Query
For property disposal, an SMSF may receive settlement proceeds in installments. How can this be accounted for?
Solution
Settlement within the same Financial Year
The sale of a property held by an SMSF took place on 01 Dec 2019 of $100,000. $90,000 was to be received on 01 Jan 2020, with the remaining balance to be received by 01 Feb 2020. $3,000 was incurred as a conveyancing fee to be taken from settlement proceeds.
1. To record the first receipt on 01 Jan 2020.
| Dr. 77200/Rental Property (unit:0) | $3,000 |
| Dr. 60400/Bank | $90,000 |
| Dr. 94910/ Investment Movement Data Clearing | $7,000 |
| Cr. 77200/Rental Property (unit:1) |
$100,000 Disposal Contract Date: 01/12/2019 |
Note
a. $3,000 is recorded as a cost base adjustment, thus the unit is entered as "0".
b. $100,000 is recorded for the disposal of the property, thus the unit is entered as "1".
c. Disposal Contract Date for the rental property should be recorded in the more details panel of the account, when recording the transaction, to ensure capital gains/losses are correctly calculated.
d. 94910/ Investment Movement Data Clearing account is an interim clearing account. Custom accounts other than clearing accounts may also be used.
2. To record the remaining balance received on 01 Feb 2020.
| Dr. 60400/Bank | $7,000 |
| Cr. 94910/ Investment Movement Data Clearing | $7,000 |
This also offsets the clearing account or other custom accounts.
Please also refer to how to process rental property transactions
BGL does not provide tax advice. Other accounting treatments may also suit.
Settlement over two Financial Years
The sale of a property held by an SMSF took place over two financial years. The purchase price of the property is $100,000, and the deposit of 10% was received on 01 April 2022, with the remaining balance to be received by 01 Jan 2023. As capital gains is to be included in the 2022 financial year (contract date), how do I process this?
1. To record the first receipt on 01 April 2022
| Dr. 60400/Bank | $10,000 |
| Dr. Recievable Account | $90,000 |
| Cr. 77200/Rental Property (unit:1) |
$100,000 Disposal Contract Date: 01/04/2022 |
Note
a. $100,000 is recorded for the disposal of the property, thus the unit is entered as "1".
b Disposal Contract Date for the rental property should be recorded in the more details panel of the account, when recording the transaction, to ensure capital gains/losses are correctly calculated.
c. Proceeds are recorded into a Recievable account. This can be a custom account, linked to the property.
2. To record the remaining balance received on 01 Jan 2023.
| Dr. 60400/Bank | $90,000 |
| Cr. Receivable Account | $90,000 |
This also offsets the clearing account or other custom accounts.
Please also refer to How to link accounts to a property
BGL does not provide tax advice. Other accounting treatments may also suit.