Any landlord here received rental in advance before?
If I earn $50k pa, rental is $20k pa, does it mean I need to pay tax for $70k? When i do tax return, I'll need to pay ATO instead of getting money back?
How can I reduce tax?
(I understand this is a forum. ..just wanted to see if someone share the same experience)
interesting….I need to do some reading abt trust to find out more
I have just searched "ATO Prepaid Rent" and the forum responses from the ATO advise that income is declared in the year it is paid irrespective of the period it relates to.
70k total? Meh pay an accountant or face false economy!
Let the accountant deal with it, less stress and headaches
accountant can't do much but to report the income and the OP will end up paying tax.
Refund it back to the tenant and ask him to pay next FY one in advance. So keep the one to 30th June and from July onwards you can receive lumpsum.
But what if rents go up 30% in 12 months time and his tenant has paid 12 months in advance based on the old prices? 30% of 20k is like $6,000.
well, it is likely they are on fixed term otherwise you will be a fool to pay 12 months in advance
Judging by headlines around housing I wouldn't be surprised if someone has offered their first born child to secure a rental.
@AustriaBargain: and judging by the cost of living increase that is expected, one would be a fool to take on a new born baby haha
For your investment property (which I'm assuming),
you can claim depreciation costs, of the items/fixtures of that property.
Also, any maintenance work you do on that property can be claimed as a portion,
however, this also means you got to spend some money too for that maintenance.
As far reducing tax or increasing your tax return,
you need to go into more debt, which you can 'claim against'.
This is the debt-driven economic model.
Otherwise, you are free to leave this model,
to go and live in another model,
which does not tax you in this way,
or turns into you a debt-slave.
You can ask Real Estate Agent to hold in their trust account and disbursed to you Monthly.
Doesn’t change the fact that the full amount is attributable to the current year. The real estate agent acts as the owner's agent, therefore money paid to them is money paid to the owner for attribution purposes.
the real fun starts when the tenant decides to break the lease during the tenancy and you need to return money!
in this case the money returned would probably be a tax deduction as it's an expense you've incurred
the money returned would probably be a tax deduction as it's an expense you've incurred
How's that? If someone pays me in advance, and then asks for the unspent portion back, I haven't incurred an expense.
If they prepay a years rent in May.
you declare the whole as income in June/July.
then they give notice of vacating in December (in a new FY) and you need to return the money ….. then .. you're gonna want to unpay those taxes. So how else are you going to declare that negative income in the new financial year other than claiming it as an expense?
@blitz: oooh. nice.
so you dont have to wait until the next eofy to claim as an expense, you can instead at any time during a FY make an ammendment and get the tax overpaid back quicker.
Thanks
Its very simple…
You earnt this income this year and therefore will be taxed this year.
The only real way to offset this is by Interest Only in Advance loan, many banks do this, unsure who you bank with, however this isn't an uncommon product.
If you're very worried, refinance to a bank that offers this facility or pay the tax this year and then next year you'll have effectively no rental income (unless you accept in advance again) and then pay less tax.
It really is that simple.
tenant paying a year's rent in advance is a possible red flag for drug criminals wanting to turn your house into a meth factory or mary you wanna grow-light setup
if they are already there - drive by to look for closed curtains no light possible black plastic sealed window openings to hide the bright lights of hydroponic marijuana crops - complete with stolen power from hacked nearby power poles
you need Jesus.
'How can I reduce tax?'
maximise your loan interest and repairs (not improvements - beware the difference - repair is normally a temporary fix to a part of something, improvement is normally replacing a whole thing with new) expenses
but then I read something about the money has gone into an offset account, which tends to reduce or avoid loan interest - recommended for home/PPOR - not so much for investment properties where you typically use the loan interest expense to balance the rent income - to reduce your taxable income and thus your tax.
My understanding was that (at least in NSW) the standard fair trading rental agreement advised you cannot take more than 2 weeks of rent in advance. Not sure if this is a legal requirement or just that of the standard contract.
Prepay your interest on the investment loan for 12 months.
Prepay your insurance.
Bring forward repairs / maintenance.
Offset with depreciation.
Should ask PwC
I asked them to call me back (Jim Chalmers)
Pay it to sper and get tax deduction
Yes. But this is done through a family Trust with a number of assets.
I recall that our accountant users the accrual method to help smooth out the transactions and distributions.