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RE: Gearing a property in a Super fund

MySF2 — Thu, 22 Jan 2009 22:48:27 GMT

Please go to System Setup > General Ledger, select the account and then click on the 'Edit account' link at the bottom of the list of accounts. Tick the 'Taxable' box on the small screen that pops up and then click on Save and then click on Exit.

You should find that the list of accounts gets reloaded on the screen in front of you.

To check that all of this has worked go to Reporting > Report Tool and run a Profit and Loss Report with the 'Show detail' box ticked. You should find that the account is shown under 'Expenses' rather than 'Non Assessable Expenses'.

Regards,

MySF

RE: Gearing a property in a Super fund

scott — Thu, 22 Jan 2009 18:52:15 GMT

Thanks, That should be tax deductible. What's the simplest way to correct the account?

Regards

RE: Gearing a property in a Super fund

MySF2 — Thu, 22 Jan 2009 16:05:42 GMT

Hi,

It sounds like you have added the account correctly. Because it is an expense account you should expect any postings to show up in the P&L. The Balance Sheet contains asset, liability and equity accounts only.

Please check the account to make sure that you have posted an amount to it. You can do this through System Setup > General Ledger. Select the account and double click on it, or select the account and click on the View Account Activity link at the bottom of the list. You should see a small window pop up with all of the lines that have been posted to this account. If there have been no postings then there will be a message to advise you of that.

According to your description the account is set as non taxable. For an expense account this means that the expenses posted to this account will be regarded as non tax deductable. Such expenses are shown as a summary item at the bottom of the profit and loss account, under the heading "Less: Non deductable expenses: ".

You can also opt to list non-assessable income and expenses by ticking the 'List non-assessable items' box on the Reporting > Report Tool > Financial > Profit and Loss screen.

Please let us know if this helps.

Regards,

MySF

RE: Gearing a property in a Super fund

scott — Thu, 22 Jan 2009 04:27:01 GMT

Hi Again,

My accountant pointed out to me that the entry for a/c 5141 doesn't show up in either the P&L or B/S. He is happy with the ledger entry itself.

When I click edit on 5141 in the general ledger account under system setup I can see that I have set it up as follows-

Account type - expense

A/c no 5141

A/c Land Tax

Parent Number 5100

Rollover to 3505 Profit and Loss

After that I have nothing ticked in the boxes Taxable, Asset or Member. Should that be the case? How do I get the Land Tax to show on the P&L?

Regards

RE: Gearing a property in a Super fund

MySF2 — Wed, 08 Oct 2008 22:23:25 GMT

Hi,

The advice we have received is that this does not need to be added as a separate line. Not sure about the entries as there is no additional payment from you, there is no additional payment to you, you do not incur any ongoing liability and this is certainly not an asset in itself.

One possible solution would be to attach a pdf version of the statement of adjustments to the property, which would ensure that the auditor can quickly find what happened.

Regards,

MySF

RE: Gearing a property in a Super fund

scott — Wed, 08 Oct 2008 20:58:07 GMT

Hi,

It was on the statement of settlements as a separate line. I'm just trying to reflect the statement in my records so the auditor is happy. Any sense what the entries would be?

regards

RE: Gearing a property in a Super fund

MySF2 — Wed, 08 Oct 2008 20:32:02 GMT

Hi,

Apologies for the delay in answering this part of your question.

The discharge of mortgage amount is normally shown on the Statement of Adjustments document. Typically this amount does not need to be recorded separately as the amount is incorporated into the amounts paid the fund. Please check if this was the case in this instance.

Regards,

MySF

RE: Gearing a property in a Super fund

scott — Sat, 04 Oct 2008 00:02:53 GMT

Have you had a chance to look at the discharge of mortgage question. Apparently it is a common practice

RE: Gearing a property in a Super fund

MySF2 — Wed, 01 Oct 2008 16:51:52 GMT

Hi,

This would count as an improvement to the property and it would be an asset in itself.

Please add the carpet as a new physical asset in the same class as the property. When you see the selection of 'Is this an improvement on an existing asset?' (just under the 'Short name' field) please answer Yes and select the property into which this carpet was placed.

