FNSTPB401 Complete Business Activity and Instalment Activity Statements ...€¦ · Complete...

FNSTPB401

Complete Business Activity and Instalment Activity Statements

Xero 2nd Edition ISBN Number: 978-1-925782-95-0

Part Number: 501

Version: Xero 20.03

AUTHOR – Kerryn Maguire

Kerryn has been working with accounting software products for over twenty years. Originally working from 1994 as an accountant with small business when accounting software became mainstream. Kerryn then focused on providing consulting and training services to small business in particular. Expanding from this into to providing curriculum based resources to TAFE and private RTOs. From this she established Microstar Publishing and more recently incorporated OfficeLink Learning to provide a wide range of resources for the Accounting and Business Services Certificate courses. Kerryn has a long association with many TAFEs and RTOs across Australia. Kerryn’s fundamental aim is to provide resources that are easy to understand while providing a practical application of skills acquired. Kerryn also co-authors two titles for Cambridge University Press which are in their 4th Edition – first published in 2000. Kerryn has considerable experience and knowledge:

Bachelor of Applied Science Mathematics Diploma of Education Graduate Diploma of Accounting CRI: Criterion Referenced Instruction Member of Institute of Certified Bookkeepers Member of VELG

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All Rights Reserved

© Copyright 2020 Learner Link Version 20.3 Xero

No part of the contents of this book may be reproduced or transmitted in any form or by any

means without the written permission of Learner Link. All registered trademarks, or service

marks of their respective owners.

While care has been taken in the preparation of this Training Tool, Learner Link, the developer

does not accept any liability for any damage or loss (including indirect and consequential loss)

incurred by any person because of relying on the information contained in this material. This tool

should not be regarded as professional advice and it should not be relied upon in any important

matter without obtaining appropriate advice relevant to your situation.

It is the Registered Training Organisation’s responsibility to validate the mapping of this tool to

the performance criteria.

Trademarks and Acknowledgements

All terms or products mentioned in this manual that are known to be trademarks have been

acknowledged. Learner Link cannot attest to the accuracy of this information. Use of a term in

this manual should not be regarded as affecting the validity of any trademark.

Software Description

This course has been designed for users of Xero as of March 2020

The case study in this material uses fictional information.

Xero Learn Content Partner

Kerryn Maguire of Maguire Printing Pty Ltd is a content partner to Xero Learn. Learner Link is a

registered business of Maguire Printing Pty Ltd.

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Contents

© Copyright 2020 Learner Link i

Contents

Unit 1 - Introduction .......................................................... 1 Accounting software used ............................................................. 1 Prerequisites ............................................................................ 2 Delivery .................................................................................. 2 Relationship to Competency Standards ............................................. 2 What you will need .................................................................... 3 Conventions used in this User Guide ................................................ 4 Symbols used in this User Guide ..................................................... 5 Access the Xero Organisation File ................................................... 6 Check Organisation Details ........................................................... 8 Check Financial Settings .............................................................. 9 Check Sales ............................................................................ 10 Check Purchases ...................................................................... 11 Set Conversion Balances ............................................................. 12 Set BAS Type .......................................................................... 13

Unit 2 – Statutory, legislative and other requirements ... 19 Australian Taxation System ......................................................... 20 List of abbreviations ................................................................. 21 Researching Legislative, Statutory and Regulatory Requirements ............ 22 Overview of Legislation, Regulations and Codes of Practice................... 24 Tax Agent Services Legislation ..................................................... 25 Registration Requirements .......................................................... 27 Continuing Professional Education ................................................. 34 Professional Associations ............................................................ 34 Privacy ................................................................................. 35 The Notifiable Data Breaches Scheme ............................................ 36 Applying for an Australian Business Number (ABN) .............................. 38 GST Legislation ....................................................................... 39 What is a ‘Consideration’? .......................................................... 40 When is a sale connected with Australia?......................................... 40 Is it an Enterprise or a Hobby? ..................................................... 40 Competition and Consumer Act 2010 .............................................. 42 GST Registration and Compliance .................................................. 42 How to calculate the GST Turnover ............................................... 42 Registering for GST .................................................................. 43 Methods of reporting GST ........................................................... 43 Selecting the reporting method .................................................... 43 GST reporting periods ............................................................... 44 Revision: Case Study 1 ............................................................... 45

