Repeat buyers are one of the strongest measures of confidence in any apartment development.

At <a href="https://www.apartments.com.au/new-apartments/era-newcastle-west-124-126-bull-street-newcastle-west-nsw-2302">ERA</a> in Newcastle West, some purchasers are returning to <a href="https://www.apartments.com.au/developers/gwh">GWH</a> after living at the developer's One Apartments. Their decision to purchase again was driven by the quality of life they found after moving into their first GWH home.

Keith Wilton had spent years living in a house in East Maitland before deciding it was time for a change. Apartment living had always been on his radar, but he was selective about what he wanted.

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"I had some boxes I wanted to tick," he says.

Keith points to the open-plan design, generous outdoor areas and considered inclusions as key reasons One Apartments worked for him.

“One of those things was a nice indoor open plan area, but also I wanted a nice outdoor open area that I could entertain on in summer or Christmases or birthdays,” he says.

He also found value in the smaller details, from integrated appliances to shared resident spaces including the pool, cinema and rooftop areas.

[smartcode_project:default project_id=135096 project_image_fid=356818]

After comparing several developments, he chose One Apartments because of GWH's longstanding local reputation and his own experience working with the developer on a commercial project more than a decade earlier.

"I knew that they were local, that the quality of the build was going to be up there. I'd looked at other apartment complexes around and close by, and I just knew that here was a better decision location wise."

Today, Keith says the move has completely changed how he experiences Newcastle.

"I enjoy living in this location because it's more of a lifestyle change. That Newcastle city living where you can walk to restaurants and bars and even beaches and parks and even shopping across the road."

[smartcode_project:default project_id=135096 project_image_fid=356828]

Beyond the location, he says it's the sense of community that has surprised him most.

"Everyone loves living here because they chose to live here, but everyone looks out for each other. It's a real great community feel here."

For Aimee and Lyle Goodman, the journey started almost by chance.

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The couple happened to be having coffee in Newcastle when they noticed the site where One Apartments was about to begin construction.

"We were aware GWH was planning a development," Aimee says. "We made one phone call and things moved pretty quickly after that."

As busy business owners, they initially thought apartment living would simply reduce the maintenance that came with larger homes. Instead, it fundamentally changed how they spent time together.

"We actually catch up more as a family now," Aimee says.

"We've had homes with big yards and lots of space, but everyone ended up in different rooms. Here we'll have dinner together, the kids can play, and we spend far more quality time together."

[smartcode_project:default project_id=135096 project_image_fid=356829]

Lyle says their confidence came from GWH's reputation within Newcastle's building industry.

"I know people who've worked across different apartment projects, and whenever GWH came up the feedback was always the same. They're rock solid. They're quality."

That confidence only grew throughout the buying process.

"One of the things that really impressed us with GWH was the whole process, was the communication," Lyle says. "It was consistent, it was regular, there was no problem if we had some weird questions, there was no problems in getting answers."

[smartcode_project:default project_id=135096 project_image_fid=351104]

Aimee says one moment stood out.

"The project actually finished on time. We realised we needed to hurry up and sell our house because everything was happening exactly when they said it would."

The positive experience at One Apartments ultimately gave all three buyers the confidence to purchase again with GWH, this time at ERA.

Their confidence reflects what many buyers are seeking in today's apartment market. Location remains important, but so too does certainty around delivery, quality and long-term liveability.

[smartcode_project:default project_id=135096 project_image_fid=356822]

ERA builds on those foundations with 280 one, two and three-bedroom apartments across two landmark towers in <a href="https://www.apartments.com.au/developments/newcastle-west-nsw-2302">Newcastle West</a>.&nbsp;

Designed by <a href="https://www.apartments.com.au/architects/fk-australia">Fender Katsalidis</a>, the project will include more than 2,000 square metres of resident amenities, including a resort-style pool, gym, sauna, private cinema and rooftop entertaining spaces overlooking the harbour and coastline.&nbsp;

The development is also within walking distance of the Newcastle Interchange, Honeysuckle, Darby Street, the harbour foreshore, restaurants, retail and the city’s beaches, continuing the walkable lifestyle that existing GWH buyers say has transformed how they live.

[smartcode_project:default project_id=135096 project_image_fid=356826]

For Keith, the appeal remains straightforward.

"You feel at home even before you've moved into your home."

For Aimee, the change is measured in time.

“I just felt like I had more time,” she says.

[smartcode_project:default project_id=135096 project_image_fid=351102]

Construction at ERA is now underway, with more than half of the residences already sold and limited two and three-bedroom apartments remaining in the East Tower release. Priced from $980,000 for two-bedroom residences and $1.46 million for three-bedroom residences, buyers can secure an apartment with a 10 per cent deposit, with premium homes offering ocean views from Level 8 and harbour views from Level 10.

ERA is also backed by Resilience Insurance's 10-year Latent Defects Insurance policy, providing protection against structural or waterproofing defects for 10 years after completion. The project is anticipated to be completed in early 2028.

[smartcode_project_cta:default project_id=135096]

Joel Robinson

From ONE to ERA: Why buyers are choosing GWH again in Newcastle West

Virgate Property Group is preparing to commence construction of Verdé, its new apartment development in Melbourne's Arts Precinct at Southbank, following a strong run of sales that has seen more than half of the project's 173 apartments secured.

Verdé has attracted a broad mix of first home buyers, owner-occupiers upgrading from nearby inner-city suburbs and investors, with younger owner-occupier couples aged between 28 and 45 accounting for the strongest enquiry. Many are already living in Southbank, South Melbourne, Albert Park, Port Melbourne, South Yarra and the CBD.

"Verdé is located in one of the most desirable pockets of southern Melbourne," Blair Property Group Director Darren Blair, who is managing sales at Verdé, said.

"It's within walking distance of the Arts Centre, Royal Botanic Gardens, Albert Park Lake, and Southbank's restaurants and retail. It's a great lifestyle location with strong amenity and liveability, which made it a very attractive choice for the project."

[smartcode_project:default project_id=4661 project_image_fid=372549]

Virgate was already familiar with the precinct, having previously delivered the successful Domain House development in neighbouring South Melbourne. That experience gave the developer confidence to acquire the Coventry Street site and continue expanding its presence in Melbourne's inner south.

"We had been keeping an eye on the site and the broader precinct for a few months before deciding to move forward with the acquisition," Virgate said.

The project was ultimately secured in 2020 following feasibility studies, planning assessments and due diligence, with the brief centred on delivering "a high-quality, considered design that feels both refined and fit for purpose."

[smartcode_project:default project_id=4661 project_image_fid=314259]

Designed by <a href="https://www.apartments.com.au/architects/bruce-henderson-architects">Bruce Henderson Architects</a>, Verdé comprises 173 one, two and three-bedroom apartments priced from $599,000. The architecture is distinguished by a faceted glass façade that responds to both the site's outlook and Melbourne's changing light conditions.

According to Bruce Henderson Architects, the coloured glazing gives the building a distinctive identity while also providing privacy and solar shading, with residences oriented to capture views across the bay, city skyline and surrounding parklands.

