(ATO)

When you rent out all or part of your residential house or unit through a digital platform, like Airbnb, Home Away or Flipkey, you:

• need to keep records of all income earned and declare it in your income tax return
• need to keep records of expenses you can claim as deductions
• don't need to pay GST on amounts of residential rent you earn.

If you are carrying on an enterprise renting out commercial residential premises, such as a commercial boarding house, you will have different income tax and GST obligations. However, just because you provide services in addition to providing a room (for example, provide breakfast or cleaning services) doesn't mean that you are providing 'board' or anything else other than renting out your space. It is rare for someone to be carrying on a business because they are renting out a property.

How GST applies to residential rent

GST doesn't apply to residential rent. You're not liable for GST on the rent you charge, and you can't claim any GST credits for associated expenses.

This applies even if you carry on another GST-registered enterprise. For example, if you're a ride-sourcing driver, you will need to account for GST on your ride-sourcing activity, but you don't need to account for GST from income earned from renting out a room or a house or unit. This is because GST doesn't apply to residential rent.

You have to pay GST if you provide accommodation in commercial residential premises, such as a hotel room or serviced apartment, a bed and breakfast, or if you rent out commercial spaces like a function room or office space. These types of accommodation are subject to GST.

Income and deductions for renting out your home

If you rent out all or part of your house or unit, the payments you receive are assessable income. This means:

• you must declare the income as rental income in your tax return
• you can only claim deductions for associated expenses apportioned:
  • for the time the room/property is rented (or occupied for payment), and
  • to reflect only the part of the property that is rented.

It doesn't matter who registers on the platform, income is declared by the owners of the property, according to their ownership or lease interest in the property. For example, if you have a 12-month lease on an apartment and occasionally rent out a room through a digital platform, you will need to declare any income you earn from this.

You may also need to pay capital gains tax (CGT) when you sell the house or unit. Even if the house or unit is your main residence, renting out any part of it usually means losing part of your CGT main residence exemption.

You will need to keep records such as:

• statements from platforms that show your income
• receipts of any expenses you want to claim deductions for.

How capital gains tax applies

You make a capital gain if you sell a CGT asset, such as a house, and make a profit. Any gain you make is assessable income and you must include that amount in your tax return for the year that you make the gain. The amount of tax you pay on a capital gain depends on a range of factors including when you bought and sold the asset, the cost of the asset, your other taxable income, and how you use the asset.

A capital gain from the sale of your main residence is usually exempt from capital gains tax (CGT). However, if you use your main residence to earn income, for example by renting out a room on a sharing economy platform, you will no longer eligible for the full CGT exemption on that main residence. You will lose a portion of your main residence exemption based on the floor area rented out, and the length of time it was rented.

There are some circumstances where you won't lose the CGT main residence exemption, for example where you move completely out of your main residence to live in another home for a period of time.

If you use a sharing economy platform to rent out all or part of a property that you don't own, CGT doesn't apply to you.

Money and Life
(Financial Planning Association of Australia)

Worrying about your finances can take a real toll on your mental health. With many people experiencing financial stress this year, we look at what you can do to improve your financial (and mental) wellbeing.

It's been a trying time for many people, with our collective mental health taking a toll as the COVID-19 pandemic rolls on. The Melbourne Institute says one-in-three Australians are now reporting financial stress, while one-in-five are feeling 'mental distress'.

The Melbourne Institute also found that self-employed, casual and contract workers are especially vulnerable to both financial stress (which is defined as difficulty paying for essential goods and services) and feelings of depression and anxiety.

Recognising the extent of the problem, the federal government has earmarked an extra $2.3 billion in this year's budget for spending on mental health services.

It's well known that our financial wellbeing and mental health go hand in hand. Severe or prolonged financial stress can trigger symptoms of anxiety and depression, relationship breakdowns, trouble sleeping and anti-social behaviour. This in turn can lead to further poor decision making when it comes to money.

Fortunately, there are things you can do to improve your financial security and wellbeing. If you're experiencing financial stress, here are some practical steps you can take to get back on track.

Related: Why financial wellbeing is a pillar of good health

Give yourself a financial health check

When you're experiencing financial stress or hardship, it can be tempting to avoid the problem altogether; but this only makes things worse. Once you gain a clear understanding of your financial position, you'll feel more in control and can take steps to improve your position.