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Case Study 2 .......................................................................... 46 Case Study 3 .......................................................................... 46 Valid tax invoices .................................................................... 47 Types of supplies ..................................................................... 48 Summary of GST Decisions .......................................................... 52 ATO Website – BAS Agents Tax Practice .......................................... 53 BAS lodgement dates – GST ......................................................... 54

Unit 3 - Reporting GST using the Accounts method ........ 57 Simpler BAS ........................................................................... 61 Simpler BAS means simpler record keeping ...................................... 62 Methods of completing the Business Activity Statement ....................... 63 Accounts method ..................................................................... 63 Simplified GST accounting methods for food retailers ......................... 75

Unit 4 - Tax codes and the Calculation Worksheet method .................................................................... 79

Getting started ....................................................................... 79 View tax rates ........................................................................ 80 Explanation of Tax Rates ............................................................ 82 Add a Tax Rate: Not Registered for GST .......................................... 84 Add a Tax Rate: Non Income Tax Deductible .................................... 85 Calculation Worksheet method of completing the Activity Statement ....... 86 GST amounts you owe the ATO from sales ....................................... 87 Using the Calculation Worksheet for sales ....................................... 90 Checking Accounts and Tax Rates ................................................. 95

Unit 5 - Entering GST transactions in Xero ...................... 99 Accounting for payment where part GST and part GST Free ................. 100 Payment to Supplier who has an ABN but Not Registered for GST ........... 104 Payment for Expense that is Non Tax Deductible .............................. 108 Payment with Part Private use .................................................... 111 Payment to Supplier who has no ABN ............................................ 113 Payment for GST only – GST on Capital Imports ................................ 115 Rounding the GST Amount ......................................................... 118 Purchase to make Input Taxed Supplies ......................................... 120 Checking for Errors .................................................................. 122 Income received from Export sale ................................................ 125 Income received from Input Taxed Sale ......................................... 127 Entering sale of an Asset ........................................................... 129 Entering the receipt of a cheque together with a recipient created tax invoice and tax invoice ..................................... 131 What is a recipient created tax invoice? ......................................... 131

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Contents

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What is a valid RCTI? ................................................................ 131 Writing a customer off as a bad debt ............................................ 135 Purchase of an Asset ................................................................ 138 Purchase of an Asset (going concern) – GST-free .............................. 140 Change Role to Adviser ............................................................. 141 Accounting for the purchase of a new Motor Vehicle using a chattel

mortgage, reporting GST on a non-cash basis or cash basis .......... 144 Identifying information outside the bookkeeper’s scope ...................... 152 Accounting for the purchase of a new computer on hire purchase .......... 153 What are the current rules of Hire Purchase? ................................... 153 Accounting for Insurance Premium Funding Arrangements ................... 157 Claiming Fuel Tax Credits .......................................................... 160 Recording Diesel purchased for the farm ........................................ 161

Unit 6 – Other GST and tax issues .................................. 175 Identifying information outside the bookkeeper’s scope ...................... 176 Luxury Car Tax (LCT) ............................................................... 177 Luxury Car Tax Threshold .......................................................... 178 Wine Equalisation Tax (WET) ...................................................... 179 Grouping .............................................................................. 180 Branches .............................................................................. 181 The Margin Scheme ................................................................. 182 Second-hand goods .................................................................. 182 Imports ................................................................................ 183 Pre-establishment Costs ............................................................ 183 Fringe Benefits....................................................................... 184 Overview of Fringe Benefits Tax (FBT) ........................................... 185 Employee Contributions – for your information only ........................... 187 Inter-entity transactions ........................................................... 188 Leaving the GST system ............................................................ 190

