At the end of each financial year, commercial property landlords must complete an Outgoings Audit where the recoverable outgoings paid during the year are audited by an external party and reviewed to assess whether the outgoings charged to tenants are accurate.
The Outgoings Audit must be completed, and a report given to the tenants within three months after the end of the financial year. This means the audit must be completed well before this three-month period to allow time for the reports to be finalised and distributed.
Preparing your documentation for the audit process can be relatively straightforward if your accounting records are up-to date-and well-organised. If, however, your records aren’t well organised, this process can be quite stressful while you go collating a year’s worth of paperwork.
If your accounting records are not accurate and you have been incorrectly claiming GST credits on items such as Rates or Land Tax, then a lot of adjustments will need to be made to your accounts. Similarly, if you have been incorrectly recording payments as recoverable outgoings that are actually property improvements, you will again be faced with having to make corrections to your accounts. All of this extra work in taking up the necessary adjustments will be costing you money in increased audit and bookkeeping fees. You may also need to make lodge revised BASs with the ATO, which could attract interest in overdue GST not being paid correctly at the time the BAS was lodged.
Some steps you can take to make the annual audit process easier are:
Maintain detailed accounting records.
Accurately categorise and record expenses and capital improvements
Use an accounting system and integrated apps that are suitable for the specific needs of commercial property management.
Regularly reconcile your tenants’ monthly lease charges and supplier expense payments.
Maintain up-to-date lease agreements and manage upcoming renewals promptly
Ensure you are indexing your “estimated outgoings” annually in accordance with the provisions in your leases
Consider engaging the support of a bookkeeper who is experienced in commercial property accounting.
All businesses need to have good accounting and record-keeping systems, but the commercial property investing environment has added complexities so it’s advisable that you seek professional support to ensure you are well-placed to meet your audit and accounting obligations.
Reach out to us if you feel you may need assistance in this area. We are happy to do a review of your financials and give you a report on your current accounting records and provide recommendations on any improvements we can see.
Ready to streamline your finances and take control of your business? Contact our expert bookkeepers today to get started.