Budget 2018 and Racing Participants

Media Release - Wednesday May 9

Having sat through extensive TV commentary, a Budget Breakfast and read the economic gurus across the press, I feel obliged and confident to share the major take out from this 2018 Budget.

As it applies to the persons:

a) in the breeding and racing industry;

b) in the property industry; and

c) who have or are considering running their own Self-Managed Super Funds (SMSFs).

Our practice does extensive advising in all these areas and we know full well that many racing players also have property interests and SMSFs, so I hope there is something for everyone.

1. Deductions denied to vacant land

As part of the 2018 Federal Budget, the Treasurer announced that, from 1 July 2019 , the Government will deny deductions for expenses associated with holding vacant land that is being held for residential or commercial purposes.

This is an integrity measure to address concerns that deductions are being improperly claimed for expenses, such as interest costs , related to holding vacant land, where the land is not genuinely held for the purpose of earning assessable income. It will also reduce tax incentives for land banking, which deny the use of land for housing or other development.

Deductions that are denied under this measure will not be able to be carried forward for use in later income years. However, there is still tax effect for expenses for which deductions will be denied that would ordinarily be a cost base element (such as borrowing expenses and council rates) as they may be included in the cost base of the asset for CGT purposes when the property is sold.

Exceptions

This measure will not apply to expenses associated with holding land that are incurred after:

§ a property has been constructed on the land, it has received approval to be occupied and is available for rent; or

¡ the land is being used by the owner to carry on a business , including a

business of primary production .

The latter point above makes it clear that a vacant "back paddock" of the breeding or racing property can still attract deductions if it can be argued as being part of the "business".

The 'carrying on a business' exception above will generally exclude land held for commercial development. Alas, property developers in "business" should be comforted by this.

2. Further extending the small business immediate deductibility asset "$20,000" threshold

As background, the 2016 Federal Budget provided a temporary increase to the immediate deduction threshold for eligible assets acquired by small business entities (SBEs).

The accelerated depreciation rules for SBEs were amended to temporarily increase to $20,000 the $1,000 threshold under which certain depreciating assets, costs incurred in relation to depreciating assets and general small business pools can be immediately written off.

Advertisement

The $20,000 threshold was due to revert to $1,000 from 1 July 2018.

As part of the 2018 Federal Budget, the Treasurer announced on that the Government will extend the $20,000 instant asset write-off by a further 12 months to 30 June 2019 for businesses with aggregated annual turnover of less than $10 million .

This measure will ensure that small businesses will be able to immediately deduct purchases of eligible assets costing less than $20,000 first used or installed ready for use by 30 June 2019.

Note – this rule does not relate to the purchase of breeding stock in a business, but they can apply to those who buy racehorses in an eligible "Stand-Alone" racing business that has no associated breeding.

3. Increasing the maximum number of allowable members in SMSFs and small APRA funds

As part of the 2018 Federal Budget, the Treasurer announced that the Government will increase the maximum allowable number of members in new and existing Self-Managed Superannuation Funds (SMSFs) and small APRA funds from four to six.

This measure intends to provide greater flexibility for joint management of retirement savings, in particular large families who want Mum, Dad and the children to be members of the one fund.

4. Three-yearly audit cycle for "compliant" SMSFs

This is welcome news to SMSFs that must bear yearly compliance costs, but not great news to SMSF auditors!

As part of the 2018 Federal Budget, the Treasurer announced that the Government will change the annual audit requirement to a three-yearly requirement for Self-Managed Superannuation Funds (SMSFs) with a history of good record-keeping and compliance.

This measure will reduce red tape for SMSF trustees that have a history of three consecutive years of clear audit reports and that have lodged the fund's annual returns in a timely manner.

The Government will consult with stakeholders to ensure a smooth implementation of this measure.

Warning

Note – this measure does not mean SMSF trustees can "run amok" in the intervening two years that the fund is not audited, as there is still an overriding obligation for trustees to stay compliant with the laws in this area, e.g. SMSFs lending only nominal amounts to related parties and maintaining eligible and appropriate investments, that, sadly for some, does not include Racehorses!

Please contact me if you wish for me to clarify or expand on any of the matters raised in this article.

Prepared by:

PAUL CARRAZZO CA

CARRAZZO CONSULTING

801 GLENFERRIE ROAD, HAWTHORN, VIC, 3122

TEL: 1300 RIGHT TRACK

FAX: (03) 9815 1899

MOB: 0417 549 347

E-mail: paul.carrazzo@carrazzo.com.au

Web Site: www.carrazzo.com.au


Advertisment
More Reading...
Hi Yo Sass Bomb Wins G3 on Sunday
Kim Reid bypassed a Group One in favour of Sunday’s Gr.3 Gee and Hickton Funeral Directors Thompson Handicap (1600m) at Trentham with Hi Yo Sass Bomb, a decision that paid dividends when the mare led from the outset to claim her third stakes success.
Second Wootton Bassett Son Added to Coolmore Stallion Roster for 2026
Set to join Camille Pissarro as the second G1 winning son of Wootton Bassett on the stallion roster for Ireland in 2026 is Henri Matisse, who this time last year was about to claim his first G1 victory at the Breeders Cup meeting at Del Mar.
Doubtland 2YO All On Red Smashes Them Again at Ascot
Widden Stud's Doubtland has a potential 2YO topliner in Perth in the shape of exciting WA colt All On Red, who remains undefeated from two starts after another comprehensive Ascot Saturday win.
Transatlantic Takes $1million Five Diamonds Prelude
Transatlantic’s lucrative spring carnival continued at Randwick with an arrogant victory in the $1m Five Diamonds Prelude.
Yes Yes Yes 3YO Shooting for G2 on Monday
Last year’s Gr.2 James and Annie Sarten Memorial (1400m) set Savaglee up for Group One glory in Christchurch, and Matamata trainer Pam Gerard is hoping to follow a similar blueprint in 2025 with her Yes Yes Yes 3YO Affirmative Action..
Good News Week for Geisel Park
Geisel Park’s black-type mare Laced Up Heels is in foal off a maiden cover to Champion Australian Sire Zoustar and an orphan foal has found a new mum.
A Century of NZB National Yearling Sales Success: Cox Plate
Moonee Valley’s A$6m Group One WS Cox Plate (2040m) is known as the weight-for-age championship of Australasia and has been won by many of Australia and New Zealand’s greatest thoroughbreds.
Undefeated 3YO King of Light Wins Listed Belgravia
Dan Morton's exciting three year old King Of Light (Earthlight) remains unbeaten in three starts, as the gelding graduated to stakes company with a scintillating first up victory in the Listed Belgravia Stakes on Cox Plate Day at Ascot.
Cream Rises at Trentham
A half-sister by Hello Youmzain (Fr) to dual Group I winner Mustang Valley, exciting filly Cream Tart is set to line up in one of the major three-year-old races over New Zealand Cup Week following her impressive win in Sunday’s Upper Hutt Car Sales LTD Three-Year-Old (1400m) at Trentham.
Pedigree Watch - Powerhouse Godolphin 3YOs Dominate
The current crop of three year-olds running for Godolphin lay claim to being the best they have ever produced in Australia and three of those colts won Group races in Australia on Saturday so let’s take a look at those pedigrees.