Latest news with #AustralianTaxationOffice
Daily Telegraph
6 hours ago
- Business
- Daily Telegraph
Huge profits as 20-year home move expires
There's a significant new trend in property investment: for the past three years, a majority of Australian investors have been positively or neutrally geared. That means their rental income has met or exceeded their expenses, including loan repayments. As a result, they've been pocketing extra income each year on top of any capital gains. This is a significant shift given the previous 20-year trend of most investors being negatively geared. The trend is revealed in FY23 tax data released by the Australian Taxation Office (ATO) last month. Based on all our tax returns, the ATO reports there were 2,261,080 Australians with an interest – either sole ownership or joint or part-ownership – in one or more rental properties in FY23. Among them, 51% – or 1,143,905 – reported net positive or neutral rental income. This is the third consecutive year in which more investors came out ahead after expenses. In FY22, 58% of investors reported positive or neutral net rental income. In FY21, it was 53 per cent. This follows a two-decade history prior to FY21 when the majority of investors were negatively geared each year. The fact that interest rates were at record lows in FY21 and FY22 is the most obvious reason why more investors were positively geared in those years. But what about FY23? The Reserve Bank of Australia raised interest rates 10 times (albeit from a low base) in FY23. The cash rate rose rapidly from 0.85 per cent to 4.1 per cent between July 2022 and June 2023, and yet most property investors remained positively geared. How is that so? I think several factors are contributing to what I hope might become a lasting trend. The biggest one is a huge surge in weekly rents that began in FY21 and continued into FY22 and FY23. Data shows annual rental growth of about 7 per cent in FY21, 9 per cent in FY22, and another 9 per cent in FY23. Additional rental income would have certainly offset the impact of rising interest rates in FY23. (The pace of rental growth has since slowed but remains above inflation, with annual increases of about 8 per cent in FY24 and 3.4 per cent in FY25.) Another contributing factor is the ageing profile of property investors. According to the data, the largest cohort of Australian investors are aged 60 years or older. The FY23 data shows more than one in four investors, or 27 per cent, are in this age group. This is relevant because older people typically have more wealth, after a lifetime of work and decades of owning their homes, and therefore have more scope to pay down investment debt. Retirement would also provide a new motivation to pay off debt, as would turning 60, since that's when many Australians can access their superannuation in a lump sum under certain conditions. Additionally, a rising number of baby boomers have been downsizing in recent years, which is freeing up funds to pay off loans or fund the purchase of a new property investment with cash. Owning property mortgage-free virtually guarantees strong positive cash flow, since loan repayments are by far the biggest cost for most landlords. I'm also mindful that since the pandemic, we have seen a significant trend in investors choosing to buy cheaper properties with higher rental yields in regional areas or investing in capital cities in states or territories that are more affordable than Sydney and Melbourne. This may also be contributing to the trend in more property investors being positively geared. Affordability is a key driver of this trend, but the pandemic also facilitated it. Lockdowns led to rapid changes in the industry, including enhanced online marketing tools and the provision of private inspections via video. Documentation like loans and property sale contracts went digital, making the financing and conveyancing processes more streamlined, and reducing the barrier of distance. I also think more investors are employing buyers' agents to do all the legwork for them, and this helps people access other states and territories to diversify their portfolios. Buyers' agents are readily available across the country, so investors can buy in the best-performing markets with confidence. For example, there is plenty of anecdotal evidence that East Coast investors have been buying in both the capital cities and regional areas of Western Australia and Queensland over the past few years. These states have been among the top performers in terms of home value growth for several years now. The best thing about more property investors being positively or neutrally geared is that it makes it easier for them to hold on to their investments for the long term. The real wealth from property investment comes from capital gains, and we know that the longer you hold your investment, the higher your capital growth is likely to be.
