Latest news with #taxchange
Telegraph
03-08-2025
- Business
- Telegraph
‘Swansea council hit us with a £15k tax bill – and two weeks to pay'
Has your holiday let business been affected by anti-tourist policies? Email money@ In the four years since Guy Allen and Emma Enticott bought their holiday let in the heart of Mumbles on the Gower Peninsula, they estimate their business has contributed £90,000 to the local economy. Their thank you from Swansea Council, however, was a backdated council tax bill for £15,000 with a 15-day deadline to pay. The shock charge was the result of a tax change two years ago that many holiday let owners have argued was never properly communicated. The dispute centred around a decision by Welsh Labour to raise the number of days that holiday home owners would have to let their property to qualify for business rates. The minimum of 70 days was raised to 182. Businesses that failed to reach the new target would instead pay council tax, which would then be treated as a second home, incurring a premium of up to 300pc. The change became law from April 1 2023 but a loophole meant the 182-day target was backdated, so the requirement had to also be met in the year preceding the rule change. The Welsh government said it wrote to holiday let owners in October 2022 to explain this stipulation. Those who received the letter complained that this only gave them six months to hit the far higher target. Others, like Allen, 62 and Enticott, 51, said they never received a letter. 'They are stealing this money from us' And while the couple have worked hard to reach the 182-day target every year since 2023, employing a lettings agent, setting up a website and a social media page, they came up 11 nights short of the target in 2022-23. They didn't think this was an issue until they received a letter on July 17 from Swansea Council demanding £15,189 by August 1 for three years' worth of council tax, all of which had a 100pc premium applied. Allen said: 'What they have done is they have taken us off business rates completely. 'It means the council has now effectively charged us for six years of council tax and this is the first we've heard of it. 'We've spoken to the Valuation Office and it's going to take up to nine months for us to get back on to business rates because of the backlog. They will end up having to repay us for the years we have hit the target and therefore should be on business rates, but in the meantime [the council] is stealing money from us. 'They are going to have the benefit of our money and the interest on it for nine months before having to pay us back.' 'Paying the price for council incompetence' The Telegraph previously revealed how some Welsh authorities were taking holiday let owners to court to try to recoup backdated bills of up to £13,000. Alistair Handyside, of trade body the Professional Association of Self Caterers, described the policy as 'effectively [being] retrospective legislation'. He said there was no finite data on the number of holiday lets in Wales, so it was highly likely that letters were not sent to all homeowners. While Allen, head of sales at a watches firm, and Enticott, who manages several properties, were able to pay the bill, they said they had concerns for the countless other holiday let owners who would not be able to afford the bill. Enticott said: 'Guy and I are old enough and ugly enough, we have got each other's backs, and are a strong couple. But my major thoughts are for people who are facing ruin. They've got the bills to service, and they've got no other income stream. As an industry we are facing an absolute crisis. 'People cannot take the pressure anymore, and they've got absolutely no chance of hitting 182 days in some parts of the country.' Allen added: 'The heavy lifting of the tourism industry is carried by furnished holiday lets and we are being killed for the sake of covering up the Welsh government's incompetence. 'You only have to go through every one-horse town in Wales to see the petrol station has closed down, the pub has closed, the chapel has closed, and there are endless derelict houses. 'There are more than 100,000 empty homes in Wales, and that has nothing to do with second homes or holiday lettings, but for Mark Drakeford and his mates, it's an easy win. 'Blame somebody else for your lack of infrastructure. They have done nothing to build a sustainable economy for Wales in rural areas, and instead they want to go after holiday lets.' A Swansea Council spokesman said: 'This was not a decision taken by Swansea Council. We advised the family that the decision to take their holiday let off business rates was taken by the Valuation Office Agency (VOA). We had no control over the decision and we have no discretion to amend it. As a result of the VOA decision, the property became liable for council tax.' 'There was no delay from the council's point of view. The VOA told us recently it had retrospectively decided to withdraw the property from business rates, backdating its decision to April 1, 2023. This triggered the need for us to issue a council tax demand, and we did this as soon as we were informed by VOA of their decision. 'We have advised the family to contact the VOA, and should the position change, we will respond to that.' A Valuation Office Agency spokesman said: 'We cannot comment on individual cases. Following the Welsh Government's announcement of the new business rates criteria for self-catering properties, we wrote to all self-catering property owners in October 2022 to let them know about upcoming changes and how this would be assessed. 'We also published information online and engaged with industry bodies and local councils to raise awareness of the changes. 'We write to customers in Wales every two years to request lettings information. If a customer thinks their property has met the criteria to qualify for business rates, they can contact us and we will look into their case. 'If a customer informs us that they are experiencing financial hardship we will prioritise their case.'