Inside, <a href="https://www.apartments.com.au/interior-designers/designoffice">DesignOffice</a> has created interiors focused on natural light, efficient planning and enduring materials. Apartments feature engineered oak flooring, natural stone benchtops, floor-to-ceiling glazing and SMEG appliances, while a restrained material palette aims to complement the expansive outlooks rather than compete with them.

[smartcode_project:default project_id=4661 project_image_fid=372550]

Resident amenity has also been designed around everyday functionality rather than occasional use. Facilities include a concierge-serviced lobby, residents' lounge with fireplace, library and co-working space, gym, terrace garden with barbecue facilities, ground-floor café, and package delivery management.

The project's location continues to be one of its strongest drawcards. Positioned on Coventry Street, Verdé sits within walking distance of the National Gallery of Victoria, Arts Centre Melbourne, Royal Botanic Gardens and Albert Park Lake, while Southbank's dining precinct, Sturt Street trams and the new ANZAC Station are all nearby. The surrounding education catchment also includes Melbourne Grammar, Melbourne Girls Grammar, Mac.Robertson Girls' High School and several major university campuses.

The sales team says buyers have responded particularly well to the combination of location, design quality and long-term liveability.

"They're responding really positively to the quality of the design, premium resident amenities and the uninterrupted views. Many also appreciate the location and how connected it is to everything they need."

The ability to secure stamp duty savings before completion has also been a key factor for purchasers, alongside the opportunity to personalise finishes ahead of settlement.

With construction set to commence soon and more than half the apartments already sold, Verdé enters its next phase as one of the Arts Precinct's more established apartment developments, offering remaining buyers an opportunity to secure a residence before construction advances further. Expected completion is scheduled for late 2027.

[smartcode_project_cta:default project_id=4661]

Virgate's Verdé Southbank moves toward construction as sales fly past halfway stage

Downsizer-focused apartment development Kooyongkoot in Hawthorn has been recognised at the 2026 Better Future Melbourne Design Awards, taking home Gold and Silver awards in two categories.

<a href="https://www.apartments.com.au/new-apartments/kooyongkoot-hawthorn-1-kooyongkoot-road-hawthorn-vic-3122">Kooyongkoot</a>, currently being delivered by developer PQD and designed by Cera Stribley, received Gold in the Interior Design – Proposed category and Silver in the Architecture – Proposed category.

The dual recognition reflects the design approach behind the boutique development on prestigious Kooyongkoot Road, where the focus has been on creating homes for downsizers seeking the space, quality and functionality of a detached house within a low-rise apartment building.

Rather than maximising apartment numbers, <a href="https://www.apartments.com.au/developers/pqd">PQD</a> and <a href="https://www.apartments.com.au/architects/cera-stribley-architects">Cera Stribley</a> limited the development to just 18 residences, allowing for larger floorplans, greater privacy, generous landscaping and expansive communal spaces.&nbsp;The majority of the apartments also benefit from corner aspects, allowing for dual sources of natural light.

Now around 70 per cent complete and on track for completion in November 2026, Kooyongkoot will comprise a mix of garden residences, ter​race apartments, sub-penthouses, and is crowned by two half-floor penthouses with direct lift access and private rooftop terraces.

[smartcode_project:default project_id=102717 project_image_fid=355297]

The Silver Award for Architecture recognised the way the building responds to its prominent corner position at the ent​rance to Hawthorn's Scotch Hill precinct, one of Melbourne's most established residential neighbourhoods.

Rather than competing with the grand homes that line Kooyongkoot Road, the architectural approach focused on restraint and longevity, using curved brickwork, generous landscaping and carefully considered proportions to integrate with the existing streetscape.

"The form feels fluid and timeless, as though shaped by the landscape itself – architecture that belongs, rather than competes," said Chris Stribley, Co-Founder and Managing Principal of Cera Stribley.

The judging submission also highlighted practical innovations throughout the building, including lift cores servicing only nine homes each, a central landscaped lightcourt designed to bring daylight and ventilation into the building, and fully enclosed private storage rooms with lighting, power and shelving to better accommodate residents transitioning from larger family homes.

[smartcode_project:default project_id=102717 project_image_fid=355293]

The Gold Award for Interior Design recognised the project's focus on long-term liveability rather than display-home aesthetics.

According to the awards submission, the interiors were designed from the inside out, prioritising how homes would function over decades of daily use through generous proportions, practical storage, durable natural materials and flexible layouts.

The specification includes natural stone throughout, upgraded acoustic glazing, V-ZUG appliances and fully enclosed storage rooms, alongside an amenity offering focused on wellness, entertainment and everyday convenience.&nbsp;

Residents will have access to a gym and yoga studio, a wellness centre featuring traditional and infrared saunas, a cold therapy shower and treatment room, as well as a residents' lounge and golf simulator/cinema room for entertainment.&nbsp;Kooyongkoot has also considered the everyday convenience of its residents by offering a private carwash and pet wash facilities on site as well as dedicated parcel lockers and oversized fully enclosed storage rooms.&nbsp;

[smartcode_project:default project_id=102717 project_image_fid=355303]

The project's attention to detail has already resonated with buyers. Earlier this year, Kooyongkoot recorded one of Boroondara's highest apartment sales when an $8 million penthouse was purchased by a Melbourne CEO downsizing from a nearby family home.

"Every detail feels deliberate, from the overall design down to the smallest touches," the purchaser said.

"The level of quality and refinement is exceptional, but what really sold it was how liveable it felt... It felt like a place where everything had been considered, not just a luxury building."

[smartcode_project:default project_id=102717 project_image_fid=355304]

Sustainability also formed a key part of both award submissions. Kooyongkoot is targeting a minimum 7.5-star NatHERS rating across all residences, supported by passive design principles, high-performance glazing, EV charging infrastructure, water reuse systems and a wellness model focused on lower-energy dry facilities rather than pools and large wet areas.

Located within walking distance of Scotch College, Methodist Ladies' College, Koo​yong Lawn Tennis Club, Aubur​n Village and Camberwell Junction, Kooyongkoot continues to target owner-occupiers looking to remain in Melbourne's inner east without compromising on space or quality. A limited selection of two, three and four-bedroom residences remains available, with prices starting from $1.9 million.

[smartcode_project_cta:default project_id=102717]

Kooyongkoot wins Gold and Silver at Better Future Melbourne Design Awards

New apartment supply has become increasingly constrained across <a href="https://www.apartments.com.au/developments/parramatta-nsw-2150">Parramatta</a> in recent years, with fewer projects progressing through to completion as development conditions have become more challenging.

It makes <a href="https://www.apartments.com.au/developers/novm">NOVM</a>'s 2021-completed <a href="https://www.apartments.com.au/buildings/the-lennox-parramatta-12-phillip-street-parramatta-nsw-2150">The Lennox</a> one of the most recently completed residential towers on the Parramatta River, and among the newest apartment developments in Sydney's second CBD.

