Does an invoice need to be paid before 30th June?

There is no CGT cost base element for the cost of Div 40 assets, although I agree practically the effect is the same as if it was added to the cost base.

The way I understand it works is, say you purchase a property for $1,000,000. $900,000 relates to the land & building and $100,000 relates to Div 40 assets:

• $900,000 - CGT cost base (excluding incidental costs)
• $100,000 - Div 40 cost
• $1,000,000 - Total purchase price

You hold the property for 6 years. During that time you can claim $60,000 in depreciation under Div 40. (Ignore Div 43 for this example.) The written down value (or 'adjustable value' using the terminology of the ITAA 1997) for the Div 40 assets after 6 years is $100,000 - $60,000 = $40,000

You sell the property after year 6 for $1,500,000. Your proceeds for the CGT event are $1,500,000 less the market value of Div 40 assets at the time of sale. Practically, people assume the market value of the Div 40 assets is equal to their written down value (in this example, $40,000) so there is no balancing adjustment required for Div 40 purposes. (Is there any ATO guidance on this valuation approach??) So proceeds for CGT are $1,500,000 - $40,000 = $1,460,000

The CGT calculation therefore is $1,460,000 - $900,000 = $560,000 gain (ignoring other costs and before CGT discount). (This is practically the same as $1,500,000 - $1,000,000 + $60,000 (as an add back for the Div 40 deductions that should have been claimed).)

There is still an issue if you don't claim the Div 40 deductions when you are entitled. Your written down value is still reduced regardless of whether you claim the depreciation or not. And in the case of Div 40, you don't have the protection of PS LA 2006/1.

 

So for the gurus, if you pay a bill on a credit card this FY and the card is due next FY, is it deductible in this FY?

 

Yes because you have paid it. It is similar to borrowing lmi or other costs.

 

Thanks that what I thought, just checking

 

Agree. The cost base adjustment rules says "could have claimed" rather than "did claim". Not claiming eligible deductions doesnt make sense IMO.

 

Hmm, so it seems I was completely confused from the get go. My confusion relating to whether it could be claimed at all, rather than how and when. I had miss-read information at the time which led me to then believe that as it was obviously an "initial repair" it could not be claimed at all from the outset, (either in full or depreciated), where'as it seems an initial repair, (or as it replaced clay pipe with PVC may be seen as a capital works improvement?) either way could actually have been depreciated from the outset?

I was under the impression that an initial repair was not claimable or depreciable at the outset as it arose generally prior to the asset being income producing, I think that's where I got my mind stuck on it becoming part of the cost base instead.

It was done in 2013/2014 fin year from memory. Have I missed the boat in now adding this to my depreciation schedule from this year forward, or would i need to have the previous years files amended to add it in?

 

Question around end of year accounting...... If your PM is doing their end of year statements tomorrow (1st July) rather then today and makes payment to you on the 1st of July for rents relating to this financial year. How would this rent be treated? i.e. what financial year would we take account for it? thanks

 

The agent is your trustee, so when they receive payment you are considered to receive it.

 

The old 1st of July statement....If its for June rents than just treat it as June.
Most PM's do try to send stmts a few days earlier to sweep their trust account down.

 

Similar question. I received an end of year statement for an IP I held last year which became an PPOR just after 1 July. The tenant skipped out on the rent and the agent managed to recover about $100, they paid it into my account after 1 July. I had put this money into my previous FY income statement as the money was 'earned' that year, I just didn't receive it until later. Was this a mistake ? should I try and fix this now ? It seems such as silly amount in the scheme of things and would make for completed accounting.

Also on a different IP I paid rates after 1 July that were issued (but not due) before 1 July this year. Are they an expense for last year or this year ?

thanks Logan

 

income when received (by your agent).
Expense when paid.

 

Similar to Daniel & Propogate - match the expense to the income. The actual cash flow is not the real issue, accrue the expense if the work was done last fiscal but the cash moves this fiscal.
It would be cleaner if the invoice was dated last fiscal.

 

Not correct but this wont concern the ATO. The arrears of income are income in the year received. I wouldnt bother trying to fix it.

 

Do both. Get the previous years amended and then make sure you include it going forward. Some time ago, we had to get a few years of amended returns (can't remember the exact reason now, but was probably depreciation) and it cost hardly anything and was a really nice lump sum!