Sneaky EOFY Property Manager practices

Discussion in 'Property Management' started by NedKelly, 1st Jul, 2021.

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  1. MyPropertyPro

    MyPropertyPro REBAA Buyer's Agents Sutherland Shire & Surrounds Business Member

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    Sure, people are free to run their portfolios how they like but it doesn't mean the mean the theory is wrong. It's just another tool in the proverbial tool kit to run a property portfolio as efficiently as possible. People are free to take or leave whatever they like.

    Finding where the next $100k is coming from and optimising your tax and cash flow situation using everything available aren't mutually exclusive activities. If anything, they form part of a synergised approach. I wouldn't have the portfolio I do had I not optimised in every possible area consistently over the years.

    "Look after the pennies and pounds will look after themselves"

    - Andrew
     
  2. Owl

    Owl Well-Known Member

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    Do the ATO see things the same way as you?

    My PM prepares statements after the end of each month. So the statement for "June" (from 31 May 2021 - 1 July 2021) shows debit entries on 1 July for Management fees, sundries and payment to me. The one page annual Financial Statement (..to 1 July 2021) my PM prepares also includes the management fees and admin fees from the "June" statement.

    I was going to simply use the numbers in the annual financial statement prepared by the PM. The management fee is a commission based on rent collected ... so I was assuming the commission is payable as soon as the tenant pays the rent to the PM. The admin fee is payable at the end of the month. So the fees to the PM are payable in June, but the PM does the transfers on 1 July. It is clear that the fees relate to June, the PM earned the fees in June and they were payable in June.

    Your saying that the ATO take the view that the fees were actually transferred into the PMs account from the trust account on 1 July therefore they are excluded from the 20-21 tax year. Is that right? ( I know next to nothing about tax and the ATO - but this strikes me as a little odd.)
     
  3. D.T.

    D.T. Specialist Property Manager Business Member

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    Sounds very silly, not sure how that'd work.

    We got around the issue the OP mentions by paying bills on the 30th and paying landlords on the 1st. Works well for everyone that way.
     
  4. OzziMelbourne

    OzziMelbourne Well-Known Member

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    Questions
    1.How do I know when rent was received by the agent?
    2. Is there any ATO ruling on this?

    I am asking just because I feel that an individual may accept any system as soon as this individual follows this system consistently
    A/ variant 1 is when the money would hit my account
    B/ variant 2 when the money would hit agent’s account
     
  5. Trainee

    Trainee Well-Known Member

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    you feeling is based on….?
     
  6. OzziMelbourne

    OzziMelbourne Well-Known Member

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    It’s based on how companies can sometimes select a certain approach in accounting and follow it as soon as it’s consistent
    Again, so far nobody proved otherwise. Any ATO ruling on this?
     
  7. Michael Mitchell

    Michael Mitchell Well-Known Member

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    Office of Fair Trading says disbursements (and month end) must be done between the 1st-5th of the following month.

    Income (rent) and expenses (bills and r&m etc) get transacted during the month, and then between the 1st-5th of the following month the disbursement is made to the Lessor and then the Agents fees are deducted.

    It's up to the Lessor's accountant how they want to deal with that but that is the law so far as the trust money, agents fees and disbursements go (Qld anyway, don't know about other states).
     
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  8. Ruby Tuesday

    Ruby Tuesday Well-Known Member

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    It pays to not be penny wise and pound foolish,you should always be flexible and open minded, not follow set rules and take advantage of every opportunity you can. Money in an offset gives a very poor return on your money. It defeats the purpose of using property for leverage. One day of 2% p/a interest V 1000's x more in oportunity cost. Buying companies that have had big losses for the year in the last week of the FY is a better place for money and best day to get either good yeild or fast profit from EOFY profit offsetting and new year money, beaten up company value buying. SSM for example bought on 30/6 for 85c and sold 2 days later for a 9% gain. Compounding makes money, not worrying about trying to save less than a piitance
     
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  9. MyPropertyPro

    MyPropertyPro REBAA Buyer's Agents Sutherland Shire & Surrounds Business Member

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    I think you've missed the point as no seasoned investor would advocate leaving money in an offset account as strategy in place of leverage. I can assure you that I have been as aggresive with leverage as anyone over the years and it has paid off well. For some reason on this forum, people tend to assess a comment as doing one thing over another. Building a good, solid and optimised property portfolio requires a multi-faceted and synergised approach using all available options over a holding period. It's the reason I've built a large double digit portfolio across this country and overseas so I'm well versed in how to use leverage and manage cash flow using various complementing strategies.

    Anyone can buy a few investment properties. Holding them all for 15-20 years whilst growing the portfolio and not being under financial strain is where people usually fall down. They sell too early, often because they failed to look after the small things whilst focusing solely on the big things and when the going gets tough realise they really hadn't taken a holistic approach from the outset.

    As I said, people are free to run their portfolios how they see fit and everyone needs to find their own path, hopefully to success.

    - Andrew
     
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  10. MWI

    MWI Well-Known Member

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    Agree.
    One agent always pays beginning of next month but on Yearly I&E statement added June 2021 income and outgoings. So it will encompass this FY2021 even though I have received rents in early July 2021!
     
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  11. OzziMelbourne

    OzziMelbourne Well-Known Member

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    What if the agent gets the money but doesn’t pay you at all?
    Imagine a simple case: an agent gets rent for a couple of months, then the agency becomes a bankrupt & doesn’t pay you anything but you got a nice statement from the agent that the money has been received by them. Will you include such virtual money into your tax return as received simply because the agent received funds?
    I appreciate that an agent is my rep but they are a separate business entity.
    Interestingly enough, several years ago I have been audited by the ATO and they didn’t say anything about my calculations, while I used a method of when $ hits my account this is the date to account such money.
     
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  12. Jarrad Mahon

    Jarrad Mahon Active Member

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    We are also able to pay out monthly if owners prefer and some have opted for this over weekly payouts.
     
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  13. Zebra

    Zebra Well-Known Member

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    It's an interesting topic Ned Kelly. If you read the ATO Rental Properties Guide it states if you have an agent then the income is regarded as being received when they receive it. The fact that the PM generates the June monthly statement on 30 June, but you don't receive the funds until 1 July doesn't matter the income goes in 30 June. The problem I find is on the 30 June statement the PM charges their fees, but when they run the EOFY report the 1 July fees aren't on there. Like someone else said it is swings and roundabouts but it's annoying when I'm trying to reconcile it back to the EOFY report which they produced on 30 June (or maybe not, depends on the PM) and it doesn't agree.
     
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