Start by doing a financial health check to assess where your income is going. Use a spreadsheet or budget planner to list your income, debts and expenses. Then look for opportunities to reduce your expenses, pay down debt and increase your savings.

Read more: How to give your finances a health check

Renegotiate your bills

Renegotiating what you owe is a smart way to free up some cash flow for daily living and ease the pressure you feel about meeting your obligations.

If you're having a hard time meeting expenses, it's important to speak to your service providers as soon as possible. Let them know you're doing it tough and ask to negotiate lower repayment amounts and extended timeframes.

Don't be shy to ask for a better deal on any services you use, including phone bills, internet and utilities. Most organisations will try to work with you it's better for them to get paid (albeit slowly) than for you to default on what you owe them.

Read more: Top negotiating tips to cut your bills now

Pay down debt

With more cash flow available, you can concentrate on clearing your debts, a key step on the path to financial freedom. If you have lots of debt, it's worth seeking the advice of a financial counsellor. They can advise you on the most efficient and cost effective way to repay what you owe. You might be able to refinance, take advantage of 'no-interest' periods or consolidate your debts into a single monthly repayment at a lower rate. Just make sure that you get advice from a licenced professional, and that you'll definitely be paying less.

Related: Smart strategies for paying down debt

Make bank accounts your best friend

Keeping all of your money in one bank account makes it hard to keep track of how much you have and how much you owe. One simple strategy to help you manage your money is to set up several bank accounts, each with a different purpose. For example, one to receive your income, another to pay household expenses, one for discretionary 'spending' and one for saving.

You can set up automatic payments to transfer the right amount of money into each account when you get paid. That way, you'll always have the money put aside to pay your bills as they arise. Make sure to set up direct debits or automatic payments for each of your regular household bills from your expense account, so there's no chance of falling behind in future.

Build your savings

Feeling financially secure goes hand in hand with having a good financial safety net in place. The more you have put aside for a rainy day, the less stressed you'll feel when things don't go to plan. Aim to build up your emergency fund to cover six-months' worth of living expenses for yourself and your family. Again, creating an automatic transfer of funds to your 'emergency' savings account each month is an easy option. Then sit back and watch your savings grow.

Where to get help

If you're experiencing financial hardship, struggling to make ends meet, or find yourself on the wrong end of one too many late payment notices, remember, there is help available.

Financial counselling is a free service that exists to support people in financial difficulty. A financial counsellor is qualified to provide advice and advocacy to anyone struggling to manage debt, or unable to meet their expenses. They can even contact your creditors on your behalf and negotiate repayment arrangements.

You can find a financial counsellor in your area using the 'Search' tool on the government's MoneySmart website.

You can also call the National Debt Helpline on 1800 007 007, which is a free, independent and confidential financial counselling service.

Read more: Financial counsellor or financial planner: What's the difference?

If you need mental health support, there are services available online and over the phone.

Beyond Blue

If you'd like to chat to someone in person, Beyond Blue operates a 24/7 phone support service, where you can speak to a trained mental health professional. They also have a range of resources on their website, or you can chat with them online between 3pm and 12am AEST.

Lifeline

If you need immediate crisis support, call Lifeline on 13 11 14. Their confidential telephone crisis support service is available 24/7 from a landline, payphone or mobile.

Lifeline also offers a range of self-help tools, facts and information on their website.

No matter your situation, there's plenty you can do to improve your financial security and wellbeing. There is help and support available, so seek advice at the earliest opportunity.

If you'd like help to reach your financial goals speak to a FINANCIAL PLANNER.

Money and Life
(Financial Planning Association of Australia)

With careful planning, you can give a helping hand to your adult children financially, while still enjoying a comfortable retirement.

In the past, wealth was often passed on through an inheritance. But with our longer lifespans, and the higher cost of living (especially housing), the desire to help our kids while we're alive and well is increasing.

If your children are young, you may have twenty or thirty years to save and invest on their behalf, while also saving for your own retirement. If this is the case, it pays to put a strategy in place early on.

For those nearing retirement age, or already retired, you may have a large lump sum you'd like to gift to one or more of your kids. Giving money is a wonderful thing to do, but it's not always simple. It can have tax implications, and may affect your income support payments from Centrelink. On the other hand, gifting may enable you to increase your government pension payments or benefits, if done right.

