Michael Talevich on Challenges and Opportunities for Property Investors in the New Tax Landscape

Tuesday February 13, 2018

Michael Talevich draws from his strong technical tax knowledge and practical technical knowledge to provide quality solutions to clients. He provides tax effective and commercially viable tax advice from business start up to complex taxation solutions to maximise the financial functionality of businesses. Michael TalevichMichael is a Chartered Accountant, a Chartered Tax Advisor and holds degrees in Commerce and Law from the Australian National University. 

We had the pleasure of sitting down with Michael recently to discuss key challenges and opportunities facing the industry today.

You can find the full Q&A below.

Can you tell us a little bit about yourself (experience, your company, expertise, etc)?

I grew up with my eyes firmly fixed on being a lawyer and followed this path to university.  It was once there that the Tax bug bit me and I considered other options. This new path led me to my current position as an owner of Nexis Accountants and Business Advisors. Nexis have offices in Canberra and Brisbane and our firm is very proactive in the implementation of new technologies for our clients. Of particular interest to me is my role as a “fixer”. Whether it is existing tax related issues, new businesses or complex tax and estate planning, I love getting into the legislation and building unique solutions for clients.

What are some of the challenges facing property investors when it comes to taxation?

The biggest issues in this area arise from the fact that property taxes deliver so much revenue to the Government, but also have the biggest concessions and exemptions. Unfortunately, property investors often start out with one intention for a property and end up somewhere completely different. Further, many property investors simply fall in to the investment game be it through marriage, moving overseas or through receiving inheritances. This results in a lack of planning across the sector which can lead to significant tax liabilities and significant incentives to avoid/reduce these taxes.

What are the common mistakes accounting and legal practitioners usually make when they work in this area?

The first would be that they mischaracterise transactions by either taking the ATO’s view on things at face value, or by simply jumping to the most favourable tax outcome. Obviously the ATO is there to raise revenue and they will sometimes oversimplify the revenue / CGT distinction such that practitioners will err on the side of the ATO’s view at the expense of a better tax outcome.

Secondly, as property is so often linked to huge changes in someone’s life, the taxes associated with these are often forgotten in the rush. For example, spouses may separate and leave a property pregnant with gains which only come to light once the property is later sold. This can often leave an otherwise reasonable split of assets way out of balance.

Finally, there are so many vanilla everyday cases that often creative structuring of investments and developments are overlooked for simpler outcomes.

What are some of the big trends and developments you see ahead for the area?

The traits of the younger generations to travel and to have it all now, are likely to see existing inherited housing stock redeveloped and/or rented at a faster rate. This is likely to see more creative arrangements between investors and developers (such as the use of options and split ownership models) becoming more commonplace. Apps such as Airbnb will only evolve further bringing new complexities to otherwise simple tax affairs.

Longer term, I think we will see an infill of property where bigger residences are built closer to the cities. These residences will likely house more than the traditional parents and 2.3 kids and will extend to include parents, siblings etc. This will assist in addressing affordability concerns but will also bring a whole range of new tax issues where properties will be the main residence of multiple owners.

Your topics focuses on ‘Challenges and Opportunities for Property Investors in the New Tax Landscape’. Why is it important for practitioners to attend your session?

There are so many different structuring options and outcomes in this area that it is difficult to keep up. It is also an area where the tax savings are significant and permanent. Getting all of this right ensures that your clients are well looked after and also that they have more money in their pocket. The big wins for accountants and lawyers can be few and far between, but property is an area where clients truly appreciate great advice and great outcomes.

What do you see as some of the key takeaways and benefits for practitioners for their practice from attending your session?

Practitioners should walk away with a refresher on some of the more creative structures used in property developments, giving these a place at the front of their mind for use by their clients. They will catch up on what they may have missed in the ongoing development of ATO view on revenue v CGT v property development. Finally, they will be able to identify the key traps that arise from changes to the use and ownership of a property.

You can hear more from Michael at the Inaugural 2018 Accounting Conference seminar, being held on Thursday 01 March at the Crowne Plaza, Canberra.


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