Rent which financial year?

My tenant decided to pay 10 weeks rent in advance end of June, paid to RE agent. Agent then paid me on July 1 with corresponding statement date of July 1. Question, do I include this amount in 19/20 tax return or 20/21?

 

Its 2020 income. I had a client last year paid 11 months in advance. Not happy jan....This year he will have less income provided the tenant doesnt repeat the issue.

The agent statement is your income and shouldnt be adjusted - Even if the agent pays you for June on 1 July its still June income. They are your agent ! When they receive it as good as you receiving it

 

When tenant pays = when ATO considers it paid.

Trust account is only holding it on your behalf.

 

On this note, what about dates of invoices? Eg. Insurance or strata or repairs or land tax etc. dated 15th June but paid after 1st July?

 

Under agency law the agent is 'you' so when they pay something, they are doing on your behalf and when they receive something they are doing it on your behalf. it is the same as you doing or recieving.
Land tax is only deductible in the year it related to no matter when it is paid.

 

So if you get insurance bills dated 15th June every year and you pay it on the 1st July 2020 and the next one you pay it on the 20th June 2021, you can claim both in the same 2020/2021 financial year, is that correct?

 

Don't your monthly accounts match expenses to the correct period ?

 

No. Except land tax

 

We pay the water, council, insurance, strata bills ourselves. We don't get our agent to pay it.

 

Yes. But you cant "prepay" prior to being issued an account.

 

Do you do monthly financial accounts ?
Complete with debtors ,creditors and accruals ?

 

Many of these issues require you to decide whether you account on a cash or accrual basis. Most individuals account on a cash basis for tax while companies are generally required to use accrual basis.

The difference is that if accounting on a cash basis then income and expenses are recorded at the time the cash is received/paid so expenses invoiced just prior to the end of the financial year can allow you to move part of your deductions between financial years.

Accrual accounting is where the income and expenses are recorded at the time they are owed/incurred. The payment date ceases to be relevant for tax as any unpaid amounts are recorded as accounts receivable/payable.

 

Property investors cant choose "cash or accruals". Property rent is passive investment income unless it is business income which is very rare as the investment must be substantial. A company will have its accounting basis determine how it reports and calculates profit and is not different and a company owner doesnt automatically mean its a business. A company owner may deduct travel expenses but this may not include a car unless it owns one of course and that can give rise to FBT issues . Accrual also still requires that costs have been incurred through issue of a invoice or a statutory debt is incurred. (eg land tax need not be physically assessed)

A owner using an agent should not use an accrual basis. A owner with substantial self managed property could account for rental income and expenses on a accruals basis but this would be very rare

In some limited instances a cash basis property owner can include deductions for costs not yet paid. eg The water account is received and the tenant pays their consumption use element of 30 June. The taxpayer may be able to use the matching basis to claim the water account despite it being unpaid at 30 June as it was incurred and the income matching principles allow the deduction to be matched with income. Further examples are statutory charges such as unpaid rates and land tax.

ATO source on non-business aspects : A person who simply co-owns an investment property or several investment properties is usually regarded as an investor who is not carrying on a business of letting rental properties, either alone or with the other co-owners. This is because of the limited scope of the rental property activities and the limited degree to which a co-owner actively participates in rental property activities.