ITWV - Years rent up front

[SupaRex]

Hello all,

I'm about to lease a property and the tenant has agreed to pay the full 12 months rent up front. I'm just wondering how to account for this on next financial years ITWV. I've rung the ATO, but it was too hard a question for they front line people, so now I'm waiting for a call back (not holding my breath).

Any advice much appreciated.

Cheers,
SupaRex

 

[HotRod]

Let them pay for 2 months now and then 10 months in July.

There is also an issue what heppens if they decide to move in 6 months time?

They'll want their money back, don't go spending it all.

You really can't spend the money as they could up and leave at any time and want their money back for the time they wont be there.

 

[INXS]

Hello all,

I'm about to lease a property and the tenant has agreed to pay the full 12 months rent up front. I'm just wondering how to account for this on next financial years ITWV. I've rung the ATO, but it was too hard a question for they front line people, so now I'm waiting for a call back (not holding my breath).

Any advice much appreciated.

Cheers,
SupaRex

Don't ask the ATO any tax questions. They are likely to give you the wrong answer. sad but true. Your rental income is taxable in the income year it is received. Therefore if you receive the rent before 30 June 2012 it will be taxable this year. If this is going to happen you may want to consider paying interest in advance and getting the tax deduction this year to offset the higher income. Go and get advice from your Accountant who can advise you based on all your personal circumstances.

 

[Rixter]

I agree with INXS....go ask your chosen tax accountant. It all depends on your financial circumstances. Only you know ALL your income & expense details.

 

[Doovalacky]

Hello all,

I'm about to lease a property and the tenant has agreed to pay the full 12 months rent up front.

Not up on the Vic laws.
From my understanding of the WA ones we can't require a tenant to pay more than 2 weeks in advance.
I know my PM recently made a tenant send a written note saving that they were voluntary paying in advance 10 weeks rent due to going on holidays.

Might be something to check?

 

[Scott No Mates]

The lessor can'trequire the tenant to pay more than 2 weeks in advance BUT the tenant can voluntarily pay more.

As for what you do with the rent, as above the tenant may break the lease so you may consider putting it into the offset account, pay the years interest upfront and retain access to the money.

 

[Burramys]

It may be wise to get something in writing, not an email, from the tenant that the pre-payment of rent is their idea. Having the bulk of the pre-payment in July is recommended.

Due to rather high income this FY I’m having May and June rent paid in July. A number of fees such as local council rates, owners corporations, water, and insurance are being paid in June, all less than 12 months payment. If you defer income and pre-pay expenditure then even in the 15% MTR there’s a good return. This does not work under all circumstances, so professional advice is indicated.

 

[monalisa]

Flood levy!!! there is an additional 1% flood levy to pay this year, so it may be worthwhile delaying the receipt of rent.

 

[buzzlightyear]

Flood levy!!! there is an additional 1% flood levy to pay this year, so it may be worthwhile delaying the receipt of rent.

The marginal effects for someone who is on $100k taxable income and then adding $25000 of prepaid rent is only $250....Not significant imo.

You could also prepay interest depending on your loan product or the prepaing of other expenses if you are concerned about tax.