Unit 7 - Payroll and the Activity Statement .................. 191 PAYG Withholding System .......................................................... 192 Processing pays ...................................................................... 193 Voluntary Agreements .............................................................. 211 Run Bank Reconciliation ............................................................ 214 Payment of PAYG Withholding .................................................... 218 Reporting Wages and Tax withheld on the Activity Statement ............... 218

Unit 8 - Calculating and reporting the PAYG Instalment 225 PAYG Instalment System ........................................................... 225 Who pays a PAYG Instalment? ..................................................... 226 The Instalment Rate ................................................................ 227

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PAYG Instalment Amount .......................................................... 227 Calculation of PAYG Instalment ................................................... 228 Lodgement Schedule ................................................................ 232 Calculation of PAYG Instalment in Xero .......................................... 233 Case Study 1 ......................................................................... 234 Case Study 2 ......................................................................... 236

Unit 9 - Preparing the Business Activity Statement ...... 239 Reflection on what you have covered in this workbook ....................... 240 Financial settings: Little Blue Distillery .......................................... 240 Reconcile Payroll .................................................................... 243 Check all data entered ............................................................. 243 Accounts Receivable Reconciliation .............................................. 244 Accounts Payable Reconciliation .................................................. 245 Inventory Reconciliation ........................................................... 246 Check Bank Account Reconciliations ............................................. 247 Common mistakes ................................................................... 248 Run the General Ledger Report ................................................... 250 Check Transactions by Tax Rate Audit Report Report ......................... 251 Balance Sheet ........................................................................ 252 Profit and Loss Report .............................................................. 253 Reconcile the GST ................................................................... 254 Run the Final Activity Statement ................................................. 255 Print the Business Activity Statement ............................................ 257 Very Important Information on Lodgement ...................................... 258 Record Payment to ATO ............................................................ 259 Finalising any GST from Conversion Balances ................................... 261 The GST Reconciliation Report .................................................... 262 Reporting on a Cash Basis .......................................................... 263 Check Tax in Aged Receivables Detail Report ................................... 266 Check tax in Aged Payables Detail Report ....................................... 267 Run Activity Statement Report .................................................... 268 The GST Reconciliation Report .................................................... 270 The Simpler BAS ..................................................................... 272 Lock Dates after BAS report has been submitted ............................... 276

Unit 10 – Correcting GST errors ..................................... 279 Correcting GST mistakes and Time limits ........................................ 280 Correcting errors .................................................................... 282 Decrease input tax credit .......................................................... 283 Increase GST to be paid ............................................................ 283 Correcting GST errors with a Journal entry in the current BAS period ...... 284

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Contents

© Copyright 2020 Learner Link v

Appendix A Elements of Competency and Performance Criteria ........................... 287

Appendix B Solutions to exercises ............................................................... 289

Appendix C Set Up 2 Factor Authentication ................................................... 323

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Statutory, legislative and other requirements

© Copyright 2020 Learner Link 19

Unit 2


Learning outcomes

In this unit, you will:

• learn about the Australian tax system

• learn the abbreviations used

• research and locate online the Financial Services Industry current legislative, statutory and regulatory requirements

• identify ATO guidelines for the Financial Services Industry

• state the purpose of the Tax Practitioners Board (TPB)

• describe the TPB registration requirements, including minimum qualifications and experience

• explain what is a ‘fit and proper’ person in regard to TPB registration

• describe the Code of Professional Conduct and the possible consequences of breaching the code

• identify the limits and boundaries of the Privacy Act and other industry codes of practice

• learn about the GST Act and Division 9 and Division 11

• learn the differences between hobbies and enterprises

• learn how to apply for an ABN

• learn about the four types of supplies

• learn about the Competition and Consumer Act 2010

• learn about GST registration and compliance

• learn how to calculate the annual turnover

• learn about methods of reporting GST and lodgement dates

• revise what a valid tax invoice is

• complete a checklist for a business

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20 © Copyright 2020 Learner Link

Australian Taxation System In 1916, the first federal income tax commenced to finance Australia’s

involvement in World War I.

