Podcast: Tax fixer-uppers and strata spies

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Think you've got your tax return right? You could be in for a shock.

The tax office is targetting double-dipping landlords who claim all sorts of things they shouldn’t, or just claim for stuff the wrong way.
For instance, property investors routinely claim levies as a tax deduction but it turns out some are tax deductible and others aren’t. But which?
By the way, in the podcast we say 86 percent of owners who use tax agents get their returns wrong. This is an error. In fact the ATO says the majority of investors make mistakes in their tax returns despite 86 percent of them using tax agents.  Oops! Big difference.
Moving on, we also look at how the NSW state government is pumping millions into the Building Commission – turning it into an effective CSI-Strata as they track down dodgy developers before they can do too much harm.
Turns out it’s a case of “round up the usual suspects” as they said in Casablanca (the movie, not the city).
And finally, we look at if or when you can record strata committee meetings, and whether or not you should.
That’s all in this week’s Flat Chat Wrap.

Transcript In Full

Jimmy  00:00

It’s E O F Y. I always confuse me every year, when that comes out, it’s E, O, E, O F Y, they say it’s our E O F Y, sale and I’m going, what is Eoffy,

Sue Williams  00:11

I’ve never actually heard anyone say E O F Y. I mean, I’ve written it in stories. I’ve never actually heard someone say it.

Jimmy  00:17

Yeah, so it’s end of financial year, which is time to get your tax done, and the tax office is on the warpath for property investors, landlords. Oh, really, some of whom listen to this podcast, we’re going to talk about that. We’re going to talk about the $35 million that’s just been tipped into the Building Commission, or is about to be when the budget goes through, and we’re going to talk about recording your strata meetings. Can you do it? Is it a good idea? I’m Jimmy Thomson. I write the flat chat column for the Australian Financial Review,

Sue Williams  00:53

And I’m Sue Williams, and I write about property for domain, the Sydney Morning Herald, the Melbourne age and the AFR.

Jimmy  00:58

And this is the flat chat wrap.

Jimmy  01:00

The tax office sent out a media release. It’s the second one and on a similar topic, which is double-dipping by rental property investors.

Sue Williams  01:26

Ah, is that when they maybe lend their lend their apartment to family, or friends, but they still claim all the deductions as if it was up for rent for the whole year?

Jimmy  01:39

No,

Sue Williams  01:42

Because that does happen as well.

Jimmy  01:43

It does happen, yeah, but that’s not what they’re after this year. What they’re after is people who claim a deduction for stuff that they bought for the rental apartment, but then claim it as depreciation as well. So anything that’s under $300 that you pay for for your rental apartment, you can claim as an immediate deduction, but anything over that is a capital expense and that should be depreciated over several years, like 20 or 40 years. And so they’re saying, Look, this is double dipping. You cannot claim it as an expense and then claim it as a tax deduction, an immediate tax deduction as well, which is complicated enough. Apparently, according to the ATO, 86% of property investors have errors in their tax returns that are done by tax agents.

Sue Williams  02:39

Really.

Jimmy  02:39

Yeah,

Sue Williams  02:40

And what would the proportion be for those who didn’t, don’t get this stuff done by taxation?

Jimmy  02:44

Well, I don’t know, but you think the the tax agent thing, they’re saying that it’s not that the tax agents are wrong, it’s that the investors, the landlords,

Sue Williams  02:54

Are providing them with wrong information.

Jimmy  02:56

They’re not giving them the full information. And they cited a case of somebody in Melbourne who had bought curtains and air conditioning and something else for their investment property and then claimed it as an immediate deduction and it should have been depreciating, but they also bought two stovetops, cooktops, one for the rental property and one for their own home,

Sue Williams  03:23

And they claimed both.

Jimmy  03:24

Yeah, the tax office went, how come this rental property has got two kitchens?

Sue Williams  03:30

That was a bit dumb.

Jimmy  03:31

So they had to pay the correct tax, pay interest on the unpaid tax, and pay a fine Think they’re trying to scare us, us being, oh, yeah, we are property investors,

Sue Williams  03:45

but we haven’t even had a depreciation schedule done, and we really should have done that.

Jimmy  03:49

Yeah, we should have that, would make sense.

Sue Williams  03:51

And it’s too late now, isn’t it really nearly there?

Jimmy  03:54

 Oh, for this year, for this year,

Sue Williams  03:56

Because we could have started claiming immediately.

