CBUS SUPER, a long-standing advocate for a housing bond aggregator, has invested $49 million in the latest National Housing Finance and Investment Corporate (NHFIC) bond issuance.

The bond will fund a number of large construction programs through Community Housing Providers (CHPs) in Victoria, Tasmania, NSW and South Australia. This is their third bond issuance. Cbus Super has invested in all three of NHFIC’s issuances, bringing its total investment to $88 million.

Cbus Super chief investment officer, Kristian Fok, said the success of the three rounds of NHFIC issuance showed the value of the innovative financing model.

“Cbus is delighted to once again support NHFIC as a cornerstone investor in their successful third affordable and social housing bond issuance,” Mr Fok said.

The issue today of $562 million is for 12 years, to include provision for construction funding of up to 2 years and term funding of 10 years. The issuance was well over-subscribed.

Mr Fok said, ‘“It is fantastic to see the tangible impact that NHFIC is having for CHPs by creating savings through lower interest costs and delivering construction of social and affordable homes. The 12 year timeframe will provide certainty to allow for some larger construction projects.”

The funds raised by the bond will be loaned to community housing providers (CHPs) to support the financing for properties across Australia, including supporting the supply of new social and affordable dwellings.

Mr Fok said, “As the leading super fund for the building and construction sector we are pleased to invest in NHFIC bonds that meet our investment risk-return criteria and fund new housing construction for Australians in need.”

“Cbus is pleased to be maintaining an ongoing commitment to the NHFIC programme and continues to explore other opportunities to partner with NHFIC," Mr Fok said.

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THE Australian Taxation Office (ATO) is aware that residential rental property owners may be concerned about how COVID-19, floods, or bushfires have reduced their income.

This may be a result of tenants paying less or entering deferred payments plans, or travel restrictions which have affected demand for short-term rental properties. New legislation also affects the tax deductions that owners of vacant land can claim.

Assistant Commissioner Karen Foat explained that whatever the circumstances, the most important first step was to keep records of all expenses.

“Without good records, you will find it difficult to declare all your rental-related income in your tax return and work out what expenses you can claim as deductions," Ms Foat said.

Reduced rental income

The COVID-19 pandemic has placed property owners and tenants in unforeseen circumstances. Many tenants are paying reduced rent or have ceased paying because their income has been adversely affected by COVID-19.

You should include rent as income at the time it is paid, so you only need to declare the rent you have received as income. If payments by your tenants are deferred until the next financial year you do not need to include these payments until you receive them. 

While rental income may be reduced, owners will continue to incur normal expenses on their rental property and will still be able to claim these expenses in their tax return as long as the reduced rent charged is determined at arms’ length, having regard to the current market conditions. 

This applies whether the reduction in rent was initiated by the tenants or the owner.

Some owners may have rental insurance that covers a loss of income. It is important to remember that any payouts from these types of policies are assessable income and must be included in tax returns.

Many banks have moved to defer loan repayments for stressed mortgagees. In these circumstances, rental property owners are still able to claim interest being charged on the loan as a deduction -- even if the bank defers the repayments.

Short-term rentals

“We recognise that circumstances over the past six months have seen many short-term rentals see cancellations or sit vacant as a result of either COVID-19 or bushfires,” Ms Foat said.

In circumstances where COVID-19 or natural disasters have adversely affected demand, including the cancellation of existing bookings for a short-term rental property, deductions are still available provided the property was still genuinely available for rent.

If owners decided to use the property for private purposes, offered the property to family or friends for free, offered the property to others in need or stopped renting the property out they cannot claim deductions in respect of those periods.  

“Generally speaking, if your plans to rent a property in 2020 were the same as those for 2019, but were disrupted by COVID-19 or bushfires, you will still be able to claim the same proportion of expenses you would have been entitled to claim previously,” Ms Foat said.

To determine the proportion of expenses that can be claimed for short-term rental properties impacted by COVID-19 or bushfires, a reasonable approach is to apportion expenses based on the previous year’s usage pattern, unless you can show it was genuinely available for rent for a longer period of time in 2020.

If you or your family or friends move into the property to live in it because of COVID-19 or bushfires, you need to count this as private use when working out your claims in 2020.

Deductions for vacant land no longer available

For the 2020 year, expenses for holding vacant land are no longer deductible for individuals intending to build a rental property on that land but the property is not yet built. This also applies to land for which you may have been claiming expenses in previous years. 

However, this does not apply to land that is used in a business, or if there has been an exceptional circumstance like a fire or flood leading to the land being vacant.

So, if you are building a rental property, you cannot claim the deductions for the costs of holding the land, such as interest. However, if your rental property was destroyed in the bushfires and you are currently rebuilding, you can claim the costs of holding your now vacant land for up to thre years while you rebuild your rental property.

COMMON MISTAKES

Travel to rental properties

“Last year, we also saw a number of taxpayers make simple mistakes such as claiming deductions for travel to inspect their rental properties,” Ms Foat said.

Residential property owners can't claim any deductions for costs incurred in travelling to residential rental property unless they are in the rare situation of being in the business of letting rental properties.

Incorrectly claiming loan interest

Taxpayers that take out a loan to purchase a rental property can claim interest (or a portion of the interest) as a tax deduction. However, directing some of the loan money to personal use, such as paying for living expenses, buying a boat, or going on a holiday is not deductible use. The ATO uses data and analytics look closely to ensure that deductions are only claimed on the portion of the loan that relates directly to the rental property.