So how can you help your children without compromising your own financial security and comfort in retirement?

Ensure you're on track for a comfortable retirement

Before you give away your wealth, it's important to remember that you need to fund your own retirement for many years.

Australians are living longer than ever, with more years spent in retirement. If you were to retire at age 60, and live to 90, that's one whole third of your lifetime spent in retirement.

As well as wanting to enjoy your retirement through travel or leisure activities, older age often comes with more medical and health expenses.

So it's really important to make sure you have enough funds saved and invested to get you through. This might sound selfish, but in reality, it means you won't become a financial burden on your children later in life.

How much will you need to retire, and, how much can you afford to give away now? It's always best to seek professional financial advice to ensure you have enough put away to see you through. A financial planner will be able to give you tailored advice about the impact of your giving on your retirement plans.

Related: Super 101 Your guide to a happy retirement

What am I giving money for?

Next, consider what it is you'd like to help your son or daughter with. Are the funds for a property deposit? To pay for a wedding? Education expenses? This might offer some clue as to the right amount of support.

Following on from this, consider how many children you need to help. If you gift funds to one child, do you need to match that for others when the time comes? If you have several children, but some are doing better than others, do you need to help them all equally?

Balancing the family dynamics around money is important, as it can be a sensitive issue. The last thing you want to do is cause a rift in the family over some perceived inequality. If you do have several children you need to help, keep this in mind, as it will limit how much help you can offer each child.

Giving an incentive

Often the best way to support children financially is to match their own contribution. Rather than purchasing something outright, offer to base your assistance on their own savings. This also means they have a vested interest in the item, which means they're likely to treat it more carefully.

Related: How to help your children with buying property

How should I give money?

If you receive the Age Pension or other benefits from Centrelink, there is a limit to how much you can give away. The gifting rules allow you to give $10,000 over one financial year, or $30,000 over five years. You'll need to let Centrelink know when you're planning to give a gift of this type.

If you're considering giving your children a substantial amount of money, it's worth taking the advice of Dr Brett Davies at Legal Consolidated. He recommends always giving funds as a loan 'payable on demand', not as a gift. Creating a written loan agreement helps keep the money in your family, even if things don't go to plan.

As Dr Davies explains, a correctly worded and executed loan agreement can protect the money in case your child was to:

• divorce
• go bankrupt
• suffer from an addiction
• suffer from a mental health problem
• you run out of money and need it back.

He gives this as an example. You gift your daughter $400,000 to buy a house. Five years later, she divorces from her husband and the house is the only asset of the marriage. The Family Court awards half of the value of the house to the husband, including $200,000 of your donated funds.

If you instead had a valid loan agreement in place, the loan must be paid out before the assets are distributed. Hence, the $400,000 comes back to you, to do with as you please. You can read more examples of a loan agreement in action here.

Always seek professional legal advice when drawing up a loan agreement to ensure that it's compliant with the law, properly worded and correctly executed.

Get professional advice

If you're nearing retirement and looking to give up work, downsize your home and/or gift funds to your children, it's important to seek financial advice.

A financial planning professional will be able to give you tailored advice about the impact of your planned giving. They can also help you work out a strategy for meeting multiple goals, such as giving to several children while funding your own comfortable retirement.

Money and Life
(Financial Planning Association of Australia)

Unsure how your relationship status affects your taxes? We've made it simple with our couple's guide to tax.

If you're newly married, engaged or living with your partner, you might not be aware that there are some implications for your taxes.

In Australia, you're not required to lodge a combined tax return with your spouse each year. Instead, you need to declare your spouse's taxable income on your individual tax return.

The Australian Taxation Office (ATO) uses your joint income to work out whether:

• you're entitled to a rebate for private health insurance (and how much)
• you need to pay the Medicare levy surcharge
• you're entitled to a Medicare levy reduction
• you're entitled to the seniors and pensioners tax offset.

So, first things first, how do you know if you have a 'spouse' in the ATO's eyes?

Do I have a spouse or de facto partner?