Jimmy  03:59

Yeah, I don’t think I totally. I think it’s retrospective, though. I think you can go back and look at it. Maybe we should check, you know somebody, you’ve been talking to somebody in the past. I’m just not sure about the depreciation thing. Because, yes, you will get money off your tax, but then when you sell, the capital gain is calculated on the basis of you how much you paid for the property minus all the depreciation. So then you’ve got a bigger capital gain. Oh, I see what you mean.

Sue Williams  04:24

So they might cancel each other out,

Jimmy  04:25

Or even more than that, but we should talk to somebody. Are we having a podcast here? Are we having a chat about our finances? Are we exposing ourselves a little bit too much? But the the other complication for tax for strata owners is so this is really weird, and this is our friend Tony Cordato, who pointed this out you can claim your levies for your apartment as a tax expense. Yeah,

Sue Williams  04:55

yep,

Jimmy  04:55

But your levies include a component that is for maintenance and improvements, which is supposed to be depreciated, right? But because that would make life just way too complicated, the tax office says, Look, you can claim the levies as an expense and your tax deduction, unless it’s a special levy, if a special levy is raised for repairs or maintenance, or whatever that kind of thing, then you cannot claim that as an expense which complicates things a bit

Sue Williams  05:30

Does. And another thing is, if the building earns money anyway, like perhaps they rent their roof space for telephone towers, anything like that, yeah, individual owners actually have to pay tax on the income

Jimmy  05:46

In New South Wales.

Sue Williams  05:47

Oh, just in New South Wales.

Jimmy  05:49

Here we are non-mutualised, which means that we are considered by the tax office to be separate entities, whereas, I think in Queensland and possibly Victoria, the tax office considers the the strata scheme to be the tax, the taxable entity. So you got, you know, yeah, you can get people here, but we some of some of our property in in this building is rented. I’m trying to think, who to why? Maybe it’s something on the roof, I don’t know, but we get a very small amount, and it’s calculated on the basis of your unit entitlements.

Sue Williams  06:28

You said the storerooms.

Jimmy  06:30

Yes, it’s the storerooms. Yes, because we Yeah, exactly. So the storerooms are for a source of income, and all that income is put together in the pot, and then it’s divided up. You never see the money. You we never see the money. It just goes into the general accounts. But it’s taken to be a benefit for tax purposes, and people say, “Why can’t I get the money?” And the law says that you can get the money if everybody in the building agrees, agrees

Sue Williams  06:55

That they all want the money.

Jimmy  06:56

And there’s always somebody who goes,

Sue Williams  06:58

Yeah, sure.

Jimmy  06:58

No, yeah, yeah. So, yeah, so that’s another complication for your tax bills, your tax returns. I think this double-dipping thing, this is the second email media release that the tax office has put out in the past two or three weeks. I think they’re really targeting this. The ATO Commissioner, or assistant Commissioner’s name is Robert Thomson, and he spells he spells his surname the same way that I spell mine, without the P. And I didn’t know when I was writing the story. I’ve just written a story for the fin review about all this, and I didn’t know, should I put no relation in there? But I thought, No, probably not. People would assume reasonably that I wasn’t a relation. So that’s it. That’s me. I just, I hate talking about tax really. I don’t understand it. I don’t understand all the complexities of all this stuff. And yeah, and I don’t, I don’t like writing about it either, because that’s even worse, because it’s an it’s in print then. But yeah, anyway, watch out, don’t double dip.

Sue Williams  08:03

And I’ve written a story about that in the prestige domain magazine,

Jimmy  08:08

Same press release from Mr Thomson

Sue Williams  08:11

EO four,

Jimmy  08:12

E offy end of financial year, when we come back, we’re going to talk about the money allocated in the upcoming budget, $35 million for the Building Commission. That’s after this.

Jimmy  08:34

I think if anybody thought that the Building Commission, the New South Wales Building Commission, and its pursuit of dodgy developers would be dialled down when David Chandler retires in August may be surprised to hear that the state government has tipped $35 million into the Building Commission.

Sue Williams  08:54

Yeah, it’s very good, isn’t it, really?

Jimmy  08:56

And it’s interesting because they’re they’re now focusing very much on data analysis. So what they’ve been doing is they look at developments that have failed, where there’s been big problems, and they look at the architect, the builder, the developer,

Sue Williams  09:15

The certifier

Jimmy  09:16

And the certifier, and then they extrapolate that out to where is this certifier working now, and who are they working for? And if they get two or three of the same names pop up,

Sue Williams  09:29

Yeah, they keep an eye on them.

