Overview

In Simple Fund 360, managing the sale of a residential property involves four critical transactions. Each of these transactions correspond to different stages of the sale process and should be processed in separate transactions.

Here’s a breakdown of each:

1. Property Sale Deposit:

• This transaction is triggered when the deposit for the sale of the property is received before settlement.
• This transaction also allows for the recording of any disbursements, such as legal fees or agent commissions withheld from the deposit

2. Disposal of depreciable assets:

• Dispose of depreciable assets (e.g., Fixtures and fittings) that have been recorded as separate assets in the Trial Balance at their written-down value (WDV).
• The WDV should adjust the property's cost base before recording the disposal transaction.

3. Property Sale Settlement:

• This event occurs at the settlement of the property sale when the purchaser pays the balance of the sale price.
• In addition to recording the receipt of the remaining purchase price, this transaction also allows for recording any disbursements or expenses related to the sale. These could include legal fees, agent commissions, water rates, council rates, and other related costs deducted from the sale's gross proceeds.

4. Disposal of the Property  - Capital Gains Tax (CGT) Transaction:

• The final transaction involves recording any capital gains tax obligations arising from the sale of the property.
• CGT is calculated based on the difference between the sale price and the property's original purchase price, adjusted for any allowable expenses and adjustments. 

Instructions

Example: A property has been sold for a price of $2,000,000 (covered in Step 4). 

1. The purchaser pays a deposit of $100,000, and the agent's commission of $40,000 is withheld.
2. A Depreciable asset with a WDV of $2,500 as of the contract date
3. Settlement takes place, and the disbursements include $800 in council rates, $400 in water rates and legal fees of $2600. A cash amount of $1,897,800 is received 

1. Property Sale Deposit:

• Please record a journal on the date the disposal is received, with any disbursements.
• To be capitalised and not expensed, disbursements need to have 0 units entered to adjust the cost base. 
• The Total Deposit is posted to a holding account, e.g. Sundry Debtors, until the Disposal Transaction can be recorded. 

2. Disposal of depreciable assets

Before entering the transaction, please ensure that the depreciable asset in the Chart of Accounts, in the More Details section, has the asset subject to the CGT box unticked.

The following journal will be used to dispose of the depreciable assets and adjust the cost base of the property:

Additional Expenses

Any additional expenses (costs of sale) incurred in selling the property not part of the deposit or settlement amount must be added to the property's cost base before the Disposal Transaction. 

Example - $5,000 in advertising expenses paid separately. 

3. Property Settlement

• Please record a journal on the date the settlement is received, with any disbursements.
• To be capitalised and not expensed, disbursements need to have 0 units entered to adjust the cost base. 
• The Settlement Amount is posted to a holding account, e.g. Sundry Debtors, until the Disposal Transaction can be recorded. 

4. Disposal of property

Please make sure all cost base adjustments have been completed before this transaction.

The disposal of the property will be recorded by recording the proceeds from the sale.