With the project largely completed before the sharp escalation in construction costs and inflation following the pandemic, The Lennox is now offering pricing that would be difficult to replicate in a comparable new development in Parramatta today, or across much of Western Sydney.

The majority of the 413 apartments at The Lennox sold before and shortly after completion. A limited release of the remaining apartments has recently been brought to market by capital partner <a href="https://www.apartments.com.au/project-marketer/equitifund-group">Equitifund</a>, with entry-level pricing from $700,000 and two-bedroom apartments available from under $1 million.

Rising above the Parramatta River at 12 Phillip Street, The Lennox comprises one, two, three and four-bedroom apartments, appealing to first home buyers, young professionals, families, downsizers and interstate investors seeking a completed apartment in one of Australia's fastest-growing economic centres.

[smartcode_project:default project_id=5743 project_image_fid=372394]

Rather than positioning Parramatta as an alternative to Sydney's CBD, Equitifund believes the city has reached a point where it stands on its own merits.

"Parramatta is no longer simply an alternative to Sydney CBD, it's becoming a destination in its own right," Equitifund Executive Chairman Greg Huxley said.

"The Lennox captures that evolution with a level of quality and amenity that's difficult to match at its price point."

[smartcode_project:default project_id=5743 project_image_fid=953]

Designed by <a href="https://www.apartments.com.au/architects/marchese-partners">Marchese Partners</a>, the tower responds directly to its riverfront setting through expansive glazing and open-plan layouts that maximise views across the Parramatta River and city skyline. Interiors feature engineered timber flooring, stone benchtops, stainless steel appliances and floor-to-ceiling glazing, while generous balconies extend the living spaces outdoors.

Marchese Partners says the project was conceived to balance high-quality apartment living with practical, long-term functionality, pairing larger, efficient floorplans with amenities more commonly associated with five-star hotels.

That emphasis continues through the resident facilities, which include a 20-metre rooftop swimming pool, fully equipped gym and wellness spaces, full-time concierge, a residents' lounge, function room, private lifts, secure basement parking and rooftop communal areas overlooking the Parramatta River. Ground-floor boardwalk retail and dining further activate the riverfront and integrate the building into the surrounding public realm.

[smartcode_project:default project_id=5743 project_image_fid=925]

Australian housing and finance group Equitifund has secured the remaining apartments, believing there are few completed apartment opportunities in Parramatta that offer the same combination of location, amenity and pricing.

Equitifund National Sales Director Ben Hamblett says buyers are increasingly recognising that premium apartment living no longer needs to come with Sydney CBD pricing.

"The Lennox is where aspirational living becomes attainable," Hamblett said.

"Wake to river and mountain views, step into Sydney's Second CBD, and arrive home to resort-calibre amenities, all without the harbour price tag."

Hamblett says owner-occupiers are also attracted by the convenience of having Westfield Parramatta, Church Street's dining precinct, Parramatta Park, Riverside Theatres, Western Sydney University and major transport connections all within walking distance.

"At The Lennox, lifestyle is not an afterthought, it is the foundation."

[smartcode_project:default project_id=5743 project_image_fid=5374]

The Lennox places residents within walking distance of Parramatta Square, Westfield Parramatta, Church Street Eat Street, Parramatta Station, the ferry wharf, Light Rail, the future Sydney Metro West, Parramatta Park and CommBank Stadium, reinforcing Parramatta's position as one of Australia's most connected metropolitan centres outside Sydney's CBD.

Equitifund says buyers visiting the display suite consistently comment on the quality of the finishes, generous floorplans, river and skyline views, and the walkability of the location. The project has attracted a broad mix of local professionals, upsizers, downsizers, buyers relocating from Sydney's inner suburbs and interstate investors seeking long-term growth opportunities.

That demand aligns with Parramatta's continued evolution as an economic powerhouse. Equitifund Research and Market Insights specialist John Bekiaris says sustained population growth, infrastructure investment and expanding employment opportunities continue to support long-term housing demand across the city.

"Parramatta has evolved from a satellite city into one of Australia's most important economic centres. Population growth, infrastructure investment and employment are all supporting sustained long-term housing demand."

[smartcode_project_cta:default project_id=5743]

The apartment price gap drawing Sydney buyers west

A luxury beachfront apartment at Rainbow Bay has more than doubled in value since it sold off the plan six years ago, setting a new local apartment record in the process.

The three-bedroom apartment in the Flow development on Petrie Street, the first of four new projects locally by Paul Gedoun's S&amp;S Projects, has sold for $7.4 million, after originally selling for $3.27 million when the project launched in 2020.

The seventh-floor apartment, comprising 187 sqm of internal living space and a 54 sqm balcony overlooking Froggies Beach and Snapper Rocks, was purchased by a local family.

The transaction was negotiated by Pezet Matheson director Kerry Pezet and equates to more than $30,000 per sqm.

Pezet said the sale reflected the limited opportunities to buy into the boutique beachfront development.

"The sale highlights the rarity of opportunities within the boutique beachfront development, where residences seldom become available," Pezet said.

"Flow is one of the Gold Coast's most tightly held buildings. Buyers from our database move quickly when residences become available, and achieving an off-market sale at $7.4 million demonstrates the depth of demand for property of this calibre."

<img alt="Flow" data-entity-type="file" data-entity-uuid="c585b206-2130-4eee-a50c-3f27c51a7c70" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-06%20at%208.33.25%E2%80%AFPM.png?VersionId=m3pHRDV62Y3fvN.XQuQHq.52ilTWpRLf" />

Flow was the first of four luxury apartment developments delivered by Paul Gedoun's S&amp;S Projects at Rainbow Bay and was completed in 2023.

Positioned on the beachfront overlooking Snapper Rocks, the residence includes three bedrooms, three bathrooms, a powder room and views stretching north along the coastline towards Surfers Paradise.

Pezet Matheson Residential principal Mitchell Lambert said buyers continued to prioritise quality beachfront apartments in tightly held locations.

"Flow Residences offers a rare combination of elevated beachfront positioning, architectural excellence, comprehensive resident amenity and premium finishes, which is exactly what discerning purchasers are seeking," Lambert said.

"The transaction further reinforces Rainbow Bay's reputation as one of Australia's premier coastal lifestyle destinations, where limited supply and growing demand continue to support strong market performance."

Pezet Matheson originally marketed and sold out Flow off the plan, making the latest transaction a return to one of the project's original buyers.

Paul Gedoun is selling his third project, <a href="https://www.apartments.com.au/new-apartments/radia-rainbow-bay-271-boundary-street-coolangatta-qld-4225">Radia Rainbow Bay</a>, after recently completing, and selling out, <a href="https://www.apartments.com.au/buildings/esprit-217-227-boundary-street-coolangatta-qld-4225">Esprit</a>. He has plans for a <a href="https://www.apartments.com.au/news/qld/first-look-s-s-projects-proposes-88-apartment-wellness-tower-at-coolangattas-boundary-street">fourth building</a>, 88 apartments on <a href="https://www.apartments.com.au/new-apartments/209-213-boundary-street-coolangatta-qld-4225">Boundary Street</a>.