Jimmy  09:31

Oh, they send inspectors out because they’ve got because of the the Residential Apartment Building Act, the RAB act, they now have the right to go and inspect anything and everything in apartments in New South Wales, so they just turn up with their hard hats and their clipboards and say, we’ve come to check what’s going on here, which I think is great, but I do think I was just writing this this week thinking, you know, you’re a civil servant in Fair Trading and you’ve got, you know, people complaining about their rental agents or their broken toys or their tattoos that aren’t coloured inside the lines, and because that’s all fair trading as well. And

Sue Williams  10:13

Dp people complain about things like that? Suppose they must?

Jimmy  10:16

I suppose they must. Yeah, but you’ve been doing all this dreadful, dreary work. And then suddenly, along comes David Chandler and says, I am setting up a Building Commission, and I need 400 people from Fair Trading to come and work for me.

Sue Williams  10:29

Yep.

Jimmy  10:30

And suddenly you’re like a detective, you know? You’re like CSI strata sitting there analysing all these things and finding out who the baddies are. And according to the press release that came out last week, they’re also targeting insurance companies. And they go into insurance companies and saying, “Oh, do you know that there’s a building here going up and this builders putting this building up, and they say that they’re insured by you. Can you just check?” And they’re going, “Oh, we’ve never heard of these people.” Yeah,

Sue Williams  11:01

That would be fun, wouldn’t it? Doing that job?

Jimmy  11:03

And if they’re also, it’s not just apartments

Sue Williams  11:05

Wack a mole

Jimmy  11:06

Wack a mole.  It’s not just apartments. They are doing freestanding houses where people, you know, there’s a lot of real cowboys out there, just and what happens is, you go along to the show apartment, it’s absolutely immaculate, and what they don’t tell you is the team that built this house that you’re looking at and thinking of spending your life savings on won’t be near any of the other buildings that go up around this because they’re off building other showhouses. So you know you’re there’s a lot of cowboys out there. They’re not just building apartments, they’re building houses too, and they’re hunting them down, which is great,

Sue Williams  11:45

Excellent. And when we come back, we’ll talk about recording meetings.

Jimmy  11:49

Recording meetings. Yeah, that’s after this.

Jimmy  11:57

Do you know what the law is on recording conversations just off the top of your head quickly.

Sue Williams  12:03

When I went to the court case the other day, they said you couldn’t record the court the court case, even though it was outside on the street.

Jimmy  12:10

Right, but that’s court so I also said people weren’t allowed to applaud, didn’t they?

Sue Williams  12:14

They did. Um, I would think that maybe it might make people really uncomfortable if you

Jimmy  12:21

 Tell me what the law is?

Sue Williams  12:23

I reckon the law is that you can’t record a meeting.

Jimmy  12:27

You can’t record a meeting.

Sue Williams  12:27

You can record it in shorthand or writing, but you can’t actually record it with a recording device.

Jimmy  12:33

How about recording a conversation?

Sue Williams  12:35

You can only do that with a person’s permission.

Jimmy  12:38

I think you’re wrong. I think the law says you can only do it with their knowledge.

Sue Williams  12:43

Oh, that’s a bit different.

Jimmy  12:44

It’s very different because what effectively happens, and I may be wrong, but I’m pretty sure this is the case. You say to somebody, “I’m recording this conversation”, and if they keep talking, they’ve effectively given you permission.

Sue Williams  12:57

Okay, well, I guess if that happens in a meeting, the only recourse they have is to leave the meeting.

Sue Williams  13:02

Be a handy thing.

Jimmy  13:02

And that’s what happened to somebody in our forum. They’ve posted now, I think the person who sent this post in, maybe the person who turned up at the meeting with a tape recorder, or not a tape recorder anymore. Would it be a little digital recorder in their pocket? And somebody at the meeting said, are you planning to record this meeting, and this person said, “I’m not telling you. I don’t have to tell you.” And the two of the committee members walked out, and because, because of the strange like before they left, they appointed two of the people who were staying to be their surrogates there, so it didn’t lose its quorum. The meeting went ahead, and apparently, according to the person who wrote to the forum, was all the better for the people having left. Now, here’s my thing, two things; If you say to somebody, “are you going to record this meeting? And they say, I’m not telling you”, and then they continue to record. I think they’re breaking the law, yeah, because they haven’t got permission and they haven’t informed yet. But what about the general idea of recording meetings? Now here we are talking on a medium which is audio, where people listen to us. Would we think that people might want to listen to a strata committee meeting? I don’t think so. Actually, no, but suppose you’ve got a really disruptive member of the committee, yeah,

Jimmy  13:03

A handy thing. I mean, it’s something that you could say at the beginning of the meeting. “We propose” you have to put it on the agenda. “We propose that we record this meeting and make the recordings available to all owners.” That seems absolutely fair to me. And would it have the effect that you were looking for? Possibly, if somebody was being disruptive, they might be less disruptive. It might also have the effect of making people who weren’t sure of themselves and wanted to ask questions that they thought might be taken as being a bit stupid. It might make them

Sue Williams  15:07

 Inhibit them.

