Primary tax accounts need to be set up to which the input tax component will be posted. These accounts are recorded on Tax categories. It is recommended that different accounts be established for GST, Withholding tax, PAYG tax and Deferred tax.
The Tax category maintenance option is used to define the specific tax registration status of the individual creditors by applying the appropriate rules to handle each classification.
Creditor’s tax classifications will probably fall into one of the following categories.
- Has an ABN and is registered to collect GST
- Has an ABN but is not registered to collect GST
- No ABN
- Overseas Importers
- Hobbyist
- Overseas creditors who attract withholding tax due to their local government arrangement. For example royalties for a foreign author. This is an optional setup.
Tables are required for the applicable tax categories and their tax rates. For all Tax categories you will need to create specific tax percentage codes as well as a zero tax percentage code. This is to cater for instances where GST is not being collected on products.
View Tax categories| Tax category | Description | ||
| GST registered tax category | For a GST Registered Creditor, the Creditor has supplied an ABN and is also registered to collect GST. In this case GST will be paid in accordance with the Creditor’s tax invoice. | ||
| Tax category for miscellaneous creditors | For a Miscellaneous but GST Registered creditor, the creditor has supplied an ABN on the invoice but they are not officially registered in your database as ongoing creditors. In this case GST will be paid in accordance with the creditor’s tax invoice supplied but the ABN number may need to be overridden.
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| Tax category for ABN registered not GST registration | If a creditor is registered for ABN but is not registered to collect GST then GST is not to be paid in any circumstances. The creditor deals with the tax issue directly with the ATO.
Give the Tax category a name and a meaningful description, for example NON-TAXABLE (ABN). ABN REQUIRED is mandatory and the Tax rule is Not taxable. Recommended Tax Codes are: 1 for 10% 0 for 0% – exempt |
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| Hobbyist tax category | For a hobbyist, no GST applies and no ABN is required.
Give the Tax category a name and a meaningful description, for example NON-TAXABLE (HOBBY). ABN REQUIRED is Not Allowed and the Tax rule is not taxable as a hobbyist is exempt from tax. The G/L tax account should be a B/S GST Clearing Account. |
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| No ABN tax category | When the creditor has no ABN and is therefore not registered to collect GST, a Pay As You Go (PAYG) withholding tax applies unless the creditor is exempt. This tax is at a high rate (example 48.5% Australia) and is withheld from payment so the creditor would generally need to substantiate a claim on the Tax Office to recover his funds. This withholding tax needs to be posted separately in the General Ledger and is processed differently. Instead of the GST being added to the invoice value, the withholding Tax is subtracted from the invoice value prior to payment.
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| No ABN tax Category (local withhold below threshold) | This category is similar to the Hobbyist Category where no tax is charged. Creating another category allows for the distinction between a Hobbyist and a Local Withholding Tax Creditor that happens to have an invoice that falls below the minimum tax threshold value.
In the Tax category description perhaps indicate that the code is for a Below Threshold situation. An ABN is not allowed and the tax rule is not taxable. The default Tax code is zero. The Tax code and description could reflect that its use is Below Threshold with an Item tax rate of zero. The G/L Tax Account should be a tax withheld general ledger account. |
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| Overseas withholding Tax category | For an overseas creditor that attracts tax due to their local government arrangements, for example foreign creditor royalties. Enter a meaningful description for this Withholding tax category.
ABN REQUIRED is flagged as Not allowed and ABN Override is ticked with the tax rule flagged as not taxable. The Tax code for Overseas Withholding tax should be created with the applicable percentage and Withholding tax General Ledger Account. The situation where the system displays a warning message G/L account not present in all possible companies should not occur for Royalty payments as Royalty General Ledger accounts must be established in all applicable companies. |
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| Overseas Imports No Deferment Tax Category | This category has been created to cater for the situation where no Deferment Agreement has yet been established for imports. Tax can therefore not be reflected as an “in” and “out” transaction one invoice. GST is charged by customs and is not reflected on the supplier’s invoice. Enter a meaningful description for this Overseas Tax category, for example, Import Customs Taxed.
ABN REQUIRED is flagged as not allowed and ABN Override is not ticked with the tax rule flagged as not taxable. The Tax code should reflect that it is non taxable with a zero tax rate and GST Input General Ledger account. |
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| Overseas Imports Deferred Tax Category | For an overseas creditor, GST would be added but not paid to the Creditor. The GST needs to be reflected as an “in” and “out” on the same invoice. This GST may be deferred upon specific registration with the ATO, since ultimately it would be paid then recovered almost immediately.