Please tick the 'Depreciation Required?' box on the right hand side of the financial tab and then click on the Depreciation Schedule link to open a new screen. On this screen fill in the depreciation details for this item. Note that you will probably have just the one depreciation item, which will be the carpet itself.

Regards,

MySF

RE: Gearing a property in a Super fund

scott — Tue, 30 Sep 2008 05:34:07 GMT

Thanks. It confused me also but I'm not going to try and understand why they did it.

If I put new carpet in a property I imagine that's a depreciating fixture rather than something I expense in the current year. How do I record that?

regards

RE: Gearing a property in a Super fund

MySF2 — Mon, 29 Sep 2008 22:58:58 GMT

Hi,

This expense could be recorded into 5160-Investment Expenses. Alternatively you could add an account with number 5141 as 'Land Tax'. The parent account should be 5100 and the account should roll to 3505-Profit and Loss.

I am not very familiar with the discharge of mortgage process, so i would like to ask for some more details on this.

Regards,

MySF

RE: Gearing a property in a Super fund

scott — Sun, 28 Sep 2008 05:03:24 GMT

Thanks, That worked well.

Another question. In the statement of adjustments there was an allowance for Land Tax. I couldn't see an account under expenses specifically for that. Should I follow the same steps to create one and can you suggest a standard number so all users for have a standard approach flowing through upgrades?

I also had a figure for the discharge of a mortgage. As I understand it the purchaser actually pays for the discharge of the vendors mortgage but the settlement figure is adjusted to allow for it. How should I classify this? It's obviously not really my expense. I imagine it's a liability I have been compensated for but it's not my liability. Where do I put it?

Regards

RE: Gearing a property in a Super fund

MySF2 — Tue, 23 Sep 2008 21:15:40 GMT

Hi,

There are a couple of solutions.

First, you can set up a new bank account and let it go into negative. This negative asset will have the same impact as establishing a positive liability. However, this will mean that your overall exposure to cash will most likely turn negative. While that is technically correct, your asset allocations may well appear odd and out of line with your actual investment strategy.

The second option would be to create the necessary liability accounts and establish the loan that way. The steps would be as follows:
[b]I) Create New 'Non-Current Liabilities' account[/b]

1.- Go to System Setup > General Ledger

2.- Click on the Add Account link at the base of the account list

3.- Fill in the details as:
Reporting type: Summary
Account type: Liability
Account Number: 2800
Account Name: Non-Current Liabilities
Parent: 2000 - Liabilities
Click on Save button, click on Yes when you see the warning
Click Exit to go back to the Account list

4.- Once again click on the Add Account link at the base of the account list

5.- Fill in the details as:
Reporting type: Detail
Account type: Liability
Account Number: 2810
Account Name: Mortgages (or whatever other name you would like to use)
Parent: 2800 - NonCurrent Liabilities
Click on Save button, click on Yes when you see the warning
Click Exit to go back to the Account list

[b]II) Check that the account has been added correctly[/b]

1.- Go to System Setup > General Ledger of Accounts

2.- Expand out '2000 - Liabilities' by clicking on the [+] next to the number

3.- You should find that there is an account 2800 and under that there is account 2810 (as a sub account, visible if you press the [+]

[b]III) Record receipt of the loan funds [/b]

1.- Post a general journal which will be
DR clearing bank account $x
CR 2810 Mortgages $ x

2.- Use the funds from the clearing bank account to pay for (part of) the property

[b]IV) Interest incurred [/b]

1.- Post a general journal which will be
DR 5165 Interest Paid $ x
CR 2810 Mortgages $ x this line increases the outstanding debt

[b]V) Interest payment or payment to reduce outstanding debt [/b]

1.- Post a general journal which will be
DR 2810 Mortageges $ x
CR bank used to pay this amount $ x

The second option is obviously more difficult, but it is a better solution that is likely to keep your accountant and your auditor happy. If you choose the second option your asset allocations charts will not reflect your actual negative allocations to cash (due to the loan).

Regards,

MySF

RE: Gearing a property in a Super fund

scott — Sun, 21 Sep 2008 04:23:11 GMT

Sorry, one more thing. How do I set up a loan account for a borrowing? As I am using the new rules on gearing a superfund I need to put the liability somewhere. What account should I use?