In 1936 a new Act consolidating previous legislation was passed by the

Australian Parliament. This Act, the Income Tax Assessment Act 1936

(ITAA 1936) still regulates our Income Tax system today.

In 1942, as a wartime measure, the Federal Government took over the

collections of all income tax. This position continues to the present day

with the Federal Government collecting all income tax and most other

taxes.

Until 30 June 2000 the Federal Government made grants to the states

out of income tax collected.

In the 1990s the Commonwealth Government commenced rewriting the

complete Income Tax Assessment Act. The first part of the re-written

Act was introduced as the Income Tax Assessment Act 1997 (ITAA 1997).

The project was then put on hold and remains uncompleted.

From 1 July 2000, a broad-based Goods and Services Tax (GST) has been

applied - a tax of 10% on most goods and services in Australia. The

principle Act governing the operation of the GST is the A New Tax

System (Goods and Services Tax Act) 1999.

In addition to the Act, the Commissioner of Taxation has issued a number

of GST Rulings and GST Determinations.

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List of abbreviations

Abbreviation Stands for

ABN Australian Business Number

ABR Australian Business Register

ACCC Australian Competition and Consumer Commission

ANTS A New Tax System

ATO Australian Taxation Office

BAS Business Activity Statement

BSP BAS Service Provider

CTP Compulsory Third Party (Insurance)

FBT Fringe Benefits Tax

GIC General Interest Charge

GST Goods and Services Tax

GW Consolidated WET And WEG

IAS Instalment Activity Statement

ITAA Income Tax Assessment Act

ITC Input Tax Credit

LCT Luxury Car Tax

NAT Unique number allocated to ATO Form

PAYG Pay As You Go

PDF Portable Document Format

RCTI Recipient Created Tax Invoice

SBE Small Business Entity

TFN Tax File Number

TPB Tax Practitioners Board

WEG Wine Equalisation Tax [WET] Plus GST

WST Wholesale Sales Tax

WET Wine Equalisation Tax

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Researching Legislative, Statutory and Regulatory Requirements

The legislation, regulation and codes of practice discussed in this user guide are not exhaustive. Consequently, it is critical that all operators and employees in the Financial Services Industry take steps to research the legislation, regulation and codes of practice relevant to their sector to identify compliance requirements.

Non-compliance has the potential to result in fines, loss of custom, deterioration of reputation, penalties and cancellation of professional memberships.

Therefore, bookkeepers must research reliable sources of information to determine the action they should take to remain compliant. Sources of information may include:

• Accountant/Registered Tax Agent

• Australian Taxation Office

• Professional Journals (accounting and bookkeeping)

• Professional Associations

• Training publications

• Experienced bookkeepers.

Research of legislative, statutory and regulatory requirements should be a continual process, rather than a one-off event, to ensure you stay abreast of updates and changes in the industry.

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@ Activity tasks

List and discuss a minimum of three methodologies you could utilise to research legislative, statutory and regulatory requirements applicable to bookkeeping activities.

______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ List and discuss the differences between the Superannuation Guarantee (Administration) Act and the Superannuation Guarantee Charge Act.

______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ Solutions can be found in Appendix B.

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Overview of Legislation, Regulations and Codes of Practice

The current legislation, regulations and codes of practice relevant to the Financial Services Industry are enormously extensive and differ for each sector.

The legislation, regulations and codes of practice that may apply include, but are not limited to:

• Income Tax Assessment Act

• Tax Agent Services Act

• Privacy Act

• Industry codes of practice

• Competition and Consumer Act

• Insurance requirements, including public liability and professional indemnity

• Professional development requirements

• Anti-discrimination legislation

• Occupational health and safety (OH&S) legislation

• Australian Accounting Standards

• National Consumer Credit Protection Act

• National Credit Code

• Legislation covering competition and prudential regulation

• ePayments Code

• Financial Transaction Reports Act

• Corporations Act (including Accounting Standards)

• Business Names legislation

• Financial Services Reform Act (FSRA)

