The Tax Man Cometh !

This amazing home price bubble has saved the bacon for many families reaching retirement age without a sufficient superannuation nest egg to see them through into old age.  That suburban home that they bought decades earlier for what would today be termed a mere pittance is suddenly valued at more than a million dollars in many Sydney suburbs, and amazingly - the family home is not subjected to the capital gains tax.

It seems that capital gains is a rather curious tax.   If you buy shares in a public company and their value increases the government decrees that the tax man will take a share of the profit when you sell those shares.  Of course, if the shares decrease in value and you make a loss when you sell, the tax man has no interest in contributing compensation.

One of the more interesting innovations of this twenty-first century has been the concept marketed by Airnb to allow homeowners with an unused bedroom to gain income by renting it to tourists who would otherwise seek accommodation in a hotel.  In some cases the homeowner offers bed and breakfast and it is not unusual for the entire house to be on offer if it is in a prime tourist area.  This is subjected to a wide mix of council regulations and may be contained with restrictions.

It is also open to interpretation by the tax man.  It is quite possible that if parts of that house are being regularly rented out for profit that it may lose its family home status and become a taxable business asset. In such a case, the capital gains arising from its eventual sale could become taxable.  That is certainly something a homeowner thinking of listing with Airnb would be wise to fully explore with legal counsel.

People running a family business from their homes are entitled to make a tax deduction claim on that portion of the house used for office purposes with component claims for lighting and heating.  In the past, this has not intruded on family home status but like all tax laws it is subject to review.   The pot of gold this housing bubble presents is a tempting target for any government short of money.

Like any new forms of business, it is the wise who first investigate the legal possibilities to avoid later liabilities.