Landlords contribution

I am trying to break this post down to the essence of what it is, but I just don’t know how to account for it.

The landlord has provided an incentive to sign the lease in the form of a “fit-out contribution”. What this means is they give us money towards getting into the shop.

I have paid for everything up front (goods and services) and have been taxed accordingly.

I have now received the monies from the landlord which correlates to a portion of the bills that I have.

I don’t know how to treat this.

  1. Treat the money as income, but then I’d be subject to paying tax on it

  2. They have written it off against bills I’ve paid, so it’s as if I never incurred those expenses. Can I delete them and treat it as their invoices they’ve written off even though it’s mine they’ve written off for me?

  3. Is it capital I can simply draw against since I have put in this contribution in 3 fold? ie, not record their contribution and withdraw this same amount against my inputs?

I just have no idea where/how to record and attribute taxes for it, and I don’t fancy waiting until next tax time to work it out. I’m hoping someone here has the knowledge to let me know what to do.

Any advice appreciated.


What you received is a leasing incentive - there are no goods or services involved, therefore no tax

You would just post the amount to the account where you allocated the costs for the shop fit out, look upon it as a discount/rebate.

As always I appreciate your advice, but in this case I still don’t quite understand.

I paid someone to build a wall
I paid for some repairs
I paid for some new furnishings (I’m breaking this down to basics, for the dummy—that’s me)

The things I paid for were “purchase invoices” that had GST on line items.

I used my cash account to pay for those invoices, and didn’t allocate GST on the payment, because they’re allocated in the invoice (this is how I’ve always been doing it—I hope I’m correct).

  1. I’ve received cash into my bank account. At the moment, I have it allocated in “accounts receivable” because they wanted an invoice detailing my purchases. I created a (pseudo?) invoice and have received the money as payment of that invoice. In that invoice, I’ve listed GST as payable against those items. I feel like now that I’ve received the money in the way they asked for it, it’s time to delete that invoice since it’s not a “thing” I’ve sold to them. Should/could I just delete that?

  2. How do I receive it into the cash account if I delete the invoice, alternatively

  3. if I don’t delete the invoice and keep it as a receivable, do I just leave it as “no tax”? (In the same way that I pay a purchase invoice from a cash account without allocating tax. I’ve got comfortable with paying bills, I feel it’s just a reverse of that, but can’t ratify it in my little brain).

  4. How do I post it to an account that is spread across multiple accounts? eg, do I break it up into the components of what it actually paid for? Assets, repairs, construction, etc?

When you say, “treat it as a discount/rebate” I feel like I almost get it.

Apologies in advance, I’m feeling more stupid than normal at the moment :stuck_out_tongue:

Thanks for the fuller story. How does the Lease described this offer and was GST included…
Is it (a) offering you an inducement or is it (b) offering a reimbursement.
(a) If you take up this lease we offer an incentive (contribution towards the fit out)
(b) If you take up this lease we offer to reimburse some of the fit out expenditure

(a) is a financial inducement, you may have to justify that you spent the money
(b) is an expense reimbursement based on actual related costs.

For either, I would have sent an (non tax) invoice for the actual costs excluding GST components , because if they offered 1000 I would want 1000. If a tax invoice is sent for 1000, then I’m only getting 910, as 90 has to be paid in tax. Alternatively send a tax invoice for 1100.

Ignoring that, lets keep it simple - the processing of the suppliers purchase invoices and the payment of them is a completely separate matter. Copies of them are only required for justification purposes.

Did you send a Tax Invoice, by this did you add GST to the total.
Or did you send a Non tax Invoice even though you listed GST paid as part of the reimbursement.
This, along with the lease terminology, needs to clarified before going further.

But a couple of other things, you “don’t” delete Invoices. Invoices don’t have to be for “things” sold. Like in this case, the Invoice is a demand for payment of the reimbursement.

That is correct

I maybe miss reading this but it appears from various comments ( like “I break it up into the components” and the right P&L structure) that perhaps you are overly braking down costs. E.G. virtually everything to do with the refurbishment of the premises (pre fitting out) would go into one Asset account. Ignore the 20k tax bonus, as that will be an year end adjustment.

@d3mad, rather then wait for the details I will cut through a lot of verbiage.

