This support note describes how to set up GST in your company file and report amounts correctly on a GST return.
Depending on how long you have been using your company file and how the file is set up, some of the following tasks may already be complete.
Set up GST codes
Default GST codes are already included when you create a company file. These are:
|GST Code||Description||Reportable on GST Return|
|S15||GST at 15%||Reportable|
|Z||Zero Rated. Generally only used for export sales, which are zero rated. These transactions need to be included on the GST return, but they don't attract GST.||Reportable|
|E||Exempt. This includes financial services, bank charges, interest, etc.||Non-reportable|
|N-T||No Tax. Used for any transaction that does not have a tax component.||Non-reportable|
|IMP||This code is used to calculate duty on imports, for example, on raw materials used in manufacture. Unless your business is importing products that attract import duty, you will not use this code.||Non-reportable|
These default GST codes are likely to be the only codes you need to use for transactions in your company file, but if needed you can create new GST codes as follows:
- Go to the Lists menu and choose GST Codes. The GST Code List window appears.
- Click New. The GST Code Information window appears.
- If the GST code is reportable on a GST return, select the GST Code is reported on GST Return option.
- Complete the fields in this window and ensure you select a linked account for GST collected and GST paid. For more information, see below.
- Click OK.
Set up GST accounts
There are several GST liability accounts used for tracking GST collected and paid. If you selected a default accounts list when you created your company file, you will probably have these accounts set up already.
If you do not have GST accounts set up already, you need to create the following accounts:
Set up accounts for recording GST collected and paid
All default GST codes automatically have an account assigned for recording GST collected and GST paid. This means when a GST code is assigned to a transaction, the amount of GST (collected or paid) is automatically recorded against the applicable GST account, for example GST Collected account (for sales and receive money transactions) or the GST Paid account (for purchases and spend money transactions). For more information about GST tracking accounts, see Set up GST accounts below.
Assign GST codes
To accurately report GST on your GST return, all transactions you record must have a GST code. This means all relevant accounts, customer and supplier cards, and items need a GST code assigned to them. Then when you use these customers and suppliers in a sales, purchase, spend money or receive money transaction, the GST amount is automatically recorded according to the applicable GST account.
The S15 GST code is assigned by default when you create any of the following:
- supplier or customer card
- income or expense account
You can change the default GST code if you need to.
To check if any transactions have been assigned an incorrect tax code, you can print the GST [Detail] report before preparing your return. This report details all the transactions you have recorded in the period and groups them by tax code. For more information see Reconcile GST amounts using reports below.
When you prepare your GST return, you need to select how you report GST. This is known as your GST accounting basis. You will either report on a Payments (cash) basis or Invoice (accruals) basis. These are described as follows:
Payments (cash) basis: You report GST collected and paid at the time of receipt or payment. For example, you make a sale for $100 on 01 August but don't receive the money until 20 September. The GST will be reported as collected on 20 September.
Invoice (accruals) basis: You report GST collected and paid at the time of issuing or receiving a tax invoice, before an actual payment is made. For example, you make a sale for $100 on 01 August but don't receive the money until 20 September. The GST will be reported as collected on 1 August.
Preparing the GST return
Before preparing your GST return, make sure you select the correct setup information, including:
- the last month of your reporting period
- the period the return covers
- the reporting basis, and
- the adjustment accounts you use for GST.
Click Preview GST Return to view or print the amounts you are reporting.
Can't preview your GST return?
If you use an earlier software version, use the GST Summary report to view GST amounts recorded in transactions, and compare the amounts against the balance of your GST accounts for the period.
Reconcile GST amounts using reports
The basis on which you report GST determines which reports you should print to reconcile your GST return. The reports are classified as either Payments or Invoice reports. When printing a report, make sure you select the same date range as the GST return reporting period.
To access the reports, go to the Reports menu and choose Index to Reports. In the Index to Reports window, click the GST tab.
The GST reports are listed under the following sub-headings:
GST Reports: These reports list GST amounts incurred and charged in transactions for the period. You can use these reports to check that transactions had the correct GST code assigned to them.
GST Code Reports: Use these reports to check for transactions with incorrect GST codes or transactions that don't have a GST code assigned to them.
Reconciliation Reports: These reports show GST amounts recorded in transactions for the period and also list the balance of your GST accounts. Use these reports to check that the total GST recorded in transactions matches the balances of your GST accounts.
After you have prepared and reconciled your GST return, you need to create a journal entry to record the amount of GST you owe or are owed (Accounts > Record Journal Entry).
The journal entry will create a debit in the GST Collected account and a credit the GST Paid account for the amounts recorded on the return. The difference is recorded in the GST Payments/Refunds account.
Your GST return shows that you have collected $2,500 in GST and paid $1,000 in GST. This means that you will need to pay the IRD $1,500 in GST. Your journal entry will look like this:
This creates a credit entry of $1,500 in the GST Payments/Refunds account. Then, when you receive your GST bill, record a Spend Money transaction against the GST Payments/Refunds account to pay the IRD.
Your GST Collected and GST Paid accounts are also reconciled (cleared) of GST amounts recorded in the return period.
For more details on this, see Paying GST and clearing GST accounts.
|The GST return does not match the GST Detail report|
This may be because:
|The GST Information Reconciliation report is out of balance|
The GST Information Reconciliation (Detail) report shows GST amounts recorded in transactions for the period and the balance of your GST accounts. If these amounts do not match it may be because: