Accounting Tips for Commercial Property

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AS COMMERCIAL PROPERTY investors, managing your finances can be one of the most important aspects of ownership. No matter how many buildings you own, you still have to run your business and finances accordingly.

Maintaining good records

You have to keep organised books to keep you out of trouble financially and with ATO.

Your good records will help you find inefficiencies with your properties, allowing you to maximise cash flow and value. Accurate records can often generate a higher price because the new buyers feel more comfortable knowing exactly what they will buy.

Accuracy is important

New property owners incorrectly record their security deposits as income on their financial statements.

However, security deposits are a future liability which is owed to the tenant if they comply with the terms of the lease agreement. You should document security deposits correctly to minimise your tax.

It is also important to use a budget on your commercial property to monitor its expenses and income and ensure that you are in a positive cash flow situation or making the right steps to operate in a positive cash flow.

Having a budget also helps

Budgeting can also give you an idea of how much money you need to cover expenditures such as rehab or repair costs. It can be helpful in comparing past expenses and income to current data as well.

We recommend that you use a computerised accounting system, because a manual system makes it hard to share information and can be a waste of time – especially when you have to re-calculate numbers due to errors.

It is a good idea to hire a real estate tax advisor, if you own a commercial property.

Bottom Line: Real estate tax laws are complex and always changing. There are expenses which can be immediately expensed while others need to be capitalised or expensed over a longer period of time.

You can expense operating expenses as well as non-cash expenses such as amortisation and depreciation. Therefore, having a good property tax specialist can help minimise your expenses.

Disclaimer: This article contains general information; before you make any financial or investment decision you should seek professional advice to take into account your individual objectives, financial situation and individual needs.

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