Tax codes

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. 

A Tax code is the user defined code to identify a tax rate applicable for a Tax category.  Multiple tax codes can be defined for a Tax category to cater for various conditions that may arise.

Whether this field displays in the Invoice/Credit Note Entry GL Dissection panel depends on the default settings in TMSAP/TAX-MODE.  This default can be overridden.  The default Tax code displays in the T column and comes from the Tax category code in the Creditor masterfile.  The Tax code can be overridden at this point to cater for portions of an invoice that attract a rate that differs from the default rate.  This caters for the differentiation between taxable items and non taxable items.  The header tax value can then be overridden if necessary.  Also the line detail tax values can be amended to cater for calculated rounding differences.

If the system displays the message Invalid tax code check the setup in TMSAP/TAX-ACT to ensure the Creditor type is valid for the Tax code selected. 

If this field is ‘Y’ then on Invoice/Credit Note Entry automatically calculates the amount of tax to be withheld based on the tax category entered on the header and may be overridden.

An overseas creditor may attract tax due to their local government arrangements, for example foreign creditor royalties. A Tax category is established accordingly.

If the creditor has no ABN and is therefore not registered to collect GST, Withholding tax may be applicable. In this case a Pay As You Go (PAYG) Withholding tax will apply unless the creditor is exempt.  This tax is at a high rate (currently 48.5%) and is withheld from payment so the creditor would generally need to submit a claim on the Government Tax Office to recover his funds.  This Withholding tax is 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. 

The following Tax breaks apply:

• 1 = No break – tax break will not apply, only a single rate can be maintained for any effective period.
• 2 = Absolute – the rate against a break amount would apply for that break amount and for all amounts up to the next break amount. The selected rate would apply to the whole  amount. If there is no further break amounts setup, then the rate for the last break amount would apply to all further payments/earnings. In the example below, if the earnings/payment amount is 45000.00 then the applicable rate would be 20% on the whole amount of 45000.00. On any amounts >= 50000.00, the rate would be 22% on the whole amount.

Example:    Rate 1          Rate 2         Rate 3      Rate 4

Break:      6000.00      35000.00      50000.00

Rate:           15.00             20.00           22.00

• 3 = Differential – varying rates would apply depending the break levels. In the above example, if the earnings/payment amount is 45000.00 then the applicable rate would be 15% on the first 6000.00 then 20% on next 35000.00 and on the remaining 4000.00 it would be 22%.

Up to 5 break rates can be entered for Tax break options 2 and 3 (Absolute and Differential).