Regards

RE: Gearing a property in a Super fund

scott — Sun, 21 Sep 2008 01:14:06 GMT

Hi,

Now I've managed to create a whole new problem. I entered a figure as a partial payment under the financial tab and filled in all the other boxes on the other tabs in the add new commercial property box. I thought it looked right when I looked at the proposed transactions but when the general journal entries popped up the consideration had doubled. I really don't how this happened. I went to transaction reporter and edited the consideration. When I went back to the property to add another payment it showed the partial payment as the incorrect "doubled up" amount. How do I get it to say the right figure? I can't see how I can amend the asset. In the balance sheet the amendment to the transaction reporter reflected the true value. I entered a subsequent partial payment and whilst the balance sheet shows the right figure the managing commercial property dialogue box stills shows the inflated total. Not really sure where to go from here.

Regards

RE: Gearing a property in a Super fund

MySF2 — Mon, 15 Sep 2008 21:49:42 GMT

Hi,

No, there is no way to process all of the separate components in one entry without lumping them together. If you wish you can enter these components as separate partial payments for the same date.

Regards,

MySF

RE: Gearing a property in a Super fund

scott — Mon, 15 Sep 2008 06:36:16 GMT

So I presume there is no way I can record the four components of the acquisition cost separately (stamp duty, transfer of land fee, mortgage fees and title search fee)?

Regards

RE: Gearing a property in a Super fund

MySF2 — Sun, 14 Sep 2008 23:40:30 GMT

Hi,

This is probably best explained with an example. If you are adding a property in the current financial year and you fill out the details under the 'Financials' tab as:
Purchase price (ex tax): $ 100,000.00
Tax on purchase: none
Tax amount on purchase: $ 0.00
Cost of acquisition: $ 5,000.00
Tax on cost: none
Tax amount on cost: $0.00
...then the transaction that is generated is:
DR $100,000.00
DR $5,000.00
CR bank $105,000.000
which is correct.

Any partial payments added in the current financial period of the superfund will also create the same transactions.

However if you add the property for a past financial year then the software will only create the account representing that asset, it will not post a transaction. Instead, as part of opening balances you will need to post a DR to the account representing the property, which will be a total of the purchase price plus the capitalised acquisition costs. The other side of the entry, the CR, should go to members equity accounts.

Once the transaction is posted it will appear in the transaction reporter.

Non-capitalised expenses that are paid for the property should be recorded separately via the Cash and Journal Processing > Cash Payments screen.

The ownership percentage is kept only for display purposes and you can change that at any time, with or without adding more partial payments.

Please let us know if this helps.

Regards,

MySF

RE: Gearing a property in a Super fund

scott — Sat, 13 Sep 2008 18:43:26 GMT

Hi,

I've been trying to follow the advice you've given on capitalising acquisition costs but I don't see how they fit into your boxes. My aquisition costs are stamp duty, transfer of land fee, mortgage fees and title search fee. The drop down box has various GST type charges which don't apply. If I enter the total of my acquisition costs under the tax box they don't appear in the transaction reporter and no journal entry was created. Do I need to just enter them as a lump sum related to acquisition cost and narrate what they break down into? Is there somewhere else I should enter these capitalised costs? When I paid the deposit I opted to say I had acquired 10% of the property and when I paid the balance it didn't give me the option to change the % ownership. Did I stuff that up or do I need to over ride the number later? I assumed I should have some sort journal entries that increase the property asset by the capitalised cost with balancing entries against the bank plus taxes and charges payable. I'm afraid I can't how this happens and I'm really confused about how the capitalised costs should look as journal entries as they are paid from the bank account. Do they pass through a clearing account?

Regards

RE: Gearing a property in a Super fund

scott — Tue, 09 Sep 2008 05:21:43 GMT

Thanks,

You were right. The sample fund was set on 2006/07. I thought I was really losing my marbles!

RE: Gearing a property in a Super fund

MySF2 — Mon, 08 Sep 2008 00:12:52 GMT

Hi Scott,

If you are adding a physical asset the bank account selection box should be visible on just under the 'Transaction to generate' selection box on the 'Financials' tab (same place as the purchase price etc). However, if you enter a date outside the date range of the current financial year then the bank account selection box disappears because the software will instead expect an opening balance entry. (note that a similar thing happens on add / manage financial assets if you enter a purchase date outside the date range of the financial year).

