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Rent unpaid at 30 June 2020 due to Covid Negotiations

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Devotee Registered Tax Practitioner

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Replies 1

@NicolaATO 

 

Nicola,

 

I am having a "discussion" with a CA firm about deductibility and claiming of GST credits of Rent unpaid at 30 June 2020 due to Covid negotiations.

 

By way of example, Rent is say $20,000 incl GST for the months of April, May and June 2020.

Tax Invoices for these amounts are on hand.

 

I am informed by the Director that 60% of April Rent, 40% of May Rent and 20% of June Rent will be waived (there is no deferral). The Agreement is yet to be signed.

 

In preparing the April - June BAS and attempting to finalise the FY20 Accounting, I have entered a Payable based on the reduced Rent.

 

2 Accountants in a CA firm are advising me in writing to accrue the full amount of $20,000 per month.

 

My accruals are $36,000 whilst the firm of CA wishes to accrue $60,000.

I wish to claim $3273 of GST Credits whilst the CA firm wishes to claim GST Credits of $5455 in the April - June 2020 BAS. I wish to have a deduction in FY20 for April - June 2020 Rent of $32,727 whilst the CA firm wants a deduction of $54,545.

 

The CA would adjust in FY21 for over claiming of GST Credits and Tax Deductions.

I believe it is better to use the most likely scenario.

The 2020 Company Tax Return is not due until May 2021 but the April - June 2020 BAS is due by 25 August.

I am feeling uncomfortable claiming GST Credits and preparing FY 20 Financial Statements per the CA instructions.  

 

Could the ATO please advise the correct treatment.

 

Trust all is well.

 

Duncan

 

 

 

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Community Support

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Hi @DuncanS

 

Thanks for your post.

 

You have asked an interesting question. Based on the information you have provided, we understand your logic as well as what the two accountants have advised you.

 

As you know, when accounting for GST on a non-cash basis you can claim GST credits in accordance with the information on the tax invoice before a payment is made. From what you have said, the tax invoices that you currently have reflect the larger rent amounts. It is also important to note that you have four years to claim credits.

 

We are going to have a closer look at your GST credit and tax deduction questions and get back to you as soon as we can.

1 REPLY 1
Highlighted

Most helpful response

Community Support

Replies 0

Hi @DuncanS

 

Thanks for your post.

 

You have asked an interesting question. Based on the information you have provided, we understand your logic as well as what the two accountants have advised you.

 

As you know, when accounting for GST on a non-cash basis you can claim GST credits in accordance with the information on the tax invoice before a payment is made. From what you have said, the tax invoices that you currently have reflect the larger rent amounts. It is also important to note that you have four years to claim credits.

 

We are going to have a closer look at your GST credit and tax deduction questions and get back to you as soon as we can.