The property industry has two main arms – development and investment – each with different tax and accounting issues and drivers.
Property Development
By its nature, property development is a capital intensive business. However, the revenue and capital nature of expenses can be different for tax and accounting purposes resulting in large adjustments between book profit and taxable income and large deferred tax assets and liabilities on the balance sheet.
For large property developers with diverse property sites, the biggest compliance challenge is usually one of tracking and reconciling the differences between book and tax adjustments through property ledgers and other sub-systems.
It is also necessary to have reliable systems and processes to reconcile swings in current and deferred tax balances.
Property developers also need to have reliable systems and processes for tracking and reconciling GST on property transactions.
Property Investment
Most property investment is done via unit trusts or managed funds, but sometimes via investment companies.
For tax purposes, property investors need to have reliable systems and processes to track asset costs for capital allowances and capital gains purposes.
Property trusts also need to have good systems to compute the taxable and tax free components of trust distributions to unit holders.