Rainbow Bay apartment doubles in price since off the plan sale during pandemic

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As if the negative gearing debate wasn't enough before the election, on July 1, there is another shocker waiting for real estate agents and property owners around Australia trying to transact in property exceeding $2 million.
According to a new ATO rule that comes into effect July 1, all Australian sellers of $2 million-plus properties will be classified as overseas investors unless they get a special tax clearance. That means that all buyers of $2 million-plus properties must deduct 10 per cent from the purchase price and pay that amount to the Australian Taxation Office (ATO) unless the seller can furnish a tax clearance, according to a recent report in The Australian. 
While the move will affect everyone, including Australians, Chinese investors will be impacted more, especially when taken together with steps taken to squeeze Chinese buying in residential property. 
Chinese and Asian buying of Sydney apartments has already fallen 50 per cent in recent weeks and the trend is spreading to other markets, particularly Melbourne. 
The current measure can be traced back to the days when former treasurer Joe Hockey caved into pressures to curb Chinese investment in Australian residential property in 2015. In the process, the treasurer was convinced by the Australian Taxation Office to widen the net to cover local residents, says the report in The Australian.
According to an ATO fact sheet, in May 2013, the government announced that it would introduce a 10% non-final withholding tax on payments made to foreign residents who dispose of certain taxable Australian property with a market value above a specified threshold. The new legislation for this measure became law in February 2016.
The $2 million rule applies to vacant land, buildings, residential and commercial property, leaseholds and strata title schemes.
The ATO website says, "The government is strengthening our foreign resident capital gains tax (CGT) regime to assist in the collection of foreign residents' liabilities."
The definition of property is very wide and includes leaseholds but does not include stock exchange investments. A purchaser who does not receive a “clearance certificate” from the vendor and does not send 10 per cent of the purchase price off to the ATO will still be liable to pay that 10 per cent to the ATO plus, almost certainly, will have to pay severe additional penalties and interest. The economics of buying the property will be severely damaged, says the media report.
It suggests that real estate agents selling $2 million plus properties should study how this new tax regime would impact their business.
For example, banks and other financiers may be affected where their secured debt exceeds 90 per cent of the value of the selling price. In a situation where the owner is being forced to sell, the banks will be better to take possession and sell themselves rather than being caught in the “tax clearance” delays.
In the majority of cases, local resident vendors will have no problem obtaining a clearance certificate, but it might increase the risk of a tax audit for property sellers who:
<ul>
<li>Have not filed tax returns for many years;</li>
<li>Have filed tax returns, which would indicate they could not afford such a property;</li>
<li>Are selling their residential house at the same time as their neighbours to a single developer, which may give rise to a profit making scheme (such that the principal residence capital gains tax exemption may not apply to the value uplift generated by selling the properties together); or</li>
<li>Where the ATO has gathered information that indicates the vendor is in the business of developing property, which means that the principal residence capital gains tax exemption may not apply.</li>
</ul>
The post by Robert Gottliebsen says this might lead to a rush to sell before July 1 and might create some property bargains for buyers.
Another implication is that as property prices rise, more vendors will fall into the $2 million plus category. Over time, the ATO may shift their audit target identification processes to $2 million-plus property vendors and away from other areas.
Additionally, if the vendor has a tax debt, the application for a “clearance certificate” may in some circumstances involve the ATO seeking to recover some or all of that tax debt from the purchaser by way of a garnishee notice. 
While the report argues that the ATO's new rule will only help recover tax legitimately owed, the danger is in the complexity. 
The legislation is yet another blow for Asian investors in Australian property. Banks have already imposed a credit squeeze on Chinese property buyers.
On July 1, the Victorian state government is set to raise the levy on foreign purchases of apartments from 3 percent to 7 percent 
For a Chinese investor, getting a tax clearance would be tough, or else they would have to give off 10 percent off the transaction price.
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New ATO rule on property deals over $2 million will hurt Chinese buyers even more

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Negative gearing can't be equated with standard business tax practice, and is not allowed in many countries, says economist Saul Eslake. 
Prime Minister Malcolm Turnbull has recognised this in the past, says Eslake in a recent post in the New Daily.
In a recent interview with the ABC’s Leigh Sales, Turnbull defended negative gearing as “income tax 101”, going on to explain it as  “a fundamental principle of tax law and has been forever that you can deduct from your income the interest expense of money that is borrowed to purchase an income-producing asset”.
This is quite a common proposition put forward by those who wish to defend the practice. It allows individuals who borrow finance the acquisition of an investment asset to offset the excess of interest they pay on those borrowings over the income the investment produces, in any given year, against their other income (for example, from wages and salaries) to reduce the amount of income tax they would otherwise be liable for.
They argue that this simply allows individuals to do what businesses can – offset the costs of ‘doing business’ (including financing costs) against taxable business income.
However, it ignores a very important difference between the tax treatment of companies and individuals. Companies don’t get the 50 per cent tax discount on capital gains which individuals have done since 1999 (nor did they get the CPI inflation adjustment to the cost base of assets which individuals did between 1985 and 1999).
Once upon a time, Turnbull appreciated this difference.
Eslake cites a speech by Turnbull from 2005 to a conference co-sponsored by The Australian newspaper and the Melbourne Institute of Applied Economic and Social Research, in which he described negative gearing as a form of ‘tax avoidance’, one of the few open to PAYE and other ‘unincorporated’ taxpayers.
A month earlier in a paper co-authored with the ANU’s Jeromey Temple, Turnbull observed that “Australia’s rules on negative gearing are very generous compared to many other countries”, noting that “the normal deductibility principles do not apply to negatively geared real estate such that the taxpayer is not obliged to demonstrate that the negatively geared property will generate positive cash flow at some point in the distant future”.
People are, of course, entitled to change their minds – especially when, as Maynard Keynes is supposed to have said, the facts change, says Eslake.
But the only relevant fact that appears to have changed between 2005 and today is that Turnbull is heading a Coalition government, rather than being a backbencher in one, and he is confronting an Opposition advocating changes to negative gearing, unlike the Labor Opposition in 2005.
In their 2005 paper, Turnbull and Dr Temple argued “the concessionary taxation of capital gains encourages people to invest in a manner which turns income into capital and, as in the case of negative gearing, allows them to deduct losses at, say, 48.5 per cent and then realise gains and pay tax at effectively half that rate”.
They cited then Reserve Bank Governor Ian Macfarlane and other commentators as claiming “this divergence in the taxation of income and capital coupled with negative gearing has contributed to the asset bubble in residential real estate”.
Ten years on, the things that have changed are that the top tax rate is now effectively 49 per cent, that capital city residential property prices are almost 75 per cent higher than they were then, and that Macfarlane is no longer Governor of the Reserve Bank.
As Turnbull acknowledged, most other countries with personal income tax regimes similar to ours don’t allow negative gearing in the way that we do. The US removed it (for investment properties) as part of a broader package of tax reforms in 1986 – with no apparent adverse consequences for the level of investment in the housing market.
And two of Turnbull’s closest political soulmates – New Zealand’s John Key and Britain’s David Cameron – both recently introduced changes to their countries’ tax regimes explicitly designed to dampen speculative investment in housing.
New Zealand has subjected investment properties bought and sold within two years to income tax at the investor’s full marginal rate, with effect from 1 October last year. And last year’s UK Budget provided that, from 2017 onwards, landlords will no longer be able to deduct the cost of their mortgage interest from their rental income in calculating their taxable income.
In conclusion, Eslake says that Turnbull would do well to follow the example set by these, electorally successful, centre-right Prime Ministers, as well as the inherent logic of his own opinions of a decade ago, rather than regurgitating the self-serving propaganda of parts of the property industry.
Saul Eslake is a leading Australian economist. He worked as the Chief Economist at the ANZ for 14 years and has worked at Bank of America-Merrill Lynch. Between 2009 and 2011, he was the Director of the Productivity Growth Program at the Grattan Institute. <a href="https://www.sauleslake.com.au/">Visit his official website here</a>.
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jonathanchancellor-7SQnKwU6yx