Enter a meaningful description for this Import Tax Deferred Category. ABN REQUIRED is flagged as not allowed and ABN Override is not ticked with the tax rule flagged as tax deferred. In this example the tax rule that applies is tax deferred. The tax is still calculated at 10% but will be deferred. Refer to the section GST Registered Tax Category for field descriptions. The Tax code description should reflect a deferred tax code with the deferred rate in the Item tax rate field. Tax deferred General Ledger accounts must be entered in the Tax account and Tax reverse account fields. In the case of deferred revenue the GST is “paid” and “claimed” immediately so two General Ledger accounts are required to reflect this. |
Contents
Add a new tax category
- In the menu, expand Base Modules > Accounts Payable > Maintenance and double-click AP Tax Category Maintenance. APM160 Tax Category selection panel appears, listing all the existing tax categories.
| Option | Description |
| Copy | Allows you to copy an existing Tax category to a new Tax category with any changes as required. |
| Tax group | Allows you to add the tax group and the tax codes applicable for that tax group. |
| Dft group | After all the tax groups are added to a tax category, you can use this option to nominate a default tax group. |
- Click Add. APM160 Tax Category panel appears to add a new tax category.
| Field | Description |
| Company | A Company number is allocated to associate the creditor with a specific company. The default company number is taken from TMSAP/CONO and can be overridden. A Payment Cycle is specified by Company. The Company number can also default from the original transaction as in the case of Already Paid Invoices. |
| Tax category | The Tax categories define the specific tax registration status of the individual creditors by applying the appropriate rules to handle each classification. The creditors tax category is established on the Creditors masterfile and defaults in various processes. A range of categories can be selected for inclusion on a payment slip. |
| Description | A user defined description of tax category is given which then displays whenever a Tax Category is used by a program. |
| ABN required | A tax file number is required unless the creditor has not applied for an ABN. A Hobbyist for example does not require an ABN. In the case where one creditor has been established on the masterfile as a miscellaneous creditor and an ABN is required, this ABN could vary from creditor to creditor. In Creditor Tax Category this flag should then be set to Yes to indicate override ability is required. There is no need to create a miscellaneous creditor for each Tax Category as the Tax Category can be overridden at Invoice Entry level. |
| ABN override | The Tax file number override flag determines whether or not the ABN may be overridden at invoice entry time. This is necessary in the case of “miscellaneous” creditors or one off creditors that do not have their own specific Creditors Masterfile record. An ABN will be shown on the creditors invoice and this number will vary from creditor to creditor. |
| ABN validation | Multiple validation rules can be applied to the ABN or Tax file number depending on the countries being handled by the system. In Creditor Tax Category the validation program number is entered in this field. In the case of Australian validation requirements the entry is XAO3AU. This is a similar process to that of the credit card validation currently available on the system. |
| Default tax group | Default tax group can only be added after the tax category has been created and the tax groups have been added using option Tax group. One of the tax groups can then be selected as a default tax group. Further overrides can be added to the default tax group; see section Add a default tax group for a tax category and add overrides |
| Non-taxable threshold | A threshold can be established to provide an exception to the rule based on the value of the invoice. The Invoice Entry program will check the Document amount entered on the header against the value in this field and if the Document amount is equal to or less than this field value, no Withholding tax is permitted. This is applicable to creditors that do not have an ABN.
If the creditor is of a Tax category that has no ABN and the invoice value is equal to or below this threshold value, the Tax category will be changed on the Invoice transaction to one of exempt. The Tax category is taken from the Alternate Tax Cat field. |
| Alternate tax cat | If the conditions of the invoice change resulting in the original Tax Category no longer being applicable, the Alternate Tax Cat entered in Creditor Tax Category will be applied. For example in the case of an invoice that falls below the threshold value due to a credit note having been passed. |
- Enter the tax category information, as required.
- Click OK to save the new tax category.
Add a tax group for a tax category
- In the menu, expand Base Modules > Accounts Payable > Maintenance and double-click AP Tax Category Maintenance. APM160 Tax Category selection panel appears.
- Select the tax category and click option Tax group. APM160 Tax Group panel appears displaying tax groups for the selected tax category.
- Click Add to add a new Tax group.
- Enter the Tax group and the Description.
- Click OK to save the Tax group.
Add tax codes for a tax group
- In the menu, expand Base Modules > Accounts Payable > Maintenance and double-click AP Tax Category Maintenance. APM160 Tax Category selection panel appears.
- Select the category and click on Tax group. APM160 Tax Group panel appears displaying tax groups for the selected tax category.
- Select a tax group and click option Tax code
- Click Add to add a new Tax code.
- Enter the Tax code.
- Click OK to save the new Tax code for the Tax group.
Add a default tax group for a tax category and add overrides
- In the menu, expand Base Modules > Accounts Payable > Maintenance and double-click AP Tax Category Maintenance. APM160 Tax Category selection panel appears.
- Select the tax category and click option Dft group. APM160 Default Tax Group – Maintenance panel appears.
- On the Dft group field search and select a tax group as default from the list of tax groups.
- Click OK. The default tax group would now display on the tax category maintenance panel.
- You have the option to override the default tax group if required. To do this:
- From the APM160 Default Tax Group – Maintenance panel click Add.
- Enter override tax group by sequence for Creditor type/Profit centre/Account major/Account minor. The override default tax group will be used instead of the default tax group only if the selection criteria (Creditor type/Profit centre/Account major/Account minor) is met.
