Tiny houses… small, transportable dwellings or cabins, offering a basic and compact accommodation solution.  Could they be the answer to an upcoming housing shortage?  Or are granny flats and apartments what cities need to help cater for the population boom? 
The experts are looking at all the options…what are your thoughts?
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Rob Burgess, The New Daily
14 September 2017

​For the past couple of years, economists have expected to see apartment gluts develop in Brisbane, Sydney and Melbourne, where developers have sought to profit from soaring property prices.
 
However, new research from BIS Oxford Economics suggests that one of those capitals – Melbourne – will see no glut at all due to high immigration.
 
This makes sense when you look at the breakdown of Melbourne’s population growth.
 
In 2016, a third of it was from natural increase (births minus deaths), with the other two-thirds made up of 13 per cent net interstate migration, and 55 per cent net overseas migration.
 
Department of Immigration figures show that slightly more than two-thirds of the overseas migrants are students – who generally do pretty well in small apartments, hence the disappearance of that glut.
 
The problem going forward, though, is that the once-expected glut will quickly become a shortage again if Melbourne’s ‘education exports’ boom continues.
 
Some lobby groups would prefer that boom not to happen, arguing that a bigger priority should be preventing further population growth – too often for ill-considered ecological or racial/cultural reasons.
 
Those views are attractive to some at an emotional level, but are based on inflated claims that have been fairly well debunked in past months.
 
See, for instance, the ‘Is Australia full?‘ series of articles published on The Conversation website by demographers, economists, town-planners, human geographers, public health experts, built-environment experts, agricultural experts and cultural researchers.

​If those more moderate views prevail, and Melbourne’s education boom does continue, where will all those migrants live?
 
One solution to that problem has been proposed by the development consortium Australian Education City, which wants to build a combined residential and educational ‘city’ near Werribee, in Melbourne’s outer-west.
 
The idea is to invite numerous universities to run campuses there, and to house many of the students, staff and researchers in 30,000 new dwellings.
 
The Victorian government says a decision on that $30 billion project should be made by year’s end – “too slow” according to the shadow planning minister David Davis, who points out that the scheme was first examined when his side of politics was still in power.
 
A spokesman for the consortium told me on Thursday that, among other things, it would take some pressure off other Melbourne areas where residents don’t particularly want their suburbs to change.

​Mega-projects aren’t the only solution on offer. Planning consultant and former Victoria MP Clem Newton-Brown argued in Thursday’s Australian newspaper in favour of building ‘tiny houses’ to make use of the nation’s suburban backyards.
 
He wrote: “Tiny houses can be small, modular truck-transportable dwellings, or cabins on wheels. There are tiny-house and modular builders popping up across Australia and they are creating extraordinary buildings, nothing like the old granny flat, which in any case can be installed only to house a family member.”
 
The ‘tiny house’ idea is big in the US, and among frustrated Gen-Ys and millennials, but is it really a solution?
 
Perhaps, though in WA the much maligned ‘granny flat’ is gaining more traction.
 
That’s because the WA state government legislated in 2015 to allow ‘ancillary dwellings’ to be built in just about any backyard on blocks over 450 square metres – and unlike previously, they can be let to anyone and not just a family member.
 
Mayor of Fremantle Brad Pettitt trialled a similar scheme in the City of Fremantle in 2012 – a success, he says, which inspired the state-wide legislation.
 
The Fremantle scheme, which required building permits but no planning approval, had some unexpected results.
 
One, he said, was that empty-nesters built small dwellings for themselves in their backyards and rented out the family home out front – the reverse of what was expected, but a logical way to generate higher incomes and free up larger dwellings.
 
Mr Pettitt sees the ad hoc ‘granny flat’ approach to urban planning as “complementary” to more closely planned medium-density projects in his area such as a 150-person solar-plus-storage powered development south of Fremantle or a new ‘Gen Y’ project that aims to fill the “‘missing middle’ of medium density housing, whereby housing stock … is increasingly either low-density, single-family homes or higher-density apartments, with little choice in between”.
 
The ‘missing middle’ pretty much sums up what Australia’s cities need to build to become more liveable.
 
But whether it’s granny flats, high-rise apartments, new ‘cities’ or the “missing middle” the recent experience in Melbourne highlights the challenge at hand.
 
And the solutions to that challenge will have to be more creative that slamming the door on migration and stamping out a nascent boom.

Queensland’s housing needs are changing … and our politicians and councillors are including granny flats and the like in their plans!  New green guidelines, homes that work with our climate and are in tune with their community … it looks like they might just be getting it right!  Take a look at this excerpt from The Courier Mail article discussing the future housing plans for Brisbane City.
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​Daryl Passmore, The Courier-Mail
September 16, 2017

​… As for housing, there is broad support from state politicians and the city council for encouraging new models, such as granny flats, duplexes, terraces and low-level apartment blocks in low-density areas.
 
The Government has emphasised this “missing middle’’ approach between single detached houses and high-rises in its just-released Southeast Queensland Regional Plan.