Negative gearing is simply a form of tax avoidance: Saul Eslake

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GUEST OBSERVER
Hard-pressed ratepayers in New South Wales and Queensland need no reminding of the perils of municipal amalgamation. 
NSW experienced a sharp dose of forced mergers in 2004. Queenslanders underwent draconian council consolidation under the Beattie government in 2008.
NSW is now on the cusp of a further round of mergers being inflicted on unwilling councils.
In all three cases, the architects of compulsory amalgamation have been under the sway of the dogma that “bigger is better” in local government. Ratepayers are told amalgamation will herald a new dawn of lower rates, cheaper services, improved service quality, enhanced financial viability and superior administration and planning.
In NSW, the Baird government has especially emphasised the financial advantages of municipal amalgamation. These claims are typically presented as the outcome of careful research and deliberation.
Mergers tested in a real-world experiment
Are these claims consistent with the empirical evidence? My colleagues Brian Bell and Joseph Drew and I investigated this question for NSW’s 2004 forced amalgamations.
We took advantage of being able to use 2014 data to compare the performance of merged councils with their unmerged counterparts over ten years.
We compared amalgamated “general purpose” councils with their un-amalgamated peer councils in the same local government classification. We thus had the benefit of a “natural experiment”, being able to compare the two groups of “like” councils against a common set of performance indicators.
Our peer-reviewed research paper will be published shortl<a href="https://www.propertyobserver.com.au/https://esa.snapdev.com.au/news/15991">y</a>.
The criteria we used for this comparison included four the Baird government is using under its “Fit for the Future” program – operating performance, own-source revenue, building and infrastructure renewal, and asset maintenance ratios – as well as council employees per capita.
We found no statistically significant differences in the performance of the two groups of councils against these criteria. This falsifies past claims by the Carr Labor government that its forced amalgamations would substantially improve NSW local government financial performance. It also undermines the Baird Coalition government’s claims for its proposed mergers.
Evidence mounts against ‘bigger is better’
Other research provides additional damning evidence. For example, Joseph Drew, Mike Kortt and I examined the outcomes of forced amalgamations in Queensland in 2008. These reduced the number of councils from 157 to just 73.
Our research demonstrated that this resulted in a greater proportion of councils exhibiting diseconomies of scale. That is, mergers created entities that were simply too large to be run efficiently.
Furthermore, of the 31 new councils the mergers created, 58% exhibit decreasing returns to scale. Comparing their efficiency through time, we found merged councils performed worse than unmerged councils.
Finally, Elizabeth Sinnewe, Mike Kortt and I recently tested the claim that “bigger is better” by examining the financial performance of Australia’s largest council by population, Brisbane City. In our recently published analysis, we compared Brisbane City Council to Sydney City Council, the average of six southeast Queensland councils and the average of ten metropolitan NSW councils.
We did so using four measures of financial performance – financial flexibility, liquidity, debt service capacity and asset management. Between 2008 and 2011, the three comparator groups outperformed Brisbane Council in financial flexibility, liquidity and debt-servicing ability.
Taken together, these three papers cast doubt over the continuing dogma that “bigger is better”. They also add to the empirical literature on municipal mergers by demonstrating that “biggest is not best” either.
In particular, the financial performance of local authorities does not improve as advocates of amalgamation contend. On the contrary, amalgamated municipalities often perform worse than their unmerged counterparts.
Amid the controversy over the Baird government’s compulsory council consolidation program, our findings underline the foolishness of making public policy in an “evidence-free” manner.
If forced amalgamations proceed, we may well see hundreds of millions of dollars in taxpayer and ratepayer funds squandered simply because policymakers preferred dogma to empirical evidence.
Brian Dollery is professor of economics and director of the Centre for Local Government, University of New England and author for The Conversation. He can be <a href="https://theconversation.com/profiles/brian-dollery-162945" target="_blank">contacted here</a>.
 
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jchancellor-FAypfDUnLy

Do mergers make for better councils? The evidence is against ‘bigger is better’ for local government

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Hi Margaret,
We have a 1 acre or 4000 sq metre block of land , zoned farming in country Victoria. We bought it in July 2014 as an investment to develop it as a future home site.
If I sell a block of land with contract of sale dated in 2017 financial year, but settlement is in 2018 financial year, is CGT based on contract of sale date or on settlement date? It will make a difference as we will be retired in 2018 financial year and will be in  a different tax bracket.
The block of land, zoned farming, did not have a planning permit to build a dwelling or shed and has generated no income while we have owned it but we have made improvements. Are the cost of the improvements deductible? We have planted 600 trees at a cost of $1100.
We have drawn up a set of house plans and successfully applied for a planning permit to build a dwelling and shed at a cost of $1400. Are maintenance costs deductible?
E.g. 100 trips to the block of land to mow lawns, water trees, earth moving costs to remove dead trees, loan costs and purchase costs and selling cost.
Can we deduct stamp duty on purchase? Legal costs on purchase? Loan borrowing costs? Loan interest from date of purchase to date of sale? Loan discharge costs? Legal costs on sale of land? Council rates from purchase date to sale date? Break fees on a fixed loan for the land purchase if I sell before the 4 year fixed term is completed?
Thanks for your suggestions
Regards
Kevin
 
