Agents Fees/ Rental Property

[Xap]

Got a question about rental income and tax returns:

My tenant pays $12,600 per annum to the agent who then deducts their 7% ($882) manangement fee who then pays me $11,718 into my bank account.

What is the amount of assessable income on my tax return; $12,600 or $11,718?

My thinking is $12,600. The 7% management fee along with other expenses are then claimed as a deduction.

Is this correct?

 

[alexlee]

Got a question about rental income and tax returns:

My tenant pays $12,600 per annum to the agent who then deducts their 7% ($882) manangement fee who then pays me $11,718 into my bank account.

What is the amount of assessable income on my tax return; $12,600 or $11,718?

My thinking is $12,600. The 7% management fee along with other expenses are then claimed as a deduction.

Is this correct?

Same end result so it doesn't matter. Rental income is 12,600 and management fee is 882. But either way your net taxable income is 11,718. The tax office won't have an issue with you putting rent of 11,718 and no management fees.

 

[Xap]

Yes, but the assessable income is $12,600. Correct?

 

[travelbug]

The accountant writes down income = $12,600. Costs $882. = Assessable income is $11,718.

Your assessable income is what comes in minus what goes out. ie the end figure. Rent goes in then you take out all the things that cost you money to hold the unit (interest, fees, rates, insurance etc). That is what your net figure is. You subtract (or add if positive) to your wage. That is what you pay tax on.

 

[Xap]

Taxable income = assessable income - deductions
income tax = (taxable income*rate)-offsets.
Net income = taxable income - income tax

Therefore, the $12,600 is assessable income, the 7% ($882) agent fee is a deduction and the $11,718 is the taxable income which is subsequently taxed.

Assessable income is 'ordinary income' which includes rents received from investment assets. Therefore I would think this amount ($12,600) would need to go on your tax return as the gross income received.

Is this correct?

 

[Rob G.]

Taxable income = assessable income - deductions
income tax = (taxable income*rate)-offsets.
Net income = taxable income - income tax

Therefore, the $12,600 is assessable income, the 7% ($882) agent fee is a deduction and the $11,718 is the taxable income which is subsequently taxed.

Assessable income is 'ordinary income' which includes rents received from investment assets. Therefore I would think this amount ($12,600) would need to go on your tax return as the gross income received.

Is this correct?

Your accounting use of "net income" is unfortunate because income tax is not an expense. Better to use "after-tax income".

Ordinary income is usually assessed on a gross receipt basis, however statutory income is often assessed on a net basis (e.g. net capital gains, or net income of a trust attributed to a beneficiary).

You put your gross rental receipts in your tax return along with your rental deductions in specific areas.

That way the ATO can spot if you are negative gearing, as well as adding back net losses for working out any Centrelink benefits.

Also, if you have an overseas property or you are a non-resident investing here they like to see your interest expense relating to rental income for possible thin capitalisation issues.

Cheers,

Rob

 

[travelbug]

Are you doing your own tax?

With your knowledge I'd think about getting an accountant.

 

[Xap]

No, I am not doing my own tax just and trying to translate what the accountant is saying.