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Tax Break & Financial statement

Discussion in 'Accounting, Tax & Legal' started by hahahaa, 27th Feb, 2010.

  1. hahahaa

    hahahaa Member

    Joined:
    9th Sep, 2008
    Posts:
    7
    Location:
    Sydney
    Does anybody know how to book the government tax break on my annual financial statement? Many thanks
     
  2. PJCA

    PJCA Member

    Joined:
    30th Oct, 2009
    Posts:
    18
    Location:
    Adelaide
    You don't state what type of entity financial statements are for...

    Financial statements are ordinarily prepared for accounting purposes, and the investment allowance is a tax concept. So it may not be disclosed in the financial statements at all.

    It is not uncommon for the allowance to be disclosed in a tax reconcilition ie: net profit for accounting purposes less investment allowance et al = taxable income. Accounting income and tax income often differ.

    In a company structure the investment allowance for is naturally taken into account in the income tax expense / provision for income tax accounts.
     
  3. Superman

    Superman Well-Known Member

    Joined:
    6th Nov, 2007
    Posts:
    343
    Location:
    Gold Coast, QLD
    As an accountant our firm made the decision not to show the tax break (additional deduction) on the financial statements.

    It should simply be a tax reconciliation item - meaning there will be a difference between the profit / net income on your financial statements and that on your tax return.

    The other option is putting the tax break in with the other side as a 'tax break reserve' account under equity.

    There may be a 'correct' treatment regarding how to show it- however your financial statements will typically be for your use only if you are a private company / sole trader / trust.

    Also, in regards to the tax break, I was talking to an ATO field officer (auditor) last week and the ATO is VERY AWARE that a lot of people have set up entities or registered an ABN simply to enable them to claim the tax break on a new vehicle when they are not legitimately in business.

    With the ATO recent computer system upgrade they will have increased abilities to easily pick up people who are 'doing a dodgey'. If you are one of these people (or could be) get some advice from a properly qualified accountant!

    SM