To record a 10% deposit please record it as a partial payment, and enter the 10% in the purchase price. To add additional payments later you can come back to the same screen and click on 'Add Partial Payment'. You should try this in the MySF Sample Fund.

The purchase price, acquisition cost and the taxes can be best explained like this: the purchase price plus the acquisition cost plus any non-claimable consumption taxes (sometimes this includes part or all of the GST paid) are the capitalised cost of the asset, also called the cost base.

You are buying property, but a painting may be a better example here. If you buy a painting for $10,000 and pay $500 delivery then the purchase price is $10,000 and the cost of acquisition is $500 therefore (assuming that the delivery can be capitalised), if you sell the painting a month later for $15,000 you would pay tax on the gain of $ 15,000 - $ 10,500 = $ 4,500.

So, any capitalised costs associated with the purchase should be recored into the acquisition cost field. Unfortunately we cannot tell you on what is and is not classified as a capitalised cost.

Costs that are not capitalised, but are expensed instead, can be recorded later and 'pinned' to the property. To pin a cost to the property, record a Cash Payment through Cash and Journal Processing > Cash Payments. While recording a payment to an expense account select the added property from the 'Assets' selection box. This will tag the expense against the asset. Note that this does not affect the cost base of the asset and should only ever be used for non-capitalised expenses (such as very minor repairs, insurance expenses).

You can view a list of income and expenses for the fund, or any group of assets, on the Reporting > Analysis Tools > Income Analysis and Reporting > Analysis Tools > Expense Analysis screens.

Regards,

MySF

RE: Gearing a property in a Super fund

scott — Sat, 06 Sep 2008 20:03:50 GMT

Hi,

I'm afraid I am completely confused. When I add a financial asset there is a box for the bank account. When I add a physical asset I can't work out how I nominate the bank account.

How do I record that I paid a 10% deposit and then a balance on settlement

There is a box for cost of acquisition and a box for tax. I presume I enter the stamp duty in the box for tax and I presume I enter transfer costs, title search and things like mortgage discharge costs in cost of aquisition. What about adjustments for allowances to rates, water etc? Where do they go? How do I break them down into their respective accounts. Do I need to use the General Journal to do all this to set it up?

Hopefully I'm missing the dead obvious.

If I have costs that specifically relate to this asset can I set the system to report the costs that relate to the specific asset?

Regards

RE: Gearing a property in a Super fund

MySF2 — Sun, 24 Aug 2008 17:20:18 GMT

Hi,

When you add a property the system will take similar actions to the addition of shares. These are, in sequence: create the asset in the asset list, create the account representing the asset in the general ledger, create the account representing the accumulated depreciation for this asset (even if there will be none), and finally it will post a transaction which contains the debits and credits to show the accounting effects of the purchase.

If and when you add a partial payment it will create another transaction, completely separate from the first, that contains the debit and credit entries to show that there has been another payment made on a separate date.

The best option may be to add a new commercial property purchase into the MySF Sample Fund to see what the effects are and then add a couple of partial payments as well. If you would like to revert to the original MySF Sample Fund and remove any changes from it then please go to File > Refresh Sample Fund.

Regards,

MySF

Gearing a property in a Super fund

scott — Sat, 23 Aug 2008 02:13:06 GMT

Hi,

I've used the new laws to purchase a property for a superfund and use some borrowings as part of the strategy. On purchase I paid a 10% deposit and then on settlement I paid the balance plus stamp duty plus adjustments (water etc). As I am using gearing I have to hold the property in a specific purpose company although the superfund is the ultimate owner. I presume I should just narrate this rather then try to create a specific company in the accounts. As I have never added property before I am a bit uncertain about what I am supposed to do with the partial payment option and how I enter the details on the flow of funds. The add new property box looks like it will post a string of entries if I click ok but I'm sure what they are going to be. Can you step me through this please? I not clear on how I get the funds matching up to purchase date for the deposit and the settlement date for the balance with all the adjustments correctly recorded.

Regards