Published December 21, 2010

EduCity well on its way to becoming M'sia's education hub

It is targeted at being the base for at least seven higher education institutes

By MALMINDERJIT SINGH

EDUCATION is increasingly becoming an important sector for economic growth, and like many of Asia's economies, Malaysia too is positioning itself as an educational hub in the region.

One does not have to travel very far from Singapore, itself an educational centre, to reach EduCity at Iskandar, Malaysia's hope as a hub for higher education.

Situated within Iskandar Malaysia, which is a government-initiated development zone announced in 2006 to increase investment in the country, EduCity is spread over 123 hectares of land and is targeted at being the base for at least seven higher-educational institutes.

At present, Newcastle University Medicine (NUMed) Malaysia is the one institution that has already begun building its physical presence, a RM90 million (S$37 million) campus, in EduCity and its success will be a benchmark that is likely to attract more institutions and students there.

'The building will be completed by May next year (2011) and handed over to us. It will be fully functional by then and include the facilities that staff and students need,' stated Chris Brink, vice-chancellor of the university.

Prof Brink explained that the institution admitted 20 students last year as part of the first cohort of NUMed and followed this with another 44 students for the second cohort in September this year.

Since the facilities at NUMed are not ready yet, Prof Brink clarified that these students are currently undertaking their pre- clinical studies at the Newcastle campus.

For the next intake in September 2011, Prof Brink expects a full complement of 100 students - all to be based at the NUMed campus in EduCity.

Besides the medical programme, Newcastle University also announced in October a plan to broaden its curriculum offering to include biomedical sciences degrees and a postgraduate education programme.

'We will start taking on the biomedical and postgraduate students in 2012 with a view of expanding the total student population at our EduCity campus to 1,000 students by 2017,' Prof Brink said.

Prof Brink hinted that the university was keen on expanding its relationship with EduCity and its presence there. 'The infrastructure has been put in place for EduCity to grow as a regional education hub and NUMed Malaysia is primed for long-term success in Asia,' he stated.

Prof Brink added that the university would certainly also look toward developing a research presence in EduCity over time and this will include establishing working relationships with the hospitals in the region.

Khairil Anwar Ahmad, chief executive of Education@Iskandar, said: 'NUMed Malaysia is a reflection of the value private sector partnerships play in the development of Malaysia, advocating knowledge sharing and skills transfer, as well as the creation of employment and business opportunities for the community. Iskandar Investment remains committed to forging new international partnerships as we strive to create value for our partners, businesses, and the nation.'

Besides NUMed, EduCity will also include a campus for the Netherlands Maritime Institute of Technology, which will commence at the initial location in Kotaraya, Johor Bahru in 2011, before the institute moves to its permanent campus in the Multi-Varsity Enterprise Building in EduCity by 2012, and a campus for the Management Development Institute of Singapore, which will open in 2013.

Singapore-based Raffles Education is conducting a feasibility study to develop Raffles University which will offer undergraduate programmes in business, technology, arts and design, health science, education, and social science specialisations.

Mr Khairil said he would soon announce the signing of a deal with a 'prominent UK university for an engineering school', reported the New York Times.

The report also quoted him as saying that Iskandar Investment had recently signed a memorandum of understanding with an American film school with a view toward setting up a partnership with a local private university and is also in negotiation with an Australian hospitality school.

'Hopefully a deal should be announced next year,' Mr Khairil said, according to the report.

'We had originally planned for EduCity to host 12,000 students when it's completed,' Mr Khairil said. 'But judging by the response, I think we will end up with 16,000 students.'

Tuesday December 21, 2010

Tax on property rentals

Tax Insights by Kang Beng Hoe

IF you own a property that you rent out, you should know that besides the prospect for ongoing income and capital appreciation, such investments offer deductions which can reduce the income tax on your profits.

However, what type of property investor are you? If you have been actively looking for housing properties to purchase and selling them at a profit, you may not be a passive investor. It is likely that you could be regarded as a property dealer or trader.

The profits derived by a property trader are taxed as income from a business whereas that derived by passive investor is treated as a capital gain and will be subject to a 5% real property gains tax if the property was held for less that five years. If held longer, there will be no tax.

The law to determine whether you are a property trader is imprecise and the outcome can depend on a subjective evaluation of the relevant facts.

For example, does it mean that if you have sold a property within a two-year period, you will be a property dealer? Not necessarily, since it depends on your intention when you acquired that property and the reason why you sold it.

The sale of a second property will reduce the strength of a claim that you are not a property dealer but again, there may be reasons to enable you to argue otherwise.

Rent received in advance

The money that you receive for rent is generally considered taxable in the year you receive it, even when it is not due or earned. You should therefore include advance payments of rent as income even though they are not due.

Tenant-paid expenses

Expenses paid by your tenant are considered income to you. This would include, say, an emergency repair to an air conditioner while you are out of town. You can then deduct the repair payment as a rental expense.

Trade for services

Your tenant might offer his services in exchange for rent. You must include as income a fair market value of his services.

For example, if your tenant, an accountant, agrees to help you prepare your accounts in exchange for two months rent, you must include the two months rent as income even though you did not actually receive the money.

Security deposits

Such deposits are not taxable on you when you receive them if the intent is to refund the money to the tenant at the end of the lease. If the tenant breaches his lease terms, then you are entitled to use the deposit to make good any defects in the property and return the balance to the tenant.

You must include the amount used to repair the defect as income and at the same time claim the amount spent as a deductible expense.

Repairs and improvements

Owners of rental properties should not assume that anything done on the property is a tax-deductible expense. The tax law looks at it quite differently.

A repair keeps your rental property in good condition and is therefore deductible in the year you incur the expense.

Improvements, on the other hand, will add value to your property and the costs are not deductible. Improvements could include a new patio, a garage or a new roof.

From a tax standpoint, you should carry out repairs as the need arises rather than wait until the problem becomes such as to require extensive renovations where elements of improvements would invariably be present. If you bought a dilapidated property and immediately incurred repair expenses on it, these “initial” repairs are not deductible, being of a capital nature.

Mortgage and other expenses

Expenses incurred to obtain a mortgage are not deductible. These could be appraisal fees, commissions or legal fees.

When you start making your mortgage payments, the amounts paid relating to your rental property will only be deductible to the extent of the interest portion. This would be ascertainable from the annual statement, which your bank will send you.

You will also be able to deduct the cost of insurance on the rental property as well as assessments and quit rent.

Rental as a business

The Inland Revenue Board (IRB), in its public ruling, states that “Where in conjunction with the letting of a property, a person also provides ancillary or support services/facilities, the letting can be considered a business source of income ” The consequence is that you are entitled to claim “capital allowances” on any plant and machinery used in the business of letting.

These could include air conditioners, refrigerators as well as furniture and fittings. Should the tax-deductible expenses in any one year exceed the rental income, then the excess being a business loss can be carried forward.

Keep good records

The IRB can be reasonable (based on the law) in deciding on the items you can deduct but you need to show them that you have adequate records of the expenses. Always be prepared to back up your claims.

Kang Beng Hoe is an executive director of Taxand Malaysia Sdn Bhd, a member of the Taxand organisation of independent tax firms worldwide. The views expressed do not necessarily represent those of the firm. Readers should seek specific professional advice before acting on the views.