​Lord Mayor Graham Quirk says: “Council will consult local communities on the future of their suburb to ensure that different types of dwellings are in tune with community expectations for that area.’’
Council has committed to using new green guidelines promoting designs compatible with the subtropical climate into its assessment of CBD building proposals and is now incorporating them into new neighbourhood plans.
 
The Brisbane River will be enhanced with five new hubs to enhance recreation and tourism, while extra bridges are on the cards, along with a major expansion of South Bank Parklands.
 
But council has ruled out a major element of the Future Brisbane action plan – incentives to encourage businesses to set up in hubs in middle-ring and outer suburbs to relieve congestion caused by people travelling into the city centre to work.

​While council supports the development of economic hubs outside the CBD, Quirk says incentives are not necessary.
 
“The Brisbane Metro will significantly reduce travel times and support the development and attractiveness of suburban precincts,’’ he says. “Council-related costs for setting up suburban businesses are already significantly cheaper than the CBD.”
 
State Government projections forecast that the proportion of people who commute into the Brisbane Council area from other parts of the region to work will rise from 31 per cent to 42 per cent by 2041.
 
Debbie Smith, managing partner for professional services firm PwC, says: “(We need to) think about how we decentralise economic activity away from the CBD and generate more opportunities for people to live closer to their places of work. This will reduce congestion and help boost lifestyles.”
 
Top demographer Bernard Salt, who conducted exclusive research for the Future Brisbane series, highlights the need to create employment opportunities close to fast-growing residential areas away from the inner city if Brisbane is to avoid the crippling gridlock that’s afflicting other cities.
 
He insists that direct intervention is necessary, saying: “The Government can lead this process by locating any new departments, divisions or authorities somewhere like Chermside or Mount Gravatt or Springfield, and that in turn draws businesses.”

Jennifer Duke, Domain
30 August 2017

A little-known loophole across all states and territories is allowing investors, who already own multiple properties, to take advantage of government grants aimed at helping first-home buyers.

An analysis of rules around grants across the country shows that it doesn’t matter if you already own one property, or 10 – a homeowner who hasn’t lived in their properties for more than six months may be able to claim certain first-home buyer stamp duty concessions and grants.
​
This means someone like Uber driver and quantity surveyor Dean Munro, 29, a multiple property owner – is eligible for government first-home buyer benefits, because this time he is buying a house with the intention of living in it.

​Dean Munro is a multiple property investor, with a family-owned portfolio he estimates is worth more than $2 million, and he’s still able to claim the stamp duty exemption on his newly bought first-home. Photo: Paul Jeffers

His property portfolio, which includes three properties owned in his name and some he teamed up with family members to buy, is worth more than $2 million.

After a decade of rentvesting – a term given to those who own investment properties but continue to rent – Mr Munro has bought a house in Melbourne’s Broadmeadows. The first-home stamp duty exemption he is entitled to will save him $17,620 on his $425,000 home.

If the property he had bought was a new build, he would have been able to claim up to $10,000 from a government grant.

An examination into the rules found property investors across all states and territories may be eligible for some form of government benefit on a property purchase, provided they haven’t lived in any of their previous investments and they haven’t owned real estate before July 1, 2000.

This is good news for Mr Munro and investors like him.

Despite also having a shares portfolio, gold and silver bullion, and a cash buffer in the bank “just in case there is a downturn in the property market”, he said the stamp duty concession – which his lawyer confirmed he was eligible for – is one of his “tactics” to get the last loan over the line and push the portfolio to its eighth property.

“This last loan was not easy to get and required a lot of thinking outside the box,” he said. “I’m just going within the rules and I haven’t used it before.

“I never used [the grant], so I’m using it now. It’s the right time to settle down and stop renting a room [in a share house]. I want to live by myself and do some renovations.”

So, how many multiple property owners like Mr Munro have been given a first-home owners grant? Even government departments handing out the grants aren’t sure.

Domain requests to all state and territory relevant government agencies for providing first-home owner grants revealed none of them collect data on whether first-home owners are also investors when providing the grant or stamp duty concession.

While rentvestors claiming first-home buyer grants are simply playing by the rules, First Home Buyers Australia founder Daniel Cohen said the grant should be a one-off payment to people purchasing their first property to live in. Both he and FHBA co-founder Taj Singh were surprised at the rules.

“So if you choose to enter the property market as a rentvestor … while this is a viable option for consideration, by choosing this method you should be giving up your right to the [grant],” Mr Cohen said.

He noted that investors were able to receive other tax incentives, such as negative gearing benefits, which were not available to first-home buyers.

The rules around the grants aren’t new.

A Queensland government spokesman said the purpose of the grant was primarily to offset the increased costs of housing arising from the introduction of the GST in 2000.

Since then, some variations have been introduced. In both Western Australia and the ACT, a property investor cannot claim entitlements if they have lived in the home for more than six months, if it was bought after June 30, 2004.For properties owned between July 1, 2000, and June 30, 2004, they could not have lived in it for any time period.

