Navigating the complexities of tax laws can be daunting, but we’re here to simplify it for you. According to the Income Tax Assessment Act 1997 (ITAA 1997), Section 6-5, rental income is considered ordinary income and must be declared in the year it is received. This means if your property manager collects rent on your behalf, you need to report that income in the same year, even if it hasn’t hit your bank account yet.
If your annual rental statement is more than TaxTank
If your annual rental statement shows more income than what is recorded in TaxTank, it typically means rental income for the current year was received in the next financial year. For example, let’s say your rental statement for the 2024 financial year shows a gross rent of $25,500.90, but TaxTank shows $23,810.05. This results in a variance of $1,690.85 that needs to be adjusted.
To correct this in TaxTank, you can use the 'Rent not paid out (Held by agent)' adjustment category. This category captures the scenario where rental income was earned in the current period but paid in an earlier or later period.
Here’s how to adjust it:
Navigate to the Property: Go to the relevant property in your TaxTank account.
Select the Income Tab: Click on the 'Income' tab.
Add Adjustment: Click the 'Add' button.
Complete the Fields: In the popup, fill in the fields
Net amount = $0.00
Date = 30.06.2024 (or last day of the relevant financial year)
Category = "Rental Income"
Description = EOFY Timing Adjustment
Adjustment Category = "Rent not paid out (Held by agent)"
Adjustment Amount = Variance
For example, if your rental statement shows a variance amount of $1,690.85, the gross income adjustment would be $1,690.85. This adjustment will balance the gross income in TaxTank with your rental statements, ensuring your records accurately reflect the income received.