• Taxation Administration Act

• Superannuation Industry (Supervision) (SIS) Act

• Australian Competition and Consumer Commission (ACCC) Section 60

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Tax Agent Services Legislation

The tax agent services legislative package consists of the:

• Tax Agent Services Act 2009 (TASA 2009). The TASA 2009 is the main Act. It established the Tax Practitioners Board (TPB) which provides for the registration of tax agents and BAS agents. The TASA replaces the first legislation enacted in 1943. The object of the TASA is to ensure that tax agent services are provided to the public in accordance with appropriate standards of professional and ethical conduct. This is to be achieved by (among other things):

a) establishing a national Board to register tax agents and BAS agents

b) introducing a Code of Professional Conduct for registered tax agents and BAS agents

c) providing for sanctions to discipline registered tax agents and BAS agents.

• Tax Agent Services Regulations 2009 (TAS Regulations 2009). The Regulations contain, among other things, the qualifications and relevant experience requirements for registration.

• Tax Agent Services (Transitional Provisions and Consequential Amendments) Act 2009 which contains the transitional and consequential matters arising from the enactment of the TASA.

• Tax Laws Amendment Act 2013 which created a regulatory framework for tax (financial) advice centres and contains transition provisions for registration as a tax (financial) advisor.

In 2010, the new national Tax Practitioners Board (TPB) was introduced. BAS service providers are now required to be registered with the TPB if they provide a BAS service for a fee or other reward. The Board provides an independent and consistent regulatory regime for all agents who provide tax agent services.

Visit www.tpb.gov.au to familiarise yourself with the TPB website.

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http://www.legislation.gov.au/Details/C2017C00085

http://www.legislation.gov.au/Details/F2018C00611

http://www.legislation.gov.au/Details/C2009A00114



http://www.tpb.gov.au/

http://www.tpb.gov.au/



The provisions that enabled the new TPB to be established commenced on 26 March 2009, when Royal Assent was given to the TASA 2009. The early commencement of these provisions was to enable the chair and members of the Board to prepare for the commencement of the new regulatory regime.

The purpose of the new regime is:

‘to ensure that tax agent services are provided to the public in

accordance with the appropriate standards of professional and

ethical conduct’, section 2-5 of the TASA.

Importantly, the new regime is not aimed only at regulating tax agent services provided by individuals to the public. The new regime is also aimed at regulated entities should they provide BAS services for a fee or other rewards.

A ‘BAS service’ is defined in the TASA, as a ‘tax agent service’ that relates to:

• Ascertaining or advising an entity about liabilities, obligations, or entitlements that arise, or could arise under a ‘BAS provision’, or

• Representing an entity in their dealings with the Commission of Taxation in relation to a BAS provision; and

• It is reasonable to expect an entity to rely on the service in relation to those liabilities, obligations or entitlements under a BAS provision.

The definition of a ‘tax agent service’ as defined in the TASA is a service that relates to:

• Ascertaining or advising about liabilities, obligations or entitlements of an entity under a taxation law; or

• Representing an entity in dealings with the Commission of Taxation in relation to a taxation law; and

• It is reasonable to expect an entity to reply on the service in relation that liability, obligation or entitlement.

As a BAS service is a tax agent service, a tax agent does not need to also register as a BAS agent to provide BAS services.

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Registration Requirements

Fit and proper person

An individual must be fit and proper in order to obtain original registration as a tax agent or BAS agent and for the purpose of maintaining continued registration under the TASA. In addition, where there is an application for registration by (or continued registration of) a company or partnership agent, the fit and proper person requirement applies to each individual director (in the case of a company) or each individual partner and director of any company partner (in the case of a partnership).

In deciding whether it is satisfied that an individual is a fit and proper person, the Board must have regard to:

whether the individual is of good fame, integrity and character

whether an event described in section 20-45 of the act has occurred during the previous 5 years

whether the individual had the status of an undischarged bankrupt at any time during the previous 5 years

whether the individual served a term of imprisonment, in whole or in part, at any time during the previous 5 years.

