June rent paid in July - which FY to report?
- Thread starter Mr T
- Start date
The RE agent is an "agent" for you as taxpayer and there is a "constructive receipt" when the agent receives and accounts for income. Some agents may pay on 30th June and if the taxpayer uses same bank its same day value where another bank is next day value. That doesnt change the recognition of income and its financial period. Some agents also withhold for a future expected expense - This doesnt mean its not income just because they didnt remit the funds to you. They hold the taxpayer money on trust. The constructive receipt rules considers when the proceeds can be dealt with on the taxpayers behalf.
The concept of "cash" accounting is often poorly understood and its not as straight fwd as some suggest. For example a bank deposit - Its income on receipt, not when banked.
This same issue happens in small business with credit card sales. Often settled a day or two after year end. Its still income when the card is presented not when the funds credited. s6-5(4) ITAA deals with income according to "ordinary concepts" and the derivation rule would apply rather than "cash receipts" as such.
The concept of "cash" accounting is often poorly understood and its not as straight fwd as some suggest. For example a bank deposit - Its income on receipt, not when banked.
This same issue happens in small business with credit card sales. Often settled a day or two after year end. Its still income when the card is presented not when the funds credited. s6-5(4) ITAA deals with income according to "ordinary concepts" and the derivation rule would apply rather than "cash receipts" as such.
Thanks for your response.
The information is a bit too technical for me.
To summarize -It should be reflected in FY2013/2014 ?
Thanks once again
Thanks, Paul, and sorry for screwing up. :/
This now means that my ITRs going back a couple of decades are out, in some cases by thousands and thousands of dollars. In the given scenario, would the ATO fine you if you declared the rent in 14/15 rather than 13/14?
I have more than a dozen tenants, and I don't even know what dates they pay the real estate agent; I only know when I receive the money. How would I ever work this out?
This now means that my ITRs going back a couple of decades are out, in some cases by thousands and thousands of dollars. In the given scenario, would the ATO fine you if you declared the rent in 14/15 rather than 13/14?
I have more than a dozen tenants, and I don't even know what dates they pay the real estate agent; I only know when I receive the money. How would I ever work this out?
The fact you are consistent probably demonstrates lack of diligence rather than a concern. The best way to correct it is to prepare this years using the agent report and adjusting for the June 2013 income to July 2013. Thereafter just use the reports.
The ATO cant amend after two years in many instances. I doubt the differences add up to much in last 2 years.. If you understate one year you overstate the following and its probably at a fairly consistent marginal tax rate. I wouldnt be worried. But I wouldnt continue. I would document this issue and do some quick numbers to see if last 2 years was a material difference. Then discuss it and make a choice to amend or just leave it alone. It would be held on file so explanation can be given if questions happen later. I doubt it.
I wonder what else you may be doing wrong ?? It may be a good example of why using a tax agent to prepare and lodge may avert a issue. Typically I review client summaries for such issues as apportionment, timing and incorrect claims (low and high) as well as deductions you havent claimed. Loan interest, apportionment, refinance and deductible fees, Basic advice on CGT costs and repairs etc. Check and verify CGT calcs and updating CGT records. Doing the numbers in the tax return is the simple bit.
The ATO cant amend after two years in many instances. I doubt the differences add up to much in last 2 years.. If you understate one year you overstate the following and its probably at a fairly consistent marginal tax rate. I wouldnt be worried. But I wouldnt continue. I would document this issue and do some quick numbers to see if last 2 years was a material difference. Then discuss it and make a choice to amend or just leave it alone. It would be held on file so explanation can be given if questions happen later. I doubt it.
I wonder what else you may be doing wrong ?? It may be a good example of why using a tax agent to prepare and lodge may avert a issue. Typically I review client summaries for such issues as apportionment, timing and incorrect claims (low and high) as well as deductions you havent claimed. Loan interest, apportionment, refinance and deductible fees, Basic advice on CGT costs and repairs etc. Check and verify CGT calcs and updating CGT records. Doing the numbers in the tax return is the simple bit.
I have more than a dozen tenants, and I don't even know what dates they pay the real estate agent; I only know when I receive the money. How would I ever work this out?
The agent summary for each property each year. Thats their job. Why recreate it ?
Agent gives me statements with each payment, but they charge extra to compile them into an annual statement, so I usually just add them up. My statements and payments dated 1 July, I've been counting as part of the new FY. I just give the annual summary to the accountant, and she's never told me there was any problem with doing it this way.
Also, the agent statement only tells me what period has been paid for, and when they disburse the money to me. It doesn't say on what date the tenant paid the agent.
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Hang on - does it make a difference how the statement from the real estate agent is labelled? I can see how "June 2014" statement would be 2013/14 FY, but I get fortnightly disbursements and the statement date is the date of the disbursement, not the time period.
So would a statement labelled "1 (or 2 or 3 or whatever) July 2014" as opposed to "June 2014" make any difference?
So would a statement labelled "1 (or 2 or 3 or whatever) July 2014" as opposed to "June 2014" make any difference?
Something worth mentioning in this context is to consider which accounting method you use. See https://www.ato.gov.au/Business/Ded...-claim-and-when/When-is-an-expense-incurred-/ for an explanation of that.
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*This is not tax advice and not even tips for living. You should ask an opinionated, inexperienced, uninterested 3rd party to consider your circumstances and advise accordingly.
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*This is not tax advice and not even tips for living. You should ask an opinionated, inexperienced, uninterested 3rd party to consider your circumstances and advise accordingly.
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To push a different button ??? You need to have a chat with the agent. They are only doing part of their job and perhaps you should ask them to charge you less...Or throw in the annual report for nothing. Its a single page or 2 of A4 paper. Why should you pay a $25 annual fee for that ?? Thats just rorting. There are plenty of good agents who would quote and offer a free annual report I'm very sure. Keep the *******s honest.
The agent is "your agent" for tax purposes and better do their job or they are creating a tax problem you dont need.
Taxpayers with passive income dont "choose" which method to use. Property investment is rarely a business except where there is a substantial scale.
