Kochie’s Weekly Market Update: Economic status and crackdown on property flipping

- November 22, 2019 3 MIN READ

Hey gang, get up to speed on this week’s financial trends with my market updates.

A wild ride on the Australian sharemarket this week. We got so close to a record high last week and have pulled back over the last 5 days…we’re one of the few western sharemarkets which hasn’t broken through previous record highs.

Nervousness about whether the China-US trade deal will be completed this year really spooked investors and, closer to home, Westpac’s hammering on money laundering charges, really weighed down the market.

As I’ve said before, markets are so sensitive to negative information and you need to be very aware of these changes.

Economic Status

.The weekly ANZ-Roy Morgan consumer confidence rating fell by 1.1 per cent to 109.9 points.

Sentiment is below both the average of 114.3 points held since 2014 and longer term average of 113.1 points since 1990. It is showing us consumers are still really nervous about the economy and our jobs.

.Minutes of the November 5 Reserve Bank Board meeting were released this week.

It’s a record of what was said by the board when assessing interest rates. Members said, “A case could be made to ease monetary policy at this meeting.” 

But the Board, “also discussed the possibility that a further reduction in interest rates could have a different effect on confidence than in the past.”

As I said last week, the RBS has to be very careful that a cut in interest rates doesn’t send a message to all of us the the economy is worth than we thought. Sounds like they are on the same wavelength

Tax Office Crackdown on Property Flipping

A warning to all those developing property and flipping them for a profit. A fascinating case in the courts this week where the Tax office took a developer to court for avoiding $1.7 million in GST. The developer claimed the properties were for personal use.

Between 2005 and 2011, the taxpayer purchased, developed and sold ten luxury properties in Toorak, Portsea and Caulfield North.

They carried out extensive work on the properties, developing and subdividing them before selling them for a profit. They sold these properties for more than $20 million and made a total profit of more than $4.4 million.

They claimed the properties were for personal use, but they were carrying on a business and should have been registered for GST, lodging Business Activity Statements (BAS) and reporting the property sales.

By choosing not to, they evaded paying $1,738,636 in tax.

The ATO is using this as an opportunity to remind people that flipping properties for profit can count as running a business, requiring you to register for GST and lodge BAS.

“If you are buying, selling or developing a property that isn’t your primary residence, you have tax obligations,” Assistant Commissioner and head of the ATO’s Criminal Law Program Ian Read said.

“There are many TV shows that make flipping properties look like a fun and lucrative thing to do. People also need to be aware of their tax obligations.”

You are required to register for GST if the turnover from your property transactions is more than the GST registration threshold of $75,000 and if you buy land or property with the intention of developing it for resale at a profit.

“We know most people try to do the right thing, and we will support people who do. But to ensure the community doesn’t miss out on essential funding and to protect the integrity of the system, we have to crack down on those who deliberately do the wrong thing,” Mr Read said.

Emergency Funds

New data shows half of us are regularly tapping into our emergency savings for non-essential expenses like holidays or nights out. 

If that’s you… it’s time to put the brakes on and start refilling the coffers.

Here are five ways to rebuild your emergency fund: 

1. Use unexpected windfalls

Have a plan to make sure it all goes straight into the fund. Everything from tax refunds and wages rises to work bonuses and birthday money.

2. Set up an automatic debit on pay day

Organise for a fixed amount to be automatically transferred each month. It eventually becomes one of those unseen transactions which doesn’t even register so you don’t miss it.

3. Target a luxury you can do without

Some estimates indicate each household wastes at least 10% of its income each month on things it doesn’t need.

4. Pad your account with dividend earnings

Build a share portfolio of good dividend stocks and deposit those dividends in your emergency fund.

5. Collect spare change

Have everyone in your family empty the change from their pockets at the end of each day. At the end of the month, deposit it all and watch it grow.