Hi Kevin,
According to the Australian tax office:
When you sell or otherwise dispose of real estate, the time of the event (when you make a capital gain or capital loss) is usually:
<ul>
<li>when you enter into the contract (generally the date on the contract), not when you settle – the fact that a contract is subject to a condition, such as finance approval, generally doesn't affect this date</li>
<li>when the change of ownership occurs if there is no contract (such as when a property passes to a beneficiary), or</li>
<li>if the real estate is compulsorily acquired – the earliest of</li>
<ul>
<li>when you receive compensation from the acquiring entity</li>
<li>when the entity became the property's owner</li>
<li>when the entity enters the property under a power of compulsory acquisition, or</li>
<li>when the entity takes possession under that power.</li>
</ul>
</ul>
In your case this means the event occurs in 2017 and this is the year the tax becomes due and payable.  If you have already lodged your tax return before settlement and the receipt of the proceeds, you would need to request an amendment to the prior year’s return. 
As for the remainder of your questions, you do need specific advice which takes into account all of your circumstances, including the purpose for which you originally bought the property and your intentions at the time.  Generally speaking though, I can tell you that:
1.   If this is not a working farm the zoning should not impact deducibility of any bona fide investment property related deductions.  You will need to get some specific advice around the planting of the trees, though, as they may not be deductible, unless such planting was required for the purposes of earning property related income.  
2.   Improvements to a rental property are deductible as long as the purpose for the block was to build an investment, and not to build future own home. 
3.   Once a property becomes income producing, maintenance costs are deductible.  If your intention was to build a property to rent out but instead you sell, some of your costs may become capital costs, but again this one would have to be determined by your accountant.
4.  You have a large list of other costs and again, their deductibility depends upon the reason you bought the block – if it was for an investment some may be considered capital costs (and so add to your cost base for the purposes of determining capital gains tax) and others, as long as the property was income producing, may be deductible as yearly expenses.  Even some costs which are normally yearly expenses can be added to the cost base in certain circumstances.  
It is critical that you consult with a highly skilled accountant who has experience in this area to be sure that you get the right advice.  Remember, regardless of what any one tells you, the responsibility for making the right claims rests with the tax payer.  Bad advice won’t get you out of trouble if you make an incorrect claim.
 
Have a property question?  <a href="mailto:news@propertyobserver.com.au" target="_blank">Ask Margaret!</a>
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mlomas-KC9MUPZ6Ca

Ask Margaret: Is CGT based on contract of sale date or on settlement date?

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Stamp duty revenue from home sales have started off 2016 in decline reducing surplus funds available for the NSW State Government's infrastructure spending spree.
Property sales netted $515 million in duties in January this year.
It was lower than the $551 million paid in January 2015.
Transactions were down to 14,800 from 16,400 monthly property sales a year earlier, in the quietest January for three years.
January is typically among the lowest months for revenues, but NSW Office of State Revenue figures indicated the 6.5 percent dip was the first since May 2013 that revenue was down on the same month 12 months prior.
Auction levels are running at less than last year suggesting the January dip may extend further into 2016. 
The latest February auction activity could signal the end of the bonanza enabling the high spending on infrastructure with February auction listings down around 20 percent at 2400 offerings. 
The auction market also ended a five-weekend sequence of above 70 percent clearance rates last weekend, slipping to 68 percent according to CoreLogic RP Data. Fresh Sydney for sale listings - auction and private treaty - are down 6.5 percent over the past four weeks compared to this time last year, CoreLogic noted.
After a slump in auction clearance rates in December to the low 50 percent, agents also blamed the wet mid-summer and an early Easter for contributing to the slowdown in activity.
The early 2015 strength in the Sydney property boom was being especially driven by properties valued over $1.2 million, the last NSW State Budget revealed, but the housing boom longevity was not being assumed by the NSW Treasury.
NSW land tax revenues were forecast to rise at a faster rate than stamp duty revenues, according to the NSW state budget papers when in her first budget, Treasurer Gladys Berejiklian announced a surplus of $2.1 billion for 2014-15 largely to windfall stamp duty receipts.
Stamp duty receipts were predicted to rise from $7.8 billion in 2015-16 to $8.6 billion in 2018-19, while the June budget papers warned that stamp duty is an "inherently volatile" revenue source for the state government.
The stamp duty fee, which remain at percent levels mostly introduced three decades ago, currently sits at a $5.33 billion total after the first seven months of the financial year.
 
 
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NSW stamp duty revenues in decline

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Bill Shorten believes there’s an affordability crisis in Australia. He believes he knows how to fix it. But I’m sure he doesn’t believe the tax policy he announced is the solution. What he announced is the smokescreen.
The tragedy for Shorten, the dead man walking of Australian politics, and the Labor Party, is that he is telling Australian households that he is going to force down the value of their homes. And that, in reality, the most likely outcome is that the cost of new housing will rise.
Short-term Shorten and his advisors don’t appear to realise that the high cost of new housing is the key to the affordability situation in Australia. And his policy will probably make it worse.
Firstly, the issue of an affordability crisis. Shorten apparently believes we have one. I believe we don’t.
The Housing Affordability Index shows that national affordability today is considerably better than it was five years ago. Sydney, following three years of big price growth, is the only jurisdiction that doesn’t have a demonstrably better affordability situation that it did in 2010. Everywhere else in Australia does. Even Sydney is marginally better off than in 2010. 
There were improvements in 2015 in many parts of the nation, reinforcing yet again that most of Australia did not have a property boom any time recently.
Jurisdictions which have a better affordability position now than 12 months ago include Perth (11% better than a year ago), Darwin (13.5% better), Hobart (7% better), regional WA (13% better), regional NSW, regional South Australia, regional Tasmania (6% better) and regional NT (10% better).
Affordability is essentially unchanged in Brisbane, regional Queensland and regional Victoria, compared to a year ago.
Sydney’s position is 4.5% less favourable, Melbourne 7.6% less, Canberra’s 9% less and Adelaide 2.6% less. But in each of those locations, affordability remains better than five years ago, even in Sydney (just). 
What we have from Federal Labor is what we got from APRA: over-the-top policy impacting the whole nation to attempt to solve a Sydney problem.
There’s going to be a major backlash against Labor once people realise the essence of Shorten’s proposal on affordability. He’s going into the upcoming federal election telling the electorate that the value of their homes is going to fall.
The essence of the tax policy announced on 12 February is that his proposed changes to negative gearing will somehow make housing more affordable. He’s not proposing to force down interest rates nor to lift average incomes, therefore the only way homes can become more affordable is for home values to fall. This would be seriously unpalatable for voters in the 70% of households that own their homes. It’s the ultimate election loser.
But home-owners need not worry. Shorten’s announced policies won’t cause home values to fall. They won’t make a single home cheaper in Australia because they don’t address the real causes of poor affordability. They have targeted the wrong culprits. 
And I’m quite sure Shorten knows that. Like most politicians, he’s not interested in addressing the real issues. He simply wants to give the appearance that he is. And he has achieved that by taking cheap shots at an easy target.
There are many problems with the announced policy. The first is that it’s based on a false premise - that the 15% or so of property buyers who are negatively-geared investors have a greater influence on property prices than the other 85%. (That 85%, incidentally, includes the biggest and most influential chunk of the buying market – home-buyers other than first-home-buyers – the people who have the numbers, the financial capacity and the motivation to pay high prices for homes).
Shorten says typical houses cost about three times average annual income 30 years ago and now it’s six times. He’s claiming that the small number of buyers who are negatively-geared investors are responsible for that change. He doesn’t provide any evidence to support this outlandish and quite illogical claim. He doesn’t provide it because it doesn’t exist.
He further claims that eliminating the tax claims of 15% of buyers will make housing more affordable. He doesn’t explain how that would happen.
But he is claiming his policy will make prices lower. If he’s right, that would be alarming for most voters. It would be also alarming for the nation, because the family home is the core asset for most Australians and the basis of their ability to provide for their retirement. 
This latter point is crucial. It’s the most important issue in the whole debate about negative gearing but is never mentioned.
Successive governments have told Australians they have to provide for their own retirement, because the Government can’t afford to fund the increasing numbers of retirement age people through pensions. We know that superannuation doesn’t cut it, so Australians need to invest to be self-funded in retirement. Governments need to encourage that. 
Negative gearing is one way to encourage people to invest - keeping in mind that it applies to all forms of investment, not just real estate. 
Eliminating it will stop many from buying real estate. Long-term it will cost the Federal Budget more than it saves - especially as the claimed savings are not great. Shorten’s figures suggest it will save the Budget just $570 million in the first four years, although I doubt he has considered the overall impact through loss of revenue to state and federal budgets – given that people buying investment property pay stamp duty, land tax and capital gains tax.
Shorten thinks that keeping negative gearing on new homes will cause investors to switch to the new product. But many won’t - because new homes are too expensive. On average, they cost $100,000 more than the equivalent existing home. That’s why 90% of investors (and most first-home buyers) buy existing properties rather than new. The negative gearing tax deductions don’t come close to making up for the price differential.
But if he’s right – and investors do switch to buying new homes – it will make new dwellings more expensive. If he’s right that prices are forced up by negatively-geared investors competing with home buyers, then switching all investors to new housing will create massive competition for a finite product and force up prices. Keep in mind that state government grants for first-home buyers are available only to buyers of new homes – and current Federal policy forces foreign investors to buy new properties, not existing.
So, if Shorten succeeds, we will have first-home buyers competing with Australian investors and foreign investors for new properties. Everyone will be trying to buy a finite supply of new homes, given that Australia is in the midst of a period of record creation of new dwellings and doesn’t need more. Shorten’s policy won’t make housing cheaper, it will make it more expensive.
And that brings us to the real issue in the affordability debate - the one that politicians including Short-term Shorten don’t want to talk about: the reality that government taxes and charges are responsible for the high cost of new housing. Multiple research studies have confirmed that more than 40% of the cost of new house-and-land packages are taxes and other government charges. Eliminate those and suddenly new homes are affordable to most buyers. A $400,000 product can be sold for $240,000.
So the real problem is not tax benefits flowing from government to the real estate industry - it’s the money flowing in the opposite direction, the taxes that are ripped out of the real estate industry.
Politicians never discuss this factor. They’re addicted to the massive amount of revenue they rip out of the real estate industry - over $70 billion in a typical year. They would rather blame unpopular minorities - a standard political tactic - than address the real issue.
The Federal Government, after two very long and expensive parliamentary inquiries which achieved little, has decided to make foreign investors the scapegoats. But forcing a small number of foreigners to sell back their mansions won’t make housing cheaper for first-home buyers.
Now the Federal Opposition has decided to make negatively geared Australian investors the scapegoats. It’s dishonest, deceitful and, frankly, disgusting.
Terry Ryder is the founder of <a href="https://www.hotspotting.com.au/" target="_blank">hotspotting.com.au</a>. You can <a href="https://mailto:ryder@hotspotting.com.au" target="_blank">email him</a> or follow him on <a href="https://twitter.com/hotspotting" target="_blank">Twitter.</a>
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terryryder-YECXbqmri2