RNZ News
24-06-2025
- Business
- RNZ News
Opposition mounts to new tax for organisations
Federated Farmers says the tax change is sector-wide and creating "huge concern". File photo. Photo: RNZ / Richard Tindiller Federated Farmers and an organisation representing the country's chartered accountants have added their voices to concerns about a proposal to apply more tax to the not-for-profit sector. Inland Revenue (IR) plans to make some societies and associations' membership fees subject to tax . Under current practice, not-for-profits structured as mutual associations do not pay tax on income such as that from members' fees. This principle, known as mutuality, is based on the idea that a group of people cannot make profit from dealing with themselves. The update to IR's interpretation of how tax should be applied seemed to be based primarily on an Australian case from 2004, after which the Australian Government enacted legislative change to avoid the sort of changes IR is suggesting. Federated Farmers said Revenue Minister Simon Watts should rule out the change. It would mean Federated Farmers was charged tax on its membership for the first time. "This is not a routine tax consultation - this is a significant new interpretation that overturns 20 years of settled practice," Federated Farmers board member Richard McIntyre said. "This isn't a minor tweak - it's a fundamental shift in how the Inland Revenue Department interprets the law. "It would have serious consequences for New Zealand's not-for-profit sector. This would pull the rug out from under about 9000 not-for profits, advocacy groups, professional associations, unions, community organisations, and political parties who rely on membership fees to fund their operations," McIntyre said. "This is not just about Federated Farmers - it's sector-wide and is creating huge concern." Chartered Accountants Australia and New Zealand (CA ANZ) tax leader John Cuthbertson said the change would "undermine New Zealand's volunteer spirit". "New Zealand has a strong culture of people banding together to deliver not-for-profit community services and companionship. Mutual organisations are amazingly diverse - think your local sports club, community group, professional bodies and social or hobby clubs. "They have created huge public value along the way, and we do not believe their work should be undermined through additional taxation." He said most were operating on very small budgets and aiming to break even each year. "As it stands, there is inconsistency of tax treatment of not-for-profits. As a result, some organisations are treating member subscriptions and levies as tax exempt, while others are not. Ultimately, tax compliance should not overburden small clubs and societies who rely on volunteers. "Chartered Accountants ANZ believes that, because of the unique nature of the not-for-profit sector, any financial transactions made by not-for-profit organisations should not be subject to taxation. "If there are concerns that some people or organisations might be misusing the tax-free status, for example, by disguising taxable activities as not-for-profit ones, then authorities should respond by conducting focused investigations and enforcing the rules where necessary." He said the law should be changed to confirm the tax exempt treatment of member subscriptions and levies received. "Thousands of chartered accountants give their time to not-for-profits for free, to enable their public good, and they are telling us they are concerned about their future viability if additional tax must be paid," he said. Both organisations said they had made submissions outlining their concerns. Inland Revenue has been approached for comment. It earlier said there would be no implications for income that is subject to specific exemptions from tax such as the charitable exemption. "The draft statement is being consulted following changes or perceived changes to the Commissioner's interpretation of the law as it relates to associations whose income is not tax exempt, the object being to test whether the legal reasoning for the interpretation is sound." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
SBS Australia
09-05-2025
- Business
- SBS Australia
The super tax that slipped under the radar during the election campaign
