ATO has holiday home deductions in its sights

Will the Tax Office kill off holiday homes? Time could be ticking on the property investment party, and a dud super fund can leave you $205,000 poorer in retirement. Here are five things you may have missed this week.

ATO cracks down on holiday homes

A weekender by the water or a ski lodge on the slopes is a dream for many of us.

And until now, it's also been a reasonable tax perk.

For years the Australian Taxation Office (ATO) has allowed holiday homeowners to claim a variety of costs on tax provided the owner makes a reasonable effort to rent the place out.

This 'negative gearing for weekenders' has likely made it a lot more affordable to own one of Australia's 250,000 vacation properties. But the holiday may be about to end.

This week saw the ATO issue draft guidance proposing that holiday homes could be treated as 'leisure facilities'.

This would prevent owners claiming deductions for loan interest, rates or maintenance, unless the property is mainly rented out to generate income, including being available during peak periods.

Susan Franks, tax leader at Chartered Accountants ANZ, says holiday homeowners need to look closely at these changes to ensure they're not caught off guard.

"With the ATO tightening its approach, holiday homeowners need to be proactive," Franks cautions.

"Make sure your property is genuinely available for rent, especially in peak season, advertise widely, set a fair market rent, and avoid restrictions that turn away guests, like 'no children', 'no pets' or requiring references for short stays."

Regulator turns it gaze to property investors

Investors are ploughing into the property market.

Mortgage Choice data shows the value of loans to investors nationally was up 34% year-on-year in the September quarter - though the increase was as high as 52.1% in Western Australia.

Loans to owner occupiers rose by a more modest 18.6%. This gels with ABS figures that show lending to property investors has outstripped home buyer demand.

Anthony Waldron, chief executive at Mortgage Choice, says investors are the most confident buyers right now.

"Current market conditions are encouraging a new generation of investors to enter the market, suggesting the demand for investment properties is likely to remain strong."

And that's making financial regulator - the Australian Prudential Regulation Authority (APRA) - nervous.

On Thursday, APRA issued commentary that it is seeing signs of a pick-up in higher-risk lending, particularly high debt-to-income borrowing by investors.

According to APRA, the issue at stake is that the "increasing interconnectedness" of our financial system has raised the potential for shocks in one sector to have a system-wide impact.

It could be a hint that the regulator is weighing up whether to intervene in the market - as it did in 2014, when APRA introduced a 10% bank limit on lending to investors, a measure later removed in 2018.

Retirees left $205,000 poorer by dud super funds

Retirees in poorly performing superannuation products could lose as much as $205,000 over their retirement.

That's according to analysis by Super Consumers Australia (SCA), which is calling for dud super funds to be held accountable.

By way of background, APRA conducts an annual performance test for super products, naming and shaming those that perform poorly.

However, the test doesn't apply to products for retirees. So people with their retirement savings in underperforming options are none the wiser.

SCA says a number of big-name funds including AMP, Russell Investments, Colonial First State and REST consistently offered underperforming retirement products across multiple growth investment categories.

"It's unreasonable that a 64-year-old is protected by a performance test, yet the moment they retire and move into an identical product, that safeguard disappears," says Dr Katrina Ellis, deputy chief executive of SCA.

"Retirees deserve the same protections as workers. Without them, people risk losing hundreds of thousands of dollars in retirement income and living standards will suffer."

Ellis is calling on the federal government to extend its performance test and super fund comparison tool to ensure retirees can avoid the duds and put their money in better performing funds.

The penny's dropped. Could the 5 cent coin be next?

US citizens are mourning the loss of the one cent coin - or 'penny' - which has just ceased production.

It marks the official end of the penny's 232-year production run as a circulating coin.

Evolving consumer payment patterns is only one factor behind the penny's demise.

Over the past decade, the cost of producing each penny has risen from 1.42 cents to 3.69 cents, meaning it costs more to produce a penny than its face value, and this sees the government lose money.

Here in Australia, the 1 and 2 cent coins were withdrawn from circulation in 1992. But what about the 5 cent coin?

Speculation around the 5 cent coin's future is not new.

However, last month, the Albanese government released draft regulations to make sure people who rely on cash can still use it for essential purchases.

But the most that can be paid using 5 cent coins is a mere five bucks. What does that buy?

With the 5 cent coin's future looking shaky, one collectable coin retailer is urging devotees to, "collect now before it's too late." We'll keep you posted.

'Big' doesn't always mean better customer service

KPMG has released a new report revealing the nation's top 10 brands for customer service.

The usual crowd pleasers were there - Bunnings, Mecca and Dan Murphy's - with Specsavers lauded as the number one brand for customer experience.

Bendigo Bank - a veteran of the top 10 - made it to second place

Amazon made a surprise debut (at number eight), and hardware chain Mitre 10 got a special nod for its high-value rewards program.

But it was the names that are missing from the list that spoke volumes. Where are the big banks? The insurance companies? Or the super funds?

KPMG notes that the financial services industry is improving customer experiences.

But it adds that empathy, one of the factors brands are scored on, remains "the most persistent challenge" across the finance sector.

There could be a lesson there for our largest financial institutions.

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