As far as the ATO is concerned, your spouse "includes another person (of any sex) who:

• you were in a relationship with that was registered under a prescribed state or territory law
• although not legally married to you, lived with you on a genuine domestic basis in a relationship as a couple."

You must declare all of the taxable income your spouse receives in your return, including:

• salary and wages
• dividends
• interest
• rental income
• foreign source income
• pensions and child support payments.

How does this affect my tax return?

There are some implications for your taxes, especially in the following areas.

Private health insurance rebate

The amount of rebate you qualify for is based on your income, so you might receive a different level of rebate as a couple than you did as an individual. You can check the rebate rates and income thresholds here.

Medicare levy surcharge

High income earners who don't have private patient hospital cover are charged a Medicare levy surcharge.

If you have a spouse, the ATO will use your combined income to work out your Medicare levy surcharge. It's calculated as a percentage of your income (up to 1.5%) and is payable in addition to the Medicare Levy.

You may need to pay the Medicare levy surcharge if you don't have private patient hospital cover and your income is over:

• $90,000 for singles
• $180,000 for families.

If you've recently gained a spouse for tax purposes, and you don't have private patient hospital cover, make sure to check whether your combined income puts you over the income threshold. Taking out private patient hospital cover will mean you don't need to pay the surcharge and you'll be covered in case of an emergency.

Medicare levy reduction

There's also a Medicare levy reduction available to low-income earners. If you have a spouse and your family taxable income is equal to or less than $48,092, you might be eligible for a reduction.

Combining your homes?

Something that's often overlooked when moving in with a spouse is the way it affects the capital gains tax (CGT) exemption on your main residence. If you both owned and lived in your own homes before moving in together; or you're in an established relationship, but lived separately during the year; and you plan to sell one or both of the properties, there could be CGT implications. Working out your CGT obligations can be tricky, so seek advice from a tax professional when preparing your return.

If you're still not sure whether you need to include your spouse's details on your return, seek advice from a tax agent or speak to the ATO. If you leave your spouse out, the ATO could amend your tax return and there could even be financial penalties.

Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)

This week's release of the Intergenerational Report should be a wake-up call for Australia's politicians and the community more broadly, the Business Council of Australia says.

The five-yearly report that provides a guide for Australia's outlook projected budget deficits, slower economic growth and a smaller population over the next four decades as a result of the pandemic.

An ageing population also means that for each person in retirement there will be fewer people working, and that productivity continues to flounder a concern that was evident even before COVID-19 hit Australian shores.

In response, the Business Council has released a discussion paper, Living on borrowed time: Australia's economic future, on what is needed to lift the nation's outlook.

"Anyone who thinks we can now just stay where we are is incredibly naive," the council's chief executive Jennifer Westacott told reporters ahead of the launch of the report on Wednesday.

"What we are trying to build is a bit of consensus to what is the direction we want to head in and what the big shifts are needed to get there."

The aim is to raise the debate around issues like actively building a low carbon economy, lifting the skills of the workforce, and making sure Australia remains an open and competitive economy while diversifying its industrial base.

Ms Westacott is not expecting a "big bang" response to the Intergenerational Report, but believes even if there are a lot of small things done, it will have a big impact, and that there is a "low hanging fruit" when it comes to regulation.

"The alternative is that we end up having yet another election campaign that lists all the things we are not going to do a race to the bottom," she said.

"It would be irresponsible to just sleep walk into the slow lane."

The paper notes that Australia now ranks 22nd in the world out of the 64 countries in the IMD World Competitiveness Index.

It also found students are falling behind on education and that one in 20 children experience poverty.

It highlights that it now takes an average worker seven years to increase their pay by $100 per fortnight, when in the past they were getting that size pay rise every year or two.

"We need to drive productivity harder and we're not doing enough on reform," Ms Westacott said.

"Achieving a one per cent increase in productivity growth a year by producing goods and services more efficiently and smarter would deliver an extra $10,000 in average incomes for Australians over a decade."

BUSINESS COUNCIL'S SIX BIG SHIFTS THAT NEED TO BE MADE:

• Move to a more diversified industrial base
• Actively build a low carbon economy
• Make sure Australia remains open to the world and competitive
• Lift the skills of the workplace
• Make sure no one gets left behind
• Rebuild public finances.

(Source: BCA's Living on borrowed time: Australia's economic future discussion paper)