentive, don’t forget to also check if you qualify for the instant asset write-off. Some businesses may be eligible to claim both.
Stay informed and make sure your business takes full advantage of this new incentive while remaining compliant with tax regulations.