Accounting Query

[amy21322]

Good evening,
A mental block ......If I receive income in July for work done in June, do I include that amount in the tax year when it was earned, or the year when it was actually received?
Similarly for rent received in July, in payment for June rental, is that a similar situation?
Also, does the same rule apply to dividends/distributions?
Appreciate your help.
Amy

 

[agent007]

Good evening,
A mental block ......If I receive income in July for work done in June, do I include that amount in the tax year when it was earned, or the year when it was actually received?
Similarly for rent received in July, in payment for June rental, is that a similar situation?
Also, does the same rule apply to dividends/distributions?
Appreciate your help.
Amy

If received in July it'll go to the next financial year.

 

[amy21322]

Hi, agent007,
Many thanks for that....I thought it might have been the other way around, so I'm happy to stand corrected.
Cheers
Amy

 

[boods99]

Good evening,
A mental block ......If I receive income in July for work done in June, do I include that amount in the tax year when it was earned, or the year when it was actually received?
Similarly for rent received in July, in payment for June rental, is that a similar situation?
Also, does the same rule apply to dividends/distributions?
Appreciate your help.
Amy

It depends on when you invoiced the work and if you are working on a cash system or on accruals...

If Cash - amount is included in the year the payment was recieved.

If Accrual - amount is included in the financial year the invoice is dated.

If you are involved in a business that turns over more than $2 mil, the ATO will insist you use the accrual method.


Hope this helps...

Boods

 

[bennido]

It depends on when you invoiced the work and if you are working on a cash system or on accruals...

If Cash - amount is included in the year the payment was recieved.

If Accrual - amount is included in the financial year the invoice is dated.

If you are involved in a business that turns over more than $2 mil, the ATO will insist you use the accrual method.


Hope this helps...

Boods

As a simple mum and dad investor, can I choose to use the simpler method (i.e. Cash) ?

 

[Pete]

Hi, Amy.

FYI, in Tony Compton's book "Rental Property and Taxation: an investor's guide" (I have the superseded 2nd edition. Wrightbooks. 2001. ISBN 1 876627 88 3) he writes (page 10) "Rental income is declared under the cash basis. ... If an agent receives the money for you, you declare the income in the year the tenant pays him, ... This is because the agent is acting on your behalf, and you are deemed to receive the rent when he receives it."

regards,