A Revenue NSW spokesman said: “It is important to note that investors do not benefit from the stamp duty exemptions that were recently expanded in NSW”.

Richie Muir, legal director at Lawlab, said there were some differing rules between the states and territories, but many rentvestors would be eligible.

“The number of rentvestors are increasing in Australia, particularly with younger generations, because they want to get on the property ladder as quickly as possible but can’t yet afford their ideal home,” Mr Muir said.

Rentvestors may be required to provide evidence they hadn’t occupied their properties, such as lease agreements, tax returns and utilities bills, and the rules also applied to their spouse, he said.

Mr Muir also noted this list was not exhaustive, and there are other eligibility requirements for the first-home owner’s grant that vary by state and territory, and the rules relating to stamp duty concessions can also be different.
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“Where the first-home owner concessions are not available, there may be other home owner stamp duty concessions available,” he said.

Airbnb is a world-wide concept that is rapidly gaining popularity here in Australia.  Letting out your unused room seems like such an easy way to make some pocket money or contribute a little extra towards the mortgage….right?

It can be, but before you place that ad you need to be aware of any possible tax obligations further down the track.  Check out this article to discover what you need to know…
 
A homeowner's guide to letting on Airbnb 
Melissa Browne, The Sydney Morning Herald
29 August 2017
 
More and more homeowners are looking for ways to increase their household income. This includes looking to their family home to provide extra funds through Airbnb or renting out the granny flat in the backyard.

While this might seem like a short-term win that may include the ability to claim a percentage of your mortgage as a tax deduction, it's important to remember the long-term cost when you sell.

Too many people aren't aware that they may lose their main residence exemption if they use their house for income-producing purposes, which means they'll potentially pay capital gains tax (CGT) when they sell their home.

If you're thinking to yourself, 'I'm only renting my spare room out every other weekend on Airbnb, the Tax Office will never find out. Besides, if I don't declare the income and claim the deduction then I don't need to worry about CGT' – I urge you to think again.
​

That's because the Tax Office can data match your information on sites such as Airbnb to ensure that you're declaring income.

The ATO's assistant commissioner Matthew Bambrick has said that information is used from "a range of third-party sources" such as banks, eBay and Uber, to data match with what is being declared on tax returns and to catch undeclared income.

"The data enables us to put together a picture of what a person's assessable income should be. If something doesn't look quite right, it will send up a red flag and we'll investigate further," he said.
"The ATO is keeping up with the sharing economy, meaning that we have the ability to identify if you have left out a significant amount of your income."

Does this mean that you shouldn't be renting out the granny flat or making a few extra bucks on Airbnb? Generally, no however it's important to understand the long-term financial implications of the short-term gains you're currently making.

Let's take the case of renting a granny flat on Airbnb. If you decide to rent the granny flat on Airbnb, it's available to rent every week and it's available for market rent then you may be entitled to claim a percentage of your interest, council rates and more against the income derived which means part of your ownership costs may be tax deductible. Which can be a great thing. This may mean that the income and expenses cancel each other out and you end up paying no income tax on the net income. Let's assume in this example that the granny flat represents 7.5 per cent of the house.

When you eventually sell your house, let's say you make a profit of $300,000. Normally you'd pay no tax on this as you'd be entitled to the main residence exemption. However, as the property was income producing for half that time then $150,000 is potentially now subject to CGT. The good news is you are potentially entitled to a 50 per cent discount, which reduces the profit to $75,000 of which 7.5 per cent is now declarable for CGT purposes or $5625. If your taxable income is an average one, the tax payable would be $1771.88.

Now that might not seem like a lot of money; however, if you live in a suburb where house prices have skyrocketed, your profit could be much more than the example above, which means that the CGT payable is also much more.

With the average Australian income for Airbnb hosts at $4500 a year, in the example above, even with deducting the CGT payable, the host would be better off.

However, with some suburbs, particularly in Sydney, having increased dramatically, there is a chance the CGT will be more than the income received, which may mean you want to reconsider your options.

You may argue that you have no intention of moving and therefore any potential CGT is irrelevant because you only pay tax on the profit when you sell. However, circumstances change for all of us and it is important to be aware of any potential gain should you choose to sell.

What is important is not to bury your head in the sand and claim that you didn't know. That's simply not a good enough excuse and the Tax Office will issue fines and penalties if you're not declaring both the income and the CGT.

Airbnb and granny flats can be a fantastic way to make some extra money from what is often our biggest and most expensive asset, however it is important to be aware of both your tax obligations both in the short term and the long term.
 
Got a Granny Flat ?

Perhaps Airbnb might be a good alternative rather than a standard residential lease arrangement (subject to any council requirements of course !)

Don’t’ have a Granny Flat yet – when you look at some of the returns home owners and investors alike are achieving, it makes it worthwhile investigating.

Then talk to your financial advisor or accountant to see what the tax implications might be for your own personal circumstances …
 
Give Sonia a call today on 0403 309 136