[Chapter] 2 - Resimercial (Our Infused, Asset Sub-class)
The four main asset classes are:
- Fixed Interest
Each of the above have many sub-classes.
As property is the subject of the day, we’ll now break down its major sub-classes:
- Rural and;
Given we’re concentrating on the astute exploitation of a main residence (as a part-business asset), the following is a reasonably comprehensive break down of the residential sub-class:
- Vacant Land
- Terrace Houses
- Larger Grouped Dwellings
- Warehouse Conversions
- Permanent Park Homes
- Caravans and Houseboats (what the heck … we’re on a roll)!
I’m sure there are more but this will do for the moment.
Whilst these buildings are usually found in residential areas, there are many exceptions such as mixed-use zones (inner CBD, redeveloped commercial or residential zones etc.).
Of note, in such areas, you’ll also find houses that have been converted to professional suites etc. with the substantive point however, being that residential buildings are mainly used for residential purposes.
When you decide to start a small business, you have a number of options in terms of how it is to operate and from where it is to be based — e.g., in a:
- Mobile Business
- On-site (e.g., professional contractor, trades-person, performing artist etc.)
- Factory / Workshop
- Hobby farm, market garden, horticulture, viticulture etc.
Whilst there may be others, I’m certainly struggling to think of any at the moment!
Looking at this list, only four (home, on-site, mobile, rural etc.), are sufficiently flexible for these purposes because they can each be carried on within a home as being the principal “place of business”.
On the contrary, if you have say a separate office, studio or workshop etc. and you take your work home either occasionally or regularly, the ATO (Australian Tax Office) does NOT allow you to claim occupancy expense deductions for areas within your home where you do the work.
The Commissioner’s view was clearly established on 30/09/1993 in taxation ruling TR 93/30 and subsequently upheld by the courts, that such an area or areas will be merely considered a “home study” and this is true even if that is the ONLY activity conducted in that part of the home.
Confused? Think about it …
You’re generally not allowed to live in an office, studio, factory or workshop etc, right?
Also, you can’t claim your home mortgage and other occupancy expenses because the generally accepted wisdom amongst accountants is that it isn’t worth the dreaded CGT implications and so if you been listening to these types, you’ve likely missed out on claiming thousands every year in normal business deductions on your home.
I’m saying there’s nothing better than incurring a whopping-big-fat CGT (Capital Gains Tax) liability when you sell your home, and this is because firstly you must have:
- Made money at sale
- Been smart enough throughout to ensure your business passed an ATO test called the “interest deductibility test”
Again, been smart enough to have exercised your entitlement to claim a good part of if not all of the mortgage interest plus a good part of water and council rates, building insurance and building depreciation expenses (and more) and all for many years as you enjoyed the ride leading up to your BIG PAY DAY!
And so here it is … "RESIMERCIAL"
INFUSED, Residential / Commercial Property
And here’s what “Resimercial Property “ (i.e. what we’re declaring as the word’s latest asset sub-class) currently looks and feels like:
Sure, it looks and feels like residential property but check out these key features:
- Zoned residential
- Comes in any floor plan (multi-level/guest wings/open-plan/ rooms off a long corridor/alfresco areas/bits of everything – it doesn’t matter)
- Can be GST free at sale (unlike commercial property), albeit where GST must apply at sale, the GST margin scheme can be applied.
- A wide range of home business & or home occupations are allowed to operate within by practically all Australian local governments
- Contrary what appears to be widespread among local council in their planning policies, most have no restriction on the amount of floor space that may be allocated for business use
- All bona-fide, typical business property tax deductions can already be claimed under existing legislation (e.g., same as non, home-based business properties)
- No necessarily practical detrimental effect on CGT main residence exemption per the non-business use of the property (for sole proprietors, partnerships and private companies) as any CGT raised from business use of the property may be reduced if not totally eliminated using the small business CGT concessions
- Favourably rated by State and Local Governments as residential property (and with certain residential exemptions still applying e.g., land tax)
I’d like to talk turkey with anyone who can explain to me what other asset class or sub-class offers all this upside without any discernible downside.
So, there it is. Something brand new for you to invest in — and you might already even have one (Resimercal asset) without having to invest anything – just a few tweaks needed here and there I suspect.