Bill Shorten's Opposition makes negatively-geared investors the scapegoats: Terry Ryder

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Property investments by SMSFs through limited recourse borrowing arrangements (LRBAs) could come under increased scrutiny of the tax office this year, says major accounting firm H&amp;R Block.
Last year, the ATO had expressed concern at LRBA loans that were not structured correctly, including incorrect registration of the ownership of property bought under an LRBA. It spoke of increasing its focus on the LRBA route.
Given the growth in the SMSF sector and the increasing popularity of strategies such as LRBAs, H&amp;R Block has tipped that property will remain a top priority for the ATO’s compliance work in the SMSF sector this year.
“I know the ATO always keeps a close eye on property investment and especially LRBAs,” H&amp;R Block's director of tax communications, Mark Chapman told SMSF Adviser.
This particularly applies to related party borrowings which may currently be structured on non-commercial terms, with a June 30 deadline to have these structures rectified, it said.
According to the ATO website, an asset purchased by an SMSF trustee through LRBA is held in a separate trust.
If the loan defaults, the lender's rights are limited to the asset held in the separate trust, but not to assets held in the SMSF.
In 2015, an ATO campaign saw 500 postcodes issued with warnings urging holiday home owners to ensure deductions were not made during periods a property was not available for let.
“With property rental a valuable source of extra income for millions of taxpayers, it can be expected that the ATO will follow up with some targeted reviews and audits this year,” Chapman was quoted as saying.
The “sharing economy” – “driven in part by the high levels of non-compliance amongst those driving for Uber or renting rooms through Airbnb,” would also be an area of scrutiny by the ATO, he said. 
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ATO to focus on LRBA route to property investment by SMSFs

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There are tax issues for Australians living overseas but who want to buy property back home.
It in important the familiarise themselves with Australian tax obligations to avoid nasty surprises from the ATO.
Among the first things to establish is the tax residency status. They will be treated as tax resident of Australia if they meet certain criteria.
Some of the things that determine residency include nationality, where you were present and for how long, where you have a home, and your economic and business ties with the country. 
If you have stayed in Australia for more than six months of the financial year (1 July to 30 June), you will be a tax resident of Australia.
Then there's the domicile. If your domicile remains in Australia and you do not have a permanent place of residence overseas, you will be treated as an Australian tax resident.
If you are a tax resident of Australia, your worldwide income and capital gains are generally subject to Australian tax.
For non-residents, only income earned in Australia and capital gains on ‘Taxable Australian Property’ are taxable in Australia. Any income or capital gain from a property in Australia will always be treated as having been sourced in Australia, hence taxed.
Also watch out for countries with Double Tax Agreement (DTA) with Australia, where the provisions of the DTA may override the domestic law in both Australia and the other country.
If the other country also taxes the same income or capital gain, Australian tax rules generally provide a foreign income tax offset on any foreign tax paid on the same income or capital gain.
There is no substitute for professional tax advice.
Take the common example of an Australian expatriate who buys a home back in Australia while still resident of another country, including for tax purposes.
The house rented until the expat eventually returns to Australia, when it will become the family’s home.
The capital gains tax (CGT) treatment when the home is eventually sold will be influenced by the length of time when the property was not the expat’s main Australian residence.
An expat’s CGT position after owning the property for 10 years but home for only the final two of those years, would, according to Joe Galea, property tax partner for accountants Deloitte in Sydney, see a fifth of any net capital gain taxable.
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Australian expatriates are to watch their tax obligations

