Tenant pays outgoings

Hi, in my commercial lease the tenant is to pay 100% outgoings via an estimate each month (water, council, strata, land tax).

My property manager properly charges 10% gst on top, pays the outgoings (except land tax which I pay) and my accountant does claim the GST on expenses in my BAS.

There is a small difference at year end.

My question is now on my company income tax return, apparantly my accountant says since the tenant pays outgoings then I should not be claiming the outgoing paid by tenant as income, and the relevant expenses paid should not be included either.

Does this sound right? Since i am claiming it on my BAS but not in income tax?

Thanks

 

Some expenses eg water & rates are GST free supplies so when the tenant reimburses you there is a small difference between your expense and the reimbursed amount which you remit to the ATO.

You must be registered for GST to charge GST to the tenant.

GST can be added, where appropriate, as the supply is to you not to the tenant.

If the agent doesn't charge gst then you would be short changed. They can't add gst to expenses which already include gst over the entire expense eg gardener or maintenance o/g.

Sad to your question:

It is an expense to you (as the tenant is not charged directly) & income - cancelling each other except for the GST.

 

Thanks Scott, that makes much more sense!

 

No it doesnt. The reimbursement of outgoings is income and the payment is a deduction. The amount the tenant pays is an estimate and I assume its adjusted from time to time. And why at year end there may be a variance. You cant have "income and expenses" for a BAS that are ignored for tax purposes. If the tenant pays you then its income. If you then pay the same amount as a outgoing it is a deductible outgoing. You should not set the two off.

You are confusing the outgoing money received as being the same item as the expense paid. In reality there are two transactions. One is income, the other an expense.

Not reporting it may even enhance the risk of audit as taxable supplies on the BAS and the return wont be similiar. Firtunately a company doesnt have a rental schedule.

 

It sounds as though the accountant is thinking the expenses are paid/claimed under an agency arrangement for one return but not the other. Doesn't make sense.

 

No. The rates etc are an expense, and the payments by the tenant are income, and should be recorded as such in the company ITR.

 

Wrong. You need a new accountant as your current one is incompetent.

 

A newbie question about managing commercial outgoings. With the strata levy, water and etc, do people I'm currently receiving the expenses directly and forwarding it to my management agent to the tenants to pay for the expenses. Surely there is a better strategy than this, because in the event the tenants are late or non-payment, I don't want to be incurred the late fees.

Also, the tenants are responsible for paying the management fees as well, so is it normal practice for the landlord to pay the management fees first than it gets reimbursed or paid by the tenants?

 

No, generally the landlord pays the rates etc, then on charges them (depending on the lease) to the tenant.