The proposed tax change aims to improve the equity and sustainability of Australia's super system, but it is not clear how it will work in practice. Source: Getty / Johner Images The re-election of the Albanese government has led to renewed concern about planned changes to the taxation of investment returns in . Labor's emphatic victory on Saturday night, including what looks like an increased presence in the Senate, suggests the legislation is likely to become law in the near future. Australia's retirement income system comprises two pillars: a government-funded age pension as well as private superannuation. Super includes compulsory employer-funded contributions as well as additional personal contributions. These two pillars are complementary; a person can receive a pension even if they have private super. But the more super they have, the less pension they are eligible for. About 70 per cent of superannuation assets are held in Australian Prudential Regulation Authority (APRA)-regulated funds, and 25 per cent are held in self-managed super funds (SMSFs). There are two types of tax — and tax concessions — on super. First, employer contributions and capped personal contributions are taxed at a concessional rate of 15 per cent. Second, income earned by a super fund is taxed at 15 per cent for balances in the accumulation phase (when contributions are being made). Income earned in the pension phase is tax-free. Starting 1 July, the government proposes to increase the concessional tax rate on super account earnings in the accumulation phase from 15 per cent to 30 per cent for balances above $3 million. Those affected — about 80,000 super account holders, or 0.5 per cent of the total — will continue to benefit from the existing 15 per cent concessional tax rate on earnings on the first $3 million of their super balance. They will also be able to carry forward any loss as an offset against their tax liability in future years. Concerns have been raised this reform implies the taxation of unrealised capital gains on assets held in super accounts, such as shares or property, even if they have not been sold. This is, indeed, a significant departure from the status quo. Both APRA-regulated funds and SMSFs are currently only required to pay capital gains tax once the asset is sold and the gain is crystallised. The move to tax unrealised capital gains is likely to prove particularly onerous for SMSFs. The typical industry super fund has a diversified portfolio of assets of varying liquidity, including significant cash holdings. But SMSF portfolios are often dominated by a large and illiquid asset (one that cannot be easily sold and converted into cash) such as a farm or business property. As a result, an SMSF facing a large unrealised capital gain, say from an increase in property values, may not have sufficient cash flow to pay the associated tax bill. The SMSF trustee might be forced to prematurely sell assets to meet the fund's tax liability. In the United States, former president Joe Biden's 2025 budget included a similar proposal to tax unrealised capital gains for households with more than US$100 million ($155.9 million) in wealth. In announcing this initiative, Treasurer Jim Chalmers suggested the motivation was two-fold. First, the federal government is facing pressure on the budget bottom line and generous tax concessions for super are becoming expensive. Second, current super tax concessions are highly regressive. This means most benefits of the concessions flow to the wealthiest households which, in any case, will not be eligible for the pension. The cost of current super concessions to the federal budget is about $50 billion in foregone revenue, according to the Treasury. That is almost the cost of the age pension. The Grattan Institute argues superannuation has become a "taxpayer-funded inheritance scheme". A Treasury review found most Australians die with large outstanding super balances. The Association of Superannuation Funds of Australia Retirement Standard calculates that, for a comfortable retirement, a couple needs a super balance of about $700,000 if they retire at age 67. The $3 million threshold is out of the ballpark. However, if the threshold is not indexed, more people will be affected over time. According to the government's Retirement Income Review, the objective of Australia's super system should be to "deliver adequate standards of living in retirement in an equitable, sustainable and cohesive way". While the proposed tax change aims to improve the equity and sustainability of Australia's super system, it is not clear how it will work in practice. In response to SMSF concerns about the difficulty in paying tax bills, the government's proposal gives taxpayers 84 days to pay the tax liability instead of the usual 21 days. This hardly mitigates the risk that SMSF trustees may have to liquidate the main asset in their fund. The Biden proposal had presented an alternative model, allowing for the tax liability to be paid over several years, not all at once. Alternatively, taxpayers could pay an interest-like charge while deferring their unrealised capital gains tax liability. Such alternatives do not appear to have been seriously considered in the Australian government's proposal. Ultimately, though, the question must be asked: is taxing volatile unrealised capital gains really the most effective way to improve equity in, and the sustainability of, the superannuation system? Mark Melatos is an associate professor of economics at the University of Sydney. He does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
