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Master Member
Group: Forum Members
Last Login: Today @ 2:26:39 AM
Posts: 107,
Visits: 1,302
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Hi,
Typically the last PAYG installment of the tax year will not be paid until after 30 June and so would not figure in the end of year rollover. It would however be paid before the return is lodged and the assessment issued.
It seems to me that this gives rise to problems:
- The end of year tax due calcs will not include the installment and so will give a larger tax liability than needs to be paid.
- The installment paid after 30 June will be incorrectly applied against next years tax liability.
It seems to me that the tax calculation will be correct if the installment is posted on 30 June. However since the money hasn't actually been paid from the bank it should be treated as a liability rather than a payment.
To achieve this I could:
1) post the tax installment payment for 30 June but paid from the clearing account:
Cash payment to ATO
DR 2130 Tax installments paid
CR 1102 Clearing Account
2) balance the clearing account by a general journal transaction from a liability account:
General Journal Type: neither
DR 1102 Clearing Account
CR 2105 Accounts Payable
Which should see the Tax due calculated correctly and the books balance at year end. Then when the payment is made (in July):
General Journal Type: neither
DR 2105 Accounts Payable
CR 1101 Bank Account
Which clears the liability.
So, my query is:
1) Is this a correct and sensible approach to get the installment applied to the right tax year?
2) Is 2105 Accounts payable the best account to use - rather than say 2999 liability Suspense, or 2400 Sundry creditors - or some other account?
Regards
Neil H.
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MySF Administrator
Group: Administrators
Last Login: 17/05/2010 6:31:15 PM
Posts: 464,
Visits: 632
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Hi,
Yes, the posted approach is the best way to deal with the scenario you have outlined. It is in line with our past recommendations for similar situations where income or expenses needed to be recognised in a financial year other than the one in which they were paid.
You should use 2105 to record this liability rather than 2400 or 2999.
Regards,
MySF
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Master Member
Group: Forum Members
Last Login: Today @ 2:26:39 AM
Posts: 107,
Visits: 1,302
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OK, thanks for that.
I was just thinking - this is likely to be a recurring item every year - is there any problem with, or reason not to, just create a new account, say 2106 Tax instalments payable, so that the items will be correctly identified on the Balance sheet?
Regards
Neil H.
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MySF Administrator
Group: Administrators
Last Login: 17/05/2010 6:31:15 PM
Posts: 464,
Visits: 632
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Hi,
No, there is no reason not to do this. The only requirement is that you should be consistent in your use of accounts, meaning that you should always use the same account for this purpose. If you decide to switch from 2105 to 2106 then you should transfer the appropriate balance across from the old account to the new one.
Regards,
MySF
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