What’s your interest in Income Splitting? Are you maximising your potential? Are you falsely claiming Rental Property Deductions?
DON’T GET STUCK BY DOING THE WRONG THING!
Interest and Income Splitting
Investment income is the easiest income with which to achieve effective income splitting. For tax purposes, interest income is generally considered earned by the holder of the bank account. For example, if Mr. Jones is the named account holder, the Tax Office will normally consider that all interest earned on the account will be taxed to Mr. Jones. Likewise, a jointly held account will normally be taxed in equal proportions to the account owners named.
Thus, by simply ensuring that all interest earning bank accounts are held in the name of the person within the family unit with the lowest marginal tax rate, substantial tax can be saved (certain exceptions apply where the interest relates to unearned income of minors).
Rental Property Alert!
For the many of you that own rental properties, or are contemplating a purchase, the ATO has just announced that it is increasing its focus on rental property deductions. It says common errors made by rental property owners include:
- Claiming rental deductions for properties not genuinely available for rent;
- Incorrectly claiming deductions for properties only available for rent part of the year (such as a holiday home);
- Incorrectly claiming structural improvement costs as repairs when they are capital works deductions (such as re-modelling a bathroom, or building a pergola);
- Overstating deduction claims for the interest on loans taken out to purchase, renovate or maintain a rental property.
To assist you in understanding the tax implications of buying, owning and selling a rental property, the Tax Office has just released a series of short videos.
Published By The Australian Taxation Reporter Team (September, 2014).