Courier-Mail
6 hours ago
- Business
- Courier-Mail
Huge profits as 20-year home move expires
There's a significant new trend in property investment: for the past three years, a majority of Australian investors have been positively or neutrally geared. That means their rental income has met or exceeded their expenses, including loan repayments. As a result, they've been pocketing extra income each year on top of any capital gains. This is a significant shift given the previous 20-year trend of most investors being negatively geared. The trend is revealed in FY23 tax data released by the Australian Taxation Office (ATO) last month. Based on all our tax returns, the ATO reports there were 2,261,080 Australians with an interest – either sole ownership or joint or part-ownership – in one or more rental properties in FY23. Among them, 51% – or 1,143,905 – reported net positive or neutral rental income. This is the third consecutive year in which more investors came out ahead after expenses. In FY22, 58% of investors reported positive or neutral net rental income. In FY21, it was 53 per cent. This follows a two-decade history prior to FY21 when the majority of investors were negatively geared each year. The fact that interest rates were at record lows in FY21 and FY22 is the most obvious reason why more investors were positively geared in those years. But what about FY23? The Reserve Bank of Australia raised interest rates 10 times (albeit from a low base) in FY23. The cash rate rose rapidly from 0.85 per cent to 4.1 per cent between July 2022 and June 2023, and yet most property investors remained positively geared. How is that so? I think several factors are contributing to what I hope might become a lasting trend. The biggest one is a huge surge in weekly rents that began in FY21 and continued into FY22 and FY23. Data shows annual rental growth of about 7 per cent in FY21, 9 per cent in FY22, and another 9 per cent in FY23. Additional rental income would have certainly offset the impact of rising interest rates in FY23. (The pace of rental growth has since slowed but remains above inflation, with annual increases of about 8 per cent in FY24 and 3.4 per cent in FY25.) Another contributing factor is the ageing profile of property investors. According to the data, the largest cohort of Australian investors are aged 60 years or older. The FY23 data shows more than one in four investors, or 27 per cent, are in this age group. This is relevant because older people typically have more wealth, after a lifetime of work and decades of owning their homes, and therefore have more scope to pay down investment debt. Retirement would also provide a new motivation to pay off debt, as would turning 60, since that's when many Australians can access their superannuation in a lump sum under certain conditions. Additionally, a rising number of baby boomers have been downsizing in recent years, which is freeing up funds to pay off loans or fund the purchase of a new property investment with cash. Owning property mortgage-free virtually guarantees strong positive cash flow, since loan repayments are by far the biggest cost for most landlords. I'm also mindful that since the pandemic, we have seen a significant trend in investors choosing to buy cheaper properties with higher rental yields in regional areas or investing in capital cities in states or territories that are more affordable than Sydney and Melbourne. This may also be contributing to the trend in more property investors being positively geared. Affordability is a key driver of this trend, but the pandemic also facilitated it. Lockdowns led to rapid changes in the industry, including enhanced online marketing tools and the provision of private inspections via video. Documentation like loans and property sale contracts went digital, making the financing and conveyancing processes more streamlined, and reducing the barrier of distance. I also think more investors are employing buyers' agents to do all the legwork for them, and this helps people access other states and territories to diversify their portfolios. Buyers' agents are readily available across the country, so investors can buy in the best-performing markets with confidence. For example, there is plenty of anecdotal evidence that East Coast investors have been buying in both the capital cities and regional areas of Western Australia and Queensland over the past few years. These states have been among the top performers in terms of home value growth for several years now. The best thing about more property investors being positively or neutrally geared is that it makes it easier for them to hold on to their investments for the long term. The real wealth from property investment comes from capital gains, and we know that the longer you hold your investment, the higher your capital growth is likely to be.
News.com.au
7 hours ago
- Business
- News.com.au
Huge profits as 20-year home move expires
There's a significant new trend in property investment: for the past three years, a majority of Australian investors have been positively or neutrally geared. That means their rental income has met or exceeded their expenses, including loan repayments. As a result, they've been pocketing extra income each year on top of any capital gains. This is a significant shift given the previous 20-year trend of most investors being negatively geared. The trend is revealed in FY23 tax data released by the Australian Taxation Office (ATO) last month. Based on all our tax returns, the ATO reports there were 2,261,080 Australians with an interest – either sole ownership or joint or part-ownership – in one or more rental properties in FY23. Among them, 51% – or 1,143,905 – reported net positive or neutral rental income. This is the third consecutive year in which more investors came out ahead after expenses. In FY22, 58% of investors reported positive or neutral net rental income. In FY21, it was 53 per cent. This follows a two-decade history prior to FY21 when the majority of investors were negatively geared each year. The fact that interest rates were at record lows in FY21 and FY22 is the most obvious reason why more investors were positively geared in those years. But what about FY23? The Reserve Bank of Australia raised interest rates 10 times (albeit from a low base) in FY23. The cash rate rose rapidly from 0.85 per cent to 4.1 per cent between July 2022 and June 2023, and yet most property investors remained positively geared. How is that so? I think several factors are contributing to what I hope might become a lasting trend. The biggest one is a huge surge in weekly rents that began in FY21 and continued into FY22 and FY23. Data shows annual rental growth of about 7 per cent in FY21, 9 per cent in FY22, and another 9 per cent in FY23. Additional rental income would have certainly offset the impact of rising interest rates in FY23. (The pace of rental growth has since slowed but remains above inflation, with annual increases of about 8 per cent in FY24 and 3.4 per cent in FY25.) Another contributing factor is the ageing profile of property investors. According to the data, the largest cohort of Australian investors are aged 60 years or older. The FY23 data shows more than one in four investors, or 27 per cent, are in this age group. This is relevant because older people typically have more wealth, after a lifetime of work and decades of owning their homes, and therefore have more scope to pay down investment debt. Retirement would also provide a new motivation to pay off debt, as would turning 60, since that's when many Australians can access their superannuation in a lump sum under certain conditions. Additionally, a rising number of baby boomers have been downsizing in recent years, which is freeing up funds to pay off loans or fund the purchase of a new property investment with cash. Owning property mortgage-free virtually guarantees strong positive cash flow, since loan repayments are by far the biggest cost for most landlords. I'm also mindful that since the pandemic, we have seen a significant trend in investors choosing to buy cheaper properties with higher rental yields in regional areas or investing in capital cities in states or territories that are more affordable than Sydney and Melbourne. This may also be contributing to the trend in more property investors being positively geared. Affordability is a key driver of this trend, but the pandemic also facilitated it. Lockdowns led to rapid changes in the industry, including enhanced online marketing tools and the provision of private inspections via video. Documentation like loans and property sale contracts went digital, making the financing and conveyancing processes more streamlined, and reducing the barrier of distance. I also think more investors are employing buyers' agents to do all the legwork for them, and this helps people access other states and territories to diversify their portfolios. Buyers' agents are readily available across the country, so investors can buy in the best-performing markets with confidence. For example, there is plenty of anecdotal evidence that East Coast investors have been buying in both the capital cities and regional areas of Western Australia and Queensland over the past few years. These states have been among the top performers in terms of home value growth for several years now. The best thing about more property investors being positively or neutrally geared is that it makes it easier for them to hold on to their investments for the long term. The real wealth from property investment comes from capital gains, and we know that the longer you hold your investment, the higher your capital growth is likely to be.
