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Tax Break & Financial statement

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

  1. hahahaa

    hahahaa Member

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

    PJCA Member

    30th Oct, 2009
    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

    6th Nov, 2007
    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!