Forum Discussion

Experienced Cover User

6 years ago

Receiving money that is not income: credit note?

I received $2000 from my mum intended to support my business, but I would not regard this as not income, but rather, an interest-free loan or potentially even a gift if the business fails and I can't repay her. How should this be recorded? Do I create a credit note in the receiving bank account, with a transaction tax code of N-T?

IanChait
6 years ago
Hi shau

The deposit does not involve GST, so the code would be N-T.

If you are a Sole Trader, you will have an Equity Account 3-XXXX called Owners Contribution or something similar. Use this account.

If you operate via a Company or Trust, you should have a Liability Account 2-XXXX called Loan - (Your Name). Record the deposit to that account.

Theresa_D
Former Staff
6 years ago
Hi shau

Thanks for your post. In a situation like this it is best to speak with your accountant on how to handle this transaction.

Feel free to use the forum if you have any other questions.
- shau
  Experienced Cover User
  6 years ago
  Theresa_D wrote:
  Hi shau
  
  Thanks for your post. In a situation like this it is best to speak with your accountant on how to handle this transaction.
  
  Feel free to use the forum if you have any other questions.
  Theresa_D That was really unhelpful. Not everyone can afford a tax accountant and what I'm asking is a really basic and simple question that doesn't really have any nuance.
  - GDay53
    Ultimate Cover User
    6 years ago
    shau
    
    Theresa_D is correct in that any advice on Tax codes can only be given by a Registered BAS or Tax Agent.
    Anyone elese would be in breach of the Tax Laws.
    If you are in business then you should have both a good BAS Agent / Bookkeeper and a good Tax Accountant.
    
    In regard as to how to record the money if it is a loan then it needs to be recorded as such as a liability.
    If not then the question becomes is it a capital investment?
    As a capital investment it would be entered as either Liability or Equity.