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 less than TaxTank
If your annual rental statement shows a different amount than what is recorded in TaxTank, it typically means rental income from a previous year was received in the current year. For instance, if your rental statement for the 2024 financial year shows a gross rent of $20,814.02, but TaxTank shows $22,763.40, there is a variance of -$1,949.38 that needs to be adjusted.
To rectify this in TaxTank, you can use the 'Funds held by Agent' adjustment category. This category reflects the scenario where rental income was earned in the last period but not paid until the next 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 = "Funds held by Agent"
Adjustment Amount = Variance
For example, if your rental statement shows a variance amount of $1,949.38, the gross income adjustment would be -$1,949.38. This adjustment will balance the gross income in TaxTank with your rental statements, ensuring your records accurately reflect the income received.
