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Residential Property Purchase - with Settlement Statement example

 

Overview

The property purchase generally takes up two steps. The first step to record the deposit (Contract date), with the subsequent settlement recorded at a later (settlement) date.

The below example is designed to assist in the process of recording a property purchase in Simple Fund 360. This example also incorporates a loan liability due to the limited recourse borrowing arrangement entered into by the trustees of the SMSF to purchase the property.

 

Note

BGL do not provide accounting or taxation advice. The following is designed to act as a guide for Simple Fund 360 users. It is not designed to be accounting or tax advice and should not be taken as a strict guideline. Other methods that are more suitable may be used instead of these steps.

 

Sample Settlement Statement

Property: 123 Fake Street, Toorak, Victoria, 3142

Contract Date: 01/08/2014

Settlement Date: 23/09/2014

  Payable by Vendor $ Payable by Purchaser $ Amount due on Settlement $
Contract Price   500,000  
Deposit   (100,000)  
Balance   400,000 400,000
       
Adjustments      

Seller's Release Fee

(mortgage Discharge)

 150    
       
       

Council Rates

$400 Quarterly Paid to 23/09/2014. 7 days remaining for Q1.

Adjustment for Purchaser (7/92 days in Q1) = 30.44 outstanding

   30.44  

Water Access and Drainage

$300 Quarterly Paid to 23/09/2014. 7 days remaining for Q1.

Adjustment for Purchaser (7/92 days in Q1) = 22.83 outstanding

   22.83  
       
NET Adjustments 150 53.27 (96.73)
       
Balance due to Vendor     399,903.27

In addition to the deposit of $100,000 and the settlement of $399,903.27 the following expenses were also paid:

  • Legal fees $1,000 (capitalised when recording settlement)
  • Stamp Duty $22,000 (capitalised when recording settlement)
  • Pest inspection expense $750

This purchase of a property was under a Limited Recourse Borrowing Arrangement (LRBA) with a loan of $200,000 recognised on the 10/09/2014.

How to Process

Steps (click each tab)

1. Create Accounts
2. Record Deposit
3. Loan Recognition
4. Record Settlement
5. Record Stamp Duty, Legal Fees

Create Accounts

 

From the Main Toolbar, go to Accounting.

Select Chart of accounts from the list.

 

  1. From the Chart of Accounts, click Add Account, now select Investment from the drop down list.  


  2. Select the Investment Type as Real Estate Properties (Australian - Residential). 

  3. From the Select Securities drop down, select Create New. 

  4. From the New Security screen, input unique Security Code (IP-001) and Security Name (123 FAKE STREET, TOORAK).

  5. Input the Security Details. 

    Details
    Explanation
    Data Feed Source This field will display Manual.
    Market Type Select from the drop down list the Market Type of the security. For this property we will select Unlisted and Direct Property.
  6. Select the Prices tab to input the price history for the investment.
  7. Select Add Price and input the Date as 01/08/2014. Now enter the Net Asset Value of $499,903.27 and select Add.

  8. Select Save to add the security to the list.

  9. From the Select Securities drop down select IP-001.


     

  10. Select More Details >> and then select the checkbox Asset subject to Limited Recourse Borrowing Arrangements. This will create the associated linked loan account 85500. 

     

  11. Select . Account 77200/IP-001 will now be added to the fund's Chart of Accounts.

Record Deposit

 

From the Main Toolbar, go to Accounting.

Select Transaction list

Select New Transaction.

Select Bank Statement.

 

From the Transaction List record the $100,000.00 deposit paid from the ANZ account.

Date Input 01/08/2014.
Reference Input 4.
Description Input Deposit for property.
Input bank Account Select 60400/BANKCODE.
Input Account Select account 77200/IP-001.
Units Input 1 unit for the purchase.
Amount Input a debit amount of $100,000.00.
More details Click to input the Settlement Date.
Settlement Date Input 23/09/2014.

 

 

Select Post to save the transaction.

In this example the cheque date and contract date are the same. In some instances the cheque may clear to the bank on a separate day to the contract date. If that is the case, record the transaction on the clearing date and record the contract date in the More Details panel. The contract date is used by Simple Fund 360 when calculating CGT on disposal.

Loan Recognition

 

From the Main Toolbar, go to Accounting.

Select Transaction list

Select New Transaction.

Select Bank Statement.

 

From the Transaction List record the $200,000.00 loan recognition to the ANZ account.

Date Input 10/09/2014.
Reference Input 4.
Description Input Loan Recognition - LRBA.
Input bank Account Select 60400/BANKCODE.
Input Account Select account 85500/IP-001.
Amount Input a credit amount of $200,000.00.

 

Select Post to save the transaction.

In this example the loan was recognised on a different date prior to the purchase. This may differ in certain situations (for example, the loan may be recognised in the settlement transaction).

Record Settlement

 

From the Main Toolbar, go to Accounting.

Select Transaction list

Select New Transaction.

Select Bank Statement.

 

From the Transaction List record the Settlement amount of $399,903.27.

Date Input 23/09/2014.
Reference Input 5.
Description Input Settlement for the property.
Input bank Account Select 60400/BANKCODE.
Select an account Select Account 77200/IP-001.
Units Input 0 units (0 units will trigger a cost base adjustment).
Amount Input a debit amount of $399,903.27.
More details Click to select a parcel.
Select parcel Click Select Parcel and tick the check box for the deposit which was made on 01/08/2014.


Save Select Post to save the transaction.

Record Stamp Duty, Legal Fees, Expenses

Two options:

A) If the amounts are capitalised, record them as a cost base adjustment to the property account (see prior tab for example of recording cost base adjustment);

B) If they are expense transactions, record a Bank Statement entry using account 42080 (Stamp Duty), 42030 (Legal Fees) and 42040 (Pest Control). Refer to Transaction Input or Smart Matching (if using a bank data feed) for more.

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