Is gross or net rental income (from IP) calculated for taxable income purposes??

Discussion in 'Accounting & Tax' started by Nightowl, 3rd Jun, 2020.

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  1. Nightowl

    Nightowl Well-Known Member

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    Hi all,
    This is like tax and investing 101, but I always thought that it was the NET rental income, and not GROSS rental income from my IP that was calculated towards my taxable income.
    So I have an IP and my gross rental income for FY 2018-2019 was $23,000, but after deductions (such as the interest repayments, repairs etc) I have about $4k net income.

    I thought: Assessable income − allowable deductions = taxable income

    Looking at my tax return from 2019, it looks like my accountant has added $23,000 to my employment income, to get to a total of my taxable income instead of $4,000. Surely they've made a mistake!! I will be calling them first thing in the morning, but not sure I can sleep in the meantime!!! I've been reading the ATO website and googling but now I'm confused .Any advice gratefully accepted!!!
     
  2. Gaurav Uppal

    Gaurav Uppal New Member

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    HI may be worth checking detailed statement as there must be losses section too.
     
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  3. mr_alex

    mr_alex Well-Known Member

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    Wouldn't your gross rental income still be reported, but also all your interest deductions etc are being claimed, leaving 4k of actual income to be taxed.
     
  4. Trainee

    Trainee Well-Known Member

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    Look at your notice of assessment. How much is taxable income? How much is your wage?

    was there a big bill to pay on the assessment? If no deductions were claimed, you would have a big bill to pay.

    even if no expenses were claimed (unlikely imho), tax returns can be amended. No need to lose sleep.
     
    Last edited: 4th Jun, 2020
  5. Mike A

    Mike A Accountant Business Member

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    you are correct. Rental income less rental expenses is added to your assessable income.

    does your tax return have a rental property schedule which breaks this down ?

    if they have merely added $23k to salary and wages this could cause you major problems as the ATO will data match your property to your tax return and without a rental property schedule think you haven't declared your rental income.

    Definitely give them a call to find out what they have done.
     
  6. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    I sometimes find that the taxpayer looks at label IT8 "Estimated Total Income". I wish I was paid a bonus of $100 for every taxpayer who said that and asked me to remove it (I cant). This is not assessable income. It is a statistical reported amount used by the ATO that includes total INCOME from all sources and that includes a share of gross rental income too. The key labels and matters to review in the return are :
    1. Taxable Income or Loss and
    2. The tax estimate provided and it should use the expression Taxable Income. It should be same as 1. Most agents will include this as either a front summary or at the end of the return.

    When assessed the Assessment notice should be the same as the above excepting if the ATO amend it automatically for things like excess super contributions
     
  7. Nightowl

    Nightowl Well-Known Member

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    Hi mr_alex thanks for your reply Yes. the interest deductions etc were claimed, and $4k rental income on individual tax return form. My bad, I wasn't clear, its on a PAYG instalment notice, where the income that was used for calculation purposes was $23,000
     
  8. Nightowl

    Nightowl Well-Known Member

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    Thanks Paul for your reply. Sorry I wasn't clear before. It is actually what's on my PAYG installment, not the tax return.
     
  9. Nightowl

    Nightowl Well-Known Member

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    Thanks for your reply. Yes my tax return does have a rental property schedule. I wasn't clear before. My accountant has added the $23,000 gross rental income, to my employment income on my PAYG installment notice.
     
  10. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    PAYG Instalments should be based on the last return lodged and taxable income with some voodoo adjustment for inflation. The tax agent cant add gross rental income to PAYGI"...the ATO do this calc.

    On a new PAYGI letter it shows why you entered and a table that includes the income total eg $300K and then the estimated tax for this income year.....The $300K doesnt assist explanation in m y view and could be confusing as you have found. Compare the tax shortfall to the return lodged and if it is similiar to the ESTIMATED TAX on this letter its correct. In any event an excessive instalment can be varied provided you do so before the due date. Not based on the letter
     
  11. Mike A

    Mike A Accountant Business Member

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    ah ok that is totally different.
     
  12. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    Mike - The ATO have a new PAYGI letter only seen in past few days with total income as a guide to why they were included. As well as the shortfall amount. It does confuse. It doesnt actually clearly tell then whjat their instalment will be which is bizarre. The former letter did but then it said - we will send you a notice. I found almost all cliensts were never sent this letter and had to lodge complaints with the TO. They found in taxpayer favour in each case and sent a apology (frame that) . ATO said they would improve the process ...Not sure they have. Lets see if they issue notices rather than telling people they have a debt.