Qualification/Experience

The table below lays out the required level of knowledge and experience for a registered BAS agent.

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To register as a tax agent there are 6 options depending on your qualifications and experience. The following table summarises the requirements under these items, covering:

• primary qualification

• board approved courses

• relevant experience

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https://www.tpb.gov.au/qualifications-and-experience-tax-agents#Primary

https://www.tpb.gov.au/qualifications-and-experience-tax-agents#Board

https://www.tpb.gov.au/qualifications-and-experience-tax-agents#Relevant



Companies/Partnerships

A company is eligible for registration as a registered tax agent or BAS agent if:

each director of the company is a fit and proper person

the company maintains professional indemnity (PI) insurance

the company is not under external administration

the company has not been convicted of a serious taxation offence or an offence involving fraud or dishonesty during the previous 5 years

the company has:

o in the case of registration as a registered tax agent – a sufficient number of individuals being registered tax agents, to provide tax agent services to a competent standard and to carry out supervisory arrangements

o in the case of registration as a registered BAS agent – a sufficient number of individuals being registered tax agents or BAS agents, to provide BAS services to a competent standard and to carry out supervisory arrangements.

TASA Knowledge

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Reporting GST using the Accounts method


Unit 3


Learning outcomes


• become familiar with the ATO guidelines for GST and completing your activity statement

• learn what is reported at G1, G2, G3, G10, G11, 1A and 1B on the Activity Statement

• understand the Simpler BAS reporting method

• learn how to record payments in the Cash Payments Book

• learn how to record receipts in the Cash Receipts Book

• carry out a Bank Reconciliation

• calculate the Cash Book balance

• transfer figures from the Cash Books to the Activity Statement using the Accounts method

• calculate the GST refund or payment

• learn about the simplified GST accounting method for food retailers.

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@ Gathering GST and BAS Information

In the following units, you will need to access information on the ATO website. It would be useful to have the following sections open so you can easily refer to them as you work through the tasks: GST for business - www.ato.gov.au/Business/GST/

GST - completing your activity statement

www.ato.gov.au/Business/GST/In-detail/Managing-GST-in-your-business/Reporting,-paying-and-activity-statements/Completing-your-BAS-for-GST/ These guidelines have replaced the following ATO publications:

• NAT 3014 – GST for small business

• NAT 7392 – GST completing your activity statement

Activity task

Use the information on ‘GST’ section to answer the following questions.

What does being registered for GST mean? (brief explanation only)

.....................................................................................

.....................................................................................

.....................................................................................

.....................................................................................

.....................................................................................

.....................................................................................

.....................................................................................

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https://www.ato.gov.au/Business/GST/

http://www.ato.gov.au/Business/GST/In-detail/Managing-GST-in-your-business/Reporting,-paying-and-activity-statements/Completing-your-BAS-for-GST/





What records do you need to keep?

.....................................................................................

.....................................................................................

.....................................................................................

.....................................................................................

.....................................................................................

When are you entitled to claim GST credits for the GST included in your business purchases?

.....................................................................................

.....................................................................................

.....................................................................................

.....................................................................................

Refer to the ‘GST - completing your activity statement’ information to answer the following questions.

What guidelines must you follow when completing the BAS (manually,

not electronically)?

.....................................................................................

.....................................................................................

.....................................................................................

.....................................................................................

Important: If you make an error on the Business Activity

Statement, use correction tape, not liquid paper.

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After completing the Business Activity Statement, how can you pay the amount owing?

.....................................................................................

.....................................................................................

.....................................................................................

.....................................................................................

.....................................................................................

.....................................................................................

When writing out a cheque, who should the cheque be made payable to?

.....................................................................................

.....................................................................................

Identifying BAS fields: What is reported in the following fields?

G1 ..................................................................................

G2 ..................................................................................

G3 ..................................................................................

G10 ................................................................................

G11 ................................................................................

1A ..................................................................................

1B ..................................................................................

Capital purchases are assets acquired by the entity during the reporting period, e.g. land, buildings, cars and equipment.

Solutions can be