Preparing your IR3R rental figures from Xero
Come tax time, the hard part of a rental return isn't the form. It's getting a clean year of income and costs, property by property, out of your books. If Xero is set up well, most of that is already there.
What the form needs from your books
The IR3R is the rental income form that goes with an individual's tax return. In short, it asks for the rent you received and the costs of earning it, for each rental property.
For most people the year runs from 1 April to 31 March. The figures you need are the year's rent, and then the costs, usually grouped as things like interest, rates, insurance, agent's fees, and repairs and maintenance.
Three things tend to go wrong. Rent and costs are only in the books as net bank payments, so the totals are short. Costs aren't tagged to a property, so you can't split them. And a month's statement that spans 31 March ends up in the wrong year.
The fix for the first two is the habit of recording each statement line, tagged to its property. The third is worth a look with your accountant, because it comes down to the dates the money moved.
It also helps to settle the year's loose ends before March is out. Chase any missing statement, check each property's totals against the year-end summary your manager sends, and note any cost you paid yourself. A short list now saves a long search later.
Things to check before you hand it over
- Every property has twelve months of statements, with no gaps.
- Bills you paid yourself are in as well as the ones paid through your manager.
- The same cost isn't in twice, once from an invoice and once from a statement.
- Anything paid on a personal card is tagged as a rental cost, with its property.
- Anything unusual, such as a major repair or a change in how a property is used, is raised with your accountant.
This page is general information, not tax or accounting advice. Check your own situation with your accountant.
A worked example
Here's one property's year, laid out the way the form groups it. The figures are made up, to show the shape.
| Item | Amount for the year |
|---|---|
| Rent received | $31,200.00 |
| Management fees | −$3,120.00 |
| Rates | −$2,450.00 |
| Insurance | −$1,380.00 |
| Repairs and maintenance | −$1,860.00 |
| Interest | −$9,600.00 |
| Result before any adjustments | $12,790.00 |
A table like this is the easy part, once the year's lines are in Xero. The harder question is which of these costs count, and by how much.
That's a question for your accountant, and the answer can differ from one property or one year to the next. The point of the table is that they start from clean, complete figures, not a shoebox of papers.
How Zerocile handles it
Because every statement line is recorded against its property as it arrives, the year's figures are already in Xero by March. Zerocile's tax pack reads them back out as one spreadsheet, laid out like the IR3R, with a section for each property.
Every figure has its transactions behind it on a separate sheet, so you can see where a number came from. A third sheet lists anything worth checking, such as a line that couldn't be placed.
You can show it for the organisation's own tax year, or as New Zealand dollars to 31 March. Hand it to your accountant, or use it to fill in the return yourself. Zerocile doesn't file anything with Inland Revenue.
Questions
Does Zerocile file my IR3R?
No. It prepares the figures and doesn't send anything to Inland Revenue. You or your accountant file the return.
What if my books aren't up to date?
The pack shows what's in Xero. If statements are missing, the figures will be too, and the check sheet will say so where it can tell.
Is this only for New Zealand?
The IR3R is a New Zealand form. For UK landlords, the pack is laid out like the SA105 property pages instead.
When should I start preparing?
Any time. If statements go into Xero each month, there's very little to prepare in April, and the pack can be made whenever you like.
No card needed