Category Archives for "Uncategorised"

NSW Medium Density Housing Code

The new Low Rise Medium Density Housing Code is set to take effect across NSW on 6 July 2018.

The NSW Government Planning & Environment website says that the new code “will provide more housing choice to meet different household needs and improve housing affordability.”

The code will allow property owners to undertake small scale low density housing projects (such as a dual occupancy) without having to obtain a council approval. Instead, private certifiers will ensure that these developments are compliant with the prevailing planning codes and built to Australian Standards. Development will still only be allowed where medium density development is already permitted under a council’s Local Environmental Plan. And, council approval will still be required for apartment blocks, multi-level units and non-complying developments.

The proposal mirrors the approval system already in place in NSW for a variety of development types, such as construction of a new home on a vacant site. Certain exclusions will apply to the code, so that it can’t be used in heritage conservation areas, and other sensitive locations, where council approval will still be required. The code will simplify the approval process. It will provide clarity for property owners. It will remove some of the political elements of the current approval process. It will alleviate the work load of overburdened councils.

Despite the obvious benefits, multiple local councils have lobbied the NSW Government to be excluded from the code. These include Ryde Council, Northern Beaches Council, Hawkesbury Council, Randwick Council, and others. The government has agreed to delay its introduction in some council areas.

It is disappointing that some council have fought the introduction of the code. Councils have historically been reluctant to relinquish any part of their approval powers. However, history has shown the significant benefits from the original complying development code, which was introduced years ago. And, when this code comes into force, the people of NSW will look back in years to come, and see that this systems is better for property owners, the community, local councils, and the people of NSW.

The full code can be read here https://www.legislation.nsw.gov.au/EPIs/2018-132.pdf

SMSF – Asset Market Values

If you are one of the many hundreds of thousands of Australians who use a self-managed superannuation fund (SMSF), it is important that you comply with the recently updated asset valuation guidelines provided by the ATO.

In some cases non-compliance may be a very expensive (and unexpected) mistake.

The current ATO asset valuation guidelines say that:

A valuation of assets is required to confirm your SMSF has complied with relevant super law for:

  • preparing the financial accounts and statements of the fund
  • acquiring assets between SMSFs and related parties
  • investments made and maintained on an arm’s-length basis
  • disposing of certain collectables and personal use assets to a related party of the fund
  • determining the market value of an SMSF’s in-house assets as a percentage of all assets in the fund
  • determining the value of assets that support a member’s super pension
  • determining the value of existing retirement income streams at 1 July 2017 as they will be counted towards the transfer balance cap
  • determining the value of new retirement income streams on or after 1 July 2017, when they will be counted towards the transfer balance cap
  • determining the market value of assets that are eligible for transitional capital gains tax (CGT) relief in the 2016–17 income year
  • determining the market value of assets supporting members’ retirement phase and accumulation accounts for the purposes of calculating the members’ total superannuation balances.

 

While the ATO does not require that you use a qualified valuer in all cases, they may review any valuation. You may be asked to provide evidence of the valuation method that has been used, following which, the ATO will decide whether to accept the valuation or not. The ATO guidelines note that valuations should be based on objective and supportable data.

The most secure position, is not to risk assessing a market value yourself. Use a qualified valuer, who will produce a report that is consistent with ATO standards. With a valuation professional, there will be no grey areas, and you can be confident that the market values of assets in your SMSF are compliant with the current ATO guidelines.

The IRS is Everywhere (even in Australia)

We were recently instructed to undertake a valuation of a property in Sydney for the purpose of US tax reporting. We are often instructed to value properties in NSW for tax purposes, but rarely for US tax purposes. When this instruction arrived, we ‘raised an eyebrow’, and asked some questions.

After a little bit of searching around, we were shocked to learn that Australian citizens living in Australia, who also hold US citizenship, have an obligation to report all Australian assets to the IRS in the USA, so that US tax can be paid on your Australian earnings.

After searching online, we found dozens of stories of retirees living on their superannuation, who were suddenly hit with large tax bills from the IRS for not reporting their Australian assets.

While the tax relationship between the USA and Australia is complex and needs to be interpreted by each individual for their own situation, it is apparent that if you are a dual citizen of Australia and the USA, living in Australia, you might be in the ‘crosshairs’. And, the US tax treatment of your Australian assets can be punitive.

So, there you go, the IRS is everywhere, and in Australia, they have asset valuation requirements for real property assets. So, if you are an Australian with a US passport, do some online searching about your responsibilities for reporting to the IRS, because otherwise, you could be in for a nasty surprise.

New Valuation Requirements for Owners Corporation High Risk for Owners

A major change happened in 2015, which straddles unit owners in NSW with significant financial risk.

The new Strata Schemes Management Act 2015 now, squarely places the responsibility for adequate insurance cover, on the shoulders of owners corporations. Removing it from the responsibility of a qualified valuer – as it has traditionally been.

There is a perceived benefit that owners corporations can save on valuation fees. However, the huge additional risks that owners corporations now carry, is linked to the requirement to get the numbers right – something that they traditionally farmed out to professional valuers. This change means that if owners don’t get it right, you may not be covered by your insurance policy at all.

Astute owners and strata managers are now actively seeking better quality valuation advice, on a more regular basis. Because, they understand that if there is a catastrophe, lot owners who have invested large amount of money into buying an apartment, want an insurance policy that protects their interests.

Changes like this happen relatively quietly, and can go unnoticed for years, but when you need to make a claim, or if there is a catastrophe, the owners that have got it right, will be the winners who have minimised their risk, and will be properly covered by their insurance policies.

Compulsory Acquisitions

New and expanding infrastructure projects in NSW, seem to be the new big thing. Right now, in Sydney alone, we have multiple major transport infrastructure projects ongoing such as Northconnex, Westconnex, the metro and the light rail. In addition to those major projects, there are smaller road upgrades, footpath installations, upgrades of water and sewerage infrastructure, electrical supply and telecommunications infrastructure. This is a constant element in the infrastructure landscape of NSW.

Many of these projects will impact in one way or another with property rights. Whether it is the need to acquire a property to locate new infrastructure on, obtain an easement to protect a piece of infrastructure, or temporarily lease a site for the purposes of staging works from. Ultimately, land owners are generally compensated for these incursions into their land rights.

But, let’s face it. Having a few Government employees in suits turn up to your house, with a Proposed Acquisition Notice, and start the process of forcibly buying your house, is a daunting and terrifying prospect.

Luckily, your rights as a land owner are enshrined in legislation. Furthermore, the process by which the NSW Government can acquire or extinguish your rights as a property owner, is guided by a relatively proscriptive piece of law, call the Land Acquisition (Just Terms Compensation) Act 1991.

One of the stated objectives of the Act includes to “ensure compensation on just terms for the owners of land that is acquired by an authority of the state”. More specifically, Section 55 of the Just Terms Act sets out the various heads of compensation that a dispossessed party are entitled to be compensated for.

Ultimately, if you do have the misfortune of receiving a Proposed Acquisition Notice for land that you own, it is important that you seek good advice from an appropriately qualified and experienced valuer and a solicitor. The adage that good advice is expensive, but you should see how much it costs to get bad advice, is never truer than in compulsory acquisition matters.

The fees you pay should form part of the compensation that you will be entitled to, and getting the right advice at the beginning can make a difference in the result of tens of thousands, hundreds of thousands, and in some cases, millions of dollars.

So, in summary, if you become involved in a compulsory acquisition matter, the most important decision you will make, is who your advisers are, so shop around and make sure you are happy with who you have selected, their background and experience.