Yahoo
a day ago
- Business
- Yahoo
Major ATO change to hit Aussies slugged with tax penalties: 'Returning to normal'
The Australian Taxation Office (ATO) has slashed its tax penalty waiver approval from 90 to 70 per cent as it returns to 'normal operations' following the pandemic. The tax office receives tens of thousands of requests each year to cancel or reduce tax penalties. The ATO applies a general interest charge (GIC) if tax remains unpaid after the due date, which is currently 10.78 per cent annually, compounding daily, and means interest can become larger than the original debt. Taxpayers can apply for a remission of interest charges, and the ATO will look at things like what caused the delay and if it was outside of your control. An ATO spokesperson said the agency had launched a review into its process for granting full or partial penalty waivers to ensure 'consistency in decision making'. RELATED Aussie 'appalled' by $4,000 ATO tax bill after common deductions rejected Major ATO deadline hits thousands of Aussies: 'Paid in full' Rare 50 cent coin sells for $3,050 due to 'unique' reason 'Our approach to GIC remissions varied in line with our effort to support businesses through COVID, and as a result, on average during this time, over 90 per cent of remission requests resulted in either [a] full or partial remission of GIC that had accrued on tax debts,' the spokesperson told The Australian Financial Review. 'Over the last two years we have communicated to the market that we were returning to normal operations and accordingly, the rate of remission has now moved to around 70 per cent.' The Tax Ombudsman will also be scrutinising the ATO's approach to tax debt interest over this coming financial year to make sure decisions are 'fair and reasonable and are made consistently for taxpayers in like circumstances'. Tax debt and the ATO's treatment of taxpayers with tax debt are a major source of complaints to the Ombudsman. 'The general interest charge is important to deter non-compliance and late payment, but it should not be used to penalise taxpayers with legitimate reasons for payment delays,' the Ombudsman Ruth Owen said. 'Our review will build on the work the ATO is already doing to find ways we can make this aspect of tax administration fairer and more transparent for all taxpayers.' Interest on ATO debts no longer tax deductible Interest charged by the ATO for late payments or underpayments is no longer tax deductible from July 1, 2025. This means it will cost more to carry a tax debt. The change was first announced in December 2023 by the government as part of the Mid-Year Economic and Fiscal Outlook. It's designed to ensure taxpayers who do the right thing and pay their taxes in full and on time aren't disadvantaged. It comes as the ATO's collectable debt hit more than $50 in to access your portfolio
Perth Now
2 days ago
- Automotive
- Perth Now
Huge sum workers may save on commute by driving electric car
Electric vehicles are likely to save people $45,000 on their work commute over their working life, according to new research. The study found EVs have less than a quarter of the running costs for the average-length commute compared to a petrol car. The Open Agent research found someone who lived 15km away from their work — which is close to the average distance most people live from their workplace according to Census data — pays $58,000 in petrol over a 42-year career. The cost of charging an electric car over this period and distance — similar to someone travelling from Scarborough to the CBD — is about $13,000. Those driving to work from 30km away (roughly the distance between Ellenbrook to Perth, or Karrinyup to the airport) face a lifetime work commute charge cost of $26,460 with an EV, or $116,100 for petrol. At the other end of the spectrum, those driving from 5km away will pay $4410 to charge an EV, or $19,350 for petrol. The research based the a petrol cost of $1.72 per litre, and an electric cost of 0.042c, which is the standard used by the Australian Taxation Office. But the Motor Trades Association warns though operational savings are undoubtedly cheaper, the study did not consider the full suite of costs associated with an electric vehicle. A Tesla charging site. Credit: Blomst / Pixabay (user Blomst) Chief executive Stephen Moir said EVs were generally much pricier to buy than a standard car and incurred extra insurance costs, while also suffering a much faster drop in value withing a few years of purchase. 'I would agree with this initial assessment that it is cheaper to run an electric vehicle if you are only looking at running the car from the time you turn it on to the time you turn it off,' he said. Mr Moir also questioned the environmental benefits of EVs considering the impact of mining lithium for batteries. However, he said swift advances on technology could soon see lithium batteries replaced with more environmentally friendly options. RAC general manager of external relations Will Golsby said its surveys showed most EV buyers chose to go electric for reasons like convenience and lower running costs, in addition to the environmental benefits. 'Ease of servicing and maintenance, and EVs being cheaper to power are key reasons people are choosing electric or hybrid over petrol or diesel,' he said. 'Hybrids have also become popular for drivers who aren't ready for a full electric vehicle but want the benefits of lower running costs and reduced emissions. 'However more needs to be done to bring down the up-front cost of EVs. We need to see a wider variety of options at lower price points. 'We support the Australian Government's fringe benefit tax exemption for EVs and continue to call for more action to improve EV affordability for Western Australians.' What it costs driving to work. Credit: The West Australian