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GUEST OBSERVER
Through ATO ID 2015/27 and ATO ID 2015/28 the ATO seem to have cemented their position in relation to the application of s 295-550 of the Income Tax Assessment Act 1997 (Cth) to related party limited recourse borrowing arrangements (‘LRBAs’). 
Importantly, the ATO has since <a href="https://www.ato.gov.au/Super/Self-managed-super-funds/In-detail/News/Non-arm-s-length-limited-recourse-borrowing-arrangements" target="_blank" style="line-height: 1.3em;">confirmed</a> that their approach to this issue in future private rulings and litigation will be consistent with their view in ATO ID 2015/27 and ATO ID 2015/28.
In December 2014, DBA Lawyers director Daniel Butler noted that: 
SMSFs that are not benchmarked should consider doing so before any ATO audit activity occurs. Hopefully, the ATO may provide an amnesty to encourage SMSFs to benchmark to arm’s length. The big question here is whether the ATO will require retrospective adjustment.
Well it appears that the hoped-for amnesty has arrived. At a meeting of the Superannuation Industry Relationship Network on 10 November 2015 the ATO confirmed that SMSF trustees should review their LRBAs to determine whether they were established and maintained on terms that are consistent with an arm’s length dealing. While not certain, it also appears that the ATO <a href="https://www.ato.gov.au/Super/Self-managed-super-funds/In-detail/News/Non-arm-s-length-limited-recourse-borrowing-arrangements/" target="_blank">will not require retrospective adjustment</a>, stating that
We will not be selecting an SMSF for review for the 2014-15 year or earlier years purely because the fund has entered into an LRBA.
The ATO is to be commended for this pragmatic and fair approach. Allowing SMSF trustees to review and amend their loan terms seems fair and reasonable, particularly given various uncertainties that existed up until recently regarding related party LRBAs.
The amnesty is not open ended however, with SMSF trustees being encouraged to take the actions suggested before 30 June 2016. From that time:
The Commissioner may allocate compliance resources to review an LRBA of an SMSF for the 2015-16 year or later years.
Further, while the ATO is not dedicating compliance resources to review an LRBA of an SMSF until 1 July 2016, if the ATO come across an SMSF with a non-commercial LRBA via their usual activity in the meantime, the income of the SMSF might be taxed at the non-arm’s length income tax rate of 47% in accordance with s 295-550 of the Income Tax Assessment Act 1997 (Cth). It is clear then that it is in the best interests of SMSF trustees to get their house in order sooner rather than later. 
So what does this mean for SMSF trustees with an LRBA related party loan?
We understand that with a diminishing number of banks willing to lend to SMSFs, related party loans may seem like an appealing option. However SMSF trustees need to be careful to ensure that related party loans are strictly on an arm’s length basis to prevent SMSF income being NALI.
For those looking to enter into a new LRBA with a related party lender, proper benchmarking is crucial. In practical terms this means approaching a number of bank/unrelated lenders and obtaining quotes for the kind of loan terms they would offer to the SMSF in their particular circumstances, and then ensuring that the related party loan mirrors the terms offered by the unrelated lenders. For those who have already entered into an LRBA with a related party lender, now is the time to closely review your LRBA to ensure that it will stand up to ATO scrutiny. 
Favourable loan terms which may suggest that a related party loan is not on an arm’s length basis include:
·         <a href="https://www.ato.gov.au/law/view/view.htm?docid=%22AID%2FAID201528%2F00001%22" target="_blank">loans with 0%</a> or low non-commercial interest;
·         <a href="https://www.ato.gov.au/law/view/view.htm?docid=%22AID%2FAID201528%2F00001%22" target="_blank">high loan to value ratios</a>; and
·         <a href="https://www.ato.gov.au/law/view/view.htm?docid=%22AID%2FAID201527%2F00001%22" target="_blank">single lump sum repayment</a> at the end of the loan term rather than regular periodic repayments.
Further Training and Assistance
Advisers can brush up on the key considerations by signing up for <a href="https://www.dbanetwork.com.au/dbalawyers/seminars3/2712/3722/SMSF-Core-Course" target="_blank">Unit 10: LRBAs in the DBA Lawyers Core Course</a>. DBA Lawyers also offers a <a href="https://www.dbalawyers.com.au/smsf-borrowing-alter-terms/" target="_blank">service of altering the terms of an existing LRBA borrowing</a> and also <a href="https://www.dbalawyers.com.au/smsf-borrowing-loan-refinance/" target="_blank">prepares documents to refinance an existing LRBA borrowing</a>.
Those who are concerned that the favourable terms of their related party loan may give rise to NALI should seriously consider changing the terms of their loan to ensure that the parties are in the same position they would have been in had they dealt at arm’s length. While the ATO are yet to define a ‘safe harbour’ it is certainly prudent to mitigate the risks by having well-documented ‘benchmark’ evidence to indicate arm’s length terms and conditions.
Philippa Briglia is lawyer and Bryce Figot is director, DBA Lawyers and can be contacted <a href="https://www.dbalawyers.com.au" target="_blank">here</a>.
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ATO to act soon on related party LRBAs

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New South Wales homeowners will have to pay around $160 a year in an emergency services property levy which will be introduced by the Baird government in a tax reform that claims it will actually save people money.
Mike Baird, the New South Wales premier said that he estimated the move could see people save about $250 a year on their current insurance premiums, if they are insured.
Foreshadowed on the front page of the Daily Telegraph under the headline 'Triple-0 Tax', New South Wales treasurer Gladys Berejiklian ­made the announcement today ahead of a tax ­reform meeting of state treasurers, with the Baird government to label it its biggest tax reform in government.
Berejiklian said the new way of collecting the levy would bring NSW in line with other states and hopefully boost the number of people who take out home and contents insurance.
"This fairer model for funding fire and emergency services will reduce the cost of insurance and encourage more people to insure their properties," she said.
The emergency services property levy will replace the emergency services levy which now goes on household insurance bills.
It will fund firefighters and state emergency services workers around the state.
The new tax from its 2017 introduction will remove a similar charge from insurance bills that currently funds firefighters and state emergency services workers.
At present $800 million of the $1 billion a year cost of funding fire and rescue NSW, the rural fire service and the state emergency service is paid for by a tax on insurance companies, passed on to customers via higher premiums for home and contents insurance.
The government will argue that replacing this with the new system will mean the ­majority of householders are better off and that the system will be much fairer.
The government’s argument is that those who are ­insured are paying for services provided for landholders who are not insured and the introduction of the levy will create a fairer system.
They say NSW is the most non-insured state in the country and hope the change will encourage more people to have their property insured, as premiums will come down.
Under the current system, of an average $1000 a year paid in insurance, $200 is paid for the insurance levy.
For a person with that average land value, from July 2017, they will have a $160 a year charge on their council rates instead.
A new insurance pricing watchdog under former ACCC head Allan Fels will be set up to police the companies, who can face fines of up to $10 million for "unreasonable prices" should they not pass on the savings.
All other states have introduced similar levies and it has been estimated 810,000, or 36%, of NSW properties do not have home and contents insurance.
In Victoria, where a similar levy was introduced in 2013, a report by professor Fels found residents paid 18%less for ­insurance than before the reforms.
The ­reform was recommended by the Henry tax ­review and also by the royal commission into the 2009 Victorian bushfires with the goal of reducing the level of underinsurance.
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