Jimmy  15:08

Yeah, might inhibit them a bit, but I think in the right circumstances, it’s a good thing.

Sue Williams  15:13

I think you’re right too.

Jimmy  15:14

The other aspect of this is a lot of meetings now happen on zoom so

Sue Williams  15:20

But when you when you record a Zoom meeting, it does come up so the other person can see that they’re being recorded,

Jimmy  15:26

Not if somebody is sitting in their bedroom with a recorder, a recording device, up against the speaker.

Sue Williams  15:33

That’s true.

Jimmy  15:34

I remember going to sing a Mirvac event, and Matt Kean was there doing a presentation on recycling materials and using them in new buildings. And I had a little handheld recorder, and I just walked over to the speaker, like the big speaker. He was talking at a microphone. There was a speaker at the side. He didn’t even realise I was there. And I put the microphone up against the speaker, and got absolutely crystal clear recording, which I think we used in podcast, actually. But yeah, it’s very easy to do you, so you don’t have to. You might be listening to a meeting on Zoom, and you could record it with a little handheld recorder, because some of them are very, very good. Yeah. In fact, Zoom recorders are one of the best ones, the most popular, but it’s a different kind of zoom. So, yeah, recording meetings. I’m in favour, but you got to tell, you got to tell the meeting. I think if you are a guest at a meeting, and like you’re not a member of the committee, and they ask you if you’re recording, and you say yes, and then everybody gets up and walks out. I think maybe you would have to do something of in the in the standing orders for the meeting, just say this committee has decided that we will not have this recorded. And if you bring recording instruments into the meeting, you will be asked to leave. Yeah, there’s enough problems in strata without that Sue, you are actually not here at the moment. Are you?

Sue Williams  17:05

No.

Jimmy  17:08

Where are you?

Sue Williams  17:09

I’m in Arnhem Land.

Jimmy  17:11

Wow!

Sue Williams  17:11

Yes. I’m doing a travel job, another travel job, and I’m travelling around quite remote areas of Arnhem Land. I start in Nhulunbuy in the northeast of Arnhem, land, where I’ve been before, but then I’m just travelling on the north coast. And

Jimmy  17:27

Get much wildlife out there,

Sue Williams  17:29

I think, lots of crocodiles.

Jimmy  17:30

What about buffalo? Do they have buffalo?

Sue Williams  17:32

They do have buffalo, actually.

Jimmy  17:34

What about camels?

Sue Williams  17:35

I don’t know about camels

Jimmy  17:36

There’s more than a million camels in wild camels in Australia at the moment.

Sue Williams  17:40

Well, maybe, maybe they’re gonna

Jimmy  17:43

See, probably got lions, maybe now,

Sue Williams  17:46

Well, I mean, it’s, it can be very, very beautiful. There’s the Arafura swamp up there, which is the biggest swamp in Australia, and that obviously carries lots and lots of wildlife. And I think I’m going on a boat on the swamp

Jimmy  18:00

Right

Sue Williams  18:00

To see what the wildlife is like.

Jimmy  18:02

You just remind have reminded myself of a joke, two old blokes sitting talking, and one of them says, Do you realise that Lions have sex four times a day? And the other one says, I knew it was a mistake to join the Legion.

Sue Williams  18:17

And on that note,

Jimmy  18:17

And on that note, well, maybe next week, we’ll be able to talk to Sue otherwise there’ll be somebody else here to talk to me and talk to you. And thank you all for listening.

Sue Williams  18:28

Bye,

Jimmy  18:29

Bye. Thanks for listening to the Flat Chat Wrap podcast. You’ll find links to the stories and other references on our website, flatchat.com.au, and if you haven’t already done so, you can subscribe to this podcast completely free on Apple podcasts, Google podcasts, Spotify, or your favourite pod catcher. Just search for flat chat wrap with a w. Click on Subscribe, and you’ll get this podcast every week without even trying. Thanks again. Talk to you again next week you.

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  • #74854
    Jimmy-T
    Keymaster

      The tax office is targetting double-dipping landlords who claim all sorts of things they shouldn’t, or just claim for stuff the wrong way.Fo
      [See the full post at: Podcast: Tax fixer-uppers and strata spies]

      The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
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