The Invoice you forwarded is incorrect, as you can’t double claim back GST - once when processing the suppliers purchase invoice and once on the leasing incentive invoice unless you are going to also pay that claimed back GST to the tax man which then wouldn’t be a leasing incentive.

Therefore, (1) edit the existing “Manager” invoice to only show one transaction line with the description - Leasing Incentive per the Lease and enter the amount. Then attach copies of the supplier invoices which exceed the value of the incentive. (Don’t detail the supplier invoices on the invoice)

If they require a reason - Your first invoice gives the “appearance” that you are claiming reimbursement for GST from them and you can only claim GST back from the Tax Dept.,

(2) On this edited invoice ensure that
(a) the Account is only a single account
(b) that it is a non-tax invoice, the tax field on the account line is blank.

As for the account, I would offset the incentive against refurbishment costs (pre fit out).
If the value exceeds that balance then via Journal redistribute the excess to other accounts.

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I’m going to post this anyway since I started it hours ago before your next post. I had just held off until I actually pulled out the lease and the provision of the contribution and it’s relationship to GST.

Yes, I think I am breaking it down too much. And yes, I haven’t even considered the tax bonus yet.

Regarding your next post. I understand it fully and it makes perfect sense.

The only problem is, I have already issued the tax invoice and been paid, it’s now that I’m trying to account for it that I realise your second post is probably how I should have done it.

Re-reading the highlighted part of part 2 above, I see that it should have been a tax exclusive invoice. It is starting to clear in my head and I feel that I need to fix this with them as they will likely attribute my invoice to a tax credit which they don’t actually have since it should have been exclusive but they do ask for a tax invoice since I suppose they want the tax input. Starting to clear, but then I’m confused all over again.

The contribution amount is less than what we spent.

Thanks very much for your input. It really does help and is appreciated!

Eagerly waiting to hear what you think I should do next, but I think I should be contacting their accounts dept and discussing it.

OK, my last post did jump the gun a bit, but was on the right path even if I wrote with fork tongue.

The resolution is to EDIT the existing tax invoice so each itemised expense (line item) DOESN’T included the original suppliers GST component - or only the tax exclusive value as stated in (2).

This means the invoice will be for a lessor sum, therefore you will have to refund the difference.
It interesting that they didn’t check your invoice out and just overpaid you. Must be your honest face.

With regards to the “Yes, I think I am breaking it down too much”, if you want, via private message, send a screenshot of the chart of accounts (not Summary) and could give some feedback.

Just realised there wouldn’t be a refund as you have exceeded the value, but you may have to add additional Supplier Invoices to fill any shortfall caused by the removal of the GST Components.

I have read and re-read this portion of the agreement quite a few times today and after your forked tongue post (which I didn’t read that way) I still think I can apply it the way you mention.

Re-reading point #2, all they want is the GST exclusive values to add to the contribution amount. Exclusive because they’re not reimbursing my GST payments (understandable), and they’re not chasing credits. So even with providing evidence I spent the money (and I spent more than the contribution), couldn’t I still do it the way you describe as a single line item and make sure the tax side is clear? I don’t need to attribute it directly to any one particular invoice or invoices, just to an account.

lol re “screenshot”, don’t you mean “screenshotS”? It scrolls for several pages :stuck_out_tongue:

If they are happy with that - go for it

Then you have a “serious” situation as that is unwieldy.
You have to remember that in the future all those accounts will still be there so if some of those accounts have a once off use (establishment) then you are stuck with them.

The P&L side should essentially be designed with the business in day to day operation mode.
Establishment mode should be recorded in the BS under broad headings and then those can be written off/depreciated to the P&L in single accounts.

Are you using windows, if yes, then you can go to Settings - COA and right click on the screen, select Print (then PDF program). That will print the entire COA, not just the screen view.

Outside of that there is no report that includes all accounts, those with zero balances.
Unless a Journal is created putting 1.00 in all zero balanced accounts and later deleted.

I’ve done something similar to what you said, I’ll do some checks and balances, but it seems to have worked out.

I’m on a mac. I just did an awful click, scroll and copy/paste and then edit out all the [edit] crud from the page. I have sent it thru via PM