Capital works and repairs

“Each year, some taxpayers claim capital works as a lump sum rather than spreading the cost over a number of years. Others claim the initial work needed to get a property ready for rent immediately instead of spreading the cost over a number of years,” Ms Foat said.

Repairs or maintenance to restore something that’s broken, damaged or deteriorating in a property you already rent out are deductible immediately. Improvements or renovations are categorised as capital works and are deductible over a number of years.

Initial repairs for damage that existed when the property was purchased can’t be claimed as an immediate deduction but may be claimed over a number of years as a capital works deduction.

Short term rentals

We often see people with short term rental properties claiming for 100 percent of their expenses when they actually use the property for their own use or provide it to family and friends for free or at a reduced rate. Properties need to be rented out or be genuinely available for rent to claim a deduction.

Factors such as reserving the property or leaving it vacant over peak periods, not charging the market rate and the types of terms and conditions of the bookings are all taken into consideration when deciding if active and genuine efforts are being made to ensure a property is available for rent.

If a property is not genuinely available for rent, you need to limit your deductions to the days when it is. 

If you are allowing friends or family to stay in the property at a reduced price, you need to limit your deductions to the amount of rent received for these periods.

Don’t forget to include all your rental income, especially from sharing economy platforms. The ATO is matching data received from these providers to information in tax returns and will be following up discrepancies.

Poor record keeping

The number one cause of the ATO disallowing a claim is taxpayers being unable to produce receipts or other documents to support a claim. Furnishing fraudulent or doctored records will attract higher penalties and may also result in prosecution.

www.ato.gov.au

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THE SIGNIFICANT and invaluable contribution merchant seafarers make to Australia’s economy and society — transporting more than 98 percent of the nation’s imports and exports — is being recognised today as the world marks the International Day of the Seafarer.

Organised by the International Maritime Organization — the United Nations agency with responsibility for the safety, security and sustainability of shipping — June 25 highlights the huge but often overlooked contribution seafarers make to modern society.

The COVID19 pandemic had been particularly hard for seafarers, with 200,000 currently stuck onboard ships around the world, unable to go home to their families due to border closures and a lack of government efforts to repatriate them.

The Maritime Union of Australia (MUA) said the day also highlighted the need to urgently turn around the decline of Australia’s merchant fleet, which has steadily shrunk under the Abbott, Turnbull, and Morrison Governments, leaving the country without the self-sufficiency a smart island nation needs.

With very few ships flying the Australian red ensign, the nation’s supply chains have become increasingly precarious, with the overwhelming majority of ships servicing the nation now foreign owned, crewed and flagged.

MUA national secretary and International Transport Workers' Federation president Paddy Crumlin paid tribute to all seafarers, saying that our nation would grind to a halt without the vital supplies they bring.

“Seafarers are the invisible workforce responsible for supplying the country with crucial supplies, fuel, and the overwhelming majority of everyday products, as well as exporting our resources and manufactured goods to the world,” Mr Crumlin said.

“Put simply, without seafarers, Australia’s economy and society would collapse almost overnight.

“Unfortunately, under the Abbott, Turnbull and Morrison Governments we have seen the continued loss of Australian-flag vessels, leaving the nation in a dangerous position that could see fuel dry up within weeks if a crisis interrupts our supply chain.

“The Liberals and Nationals have driven a race to the bottom on the Australian coast, resulting in highly-skilled Australian seafarers being replaced by flag of convenience vessels registered in notorious tax havens and crewed by exploited foreign visa workers paid as little as $2 per hour.

“The International Day of the Seafarer highlights the need for Australia to restore merchant shipping, with a strategic fleet of Australian-flagged vessels crewed by Australian workers that can ensure our sovereign self-sufficiency and the security for our nation’s fuel and supply capabilities.”

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THE Joint Standing Committee on Migration has launched an inquiry into the Working Holiday Maker program to ensure it is working effectively to support the tourism, health care and agriculture sectors during the COVID-19 economic recovery.

Working holiday makers contribute around $3 billion a year to the Australian economy and support jobs in regional Australia. They arrive in Australia with money to spend and inject the wages they earn here back into local communities.

The program is also important for building people-to-people links and gives young Australians the chance to visit and work in over 40 countries.

Working holiday makers are a major contributor to the labour force in the agriculture, tourism, health care and aged care sectors.

There are around 50,000 fewer backpackers in Australia because of the coronavirus, but once borders re-open, they will be key to filling some roles where Australian workers are usually not available, particularly in regional areas.

The Committee will look at how backpackers can complement, rather than compete with those Australian workers laid off because of the pandemic.

Chair of the Joint Standing Committee on Migration, Julian Leeser MP said given the COVID-19 pandemic had effectively closed Australia’s borders and stopped the flow of working holiday makers, it was important to examine how this would impact the economy and look closely at the program to ensure it is working in Australia’s interest.

“The very clear focus at the moment must be on getting Australians back into work and how migration can support our economic recovery,” Mr Leeser said.

“We will be looking closely at the program to make sure it is supporting Australian jobs and making visa holders available to support businesses that need more people, particularly in regional communities which have relied on these workers in the past,” Mr Leeser said.

The Federal Government has already made changes to allow working holiday makers working in critical sectors – such as health care and agriculture – to stay longer with one employer and to be eligible for a further visa to continue working in these sectors.

In February, the Government also made changes to allow backpackers to better assist with the recovery and rebuilding efforts following the bushfires that devastated many rural and regional communities.

The Committee is encouraging people to contribute to the process. Submissions to the inquiry will be accepted until July 24, 2020.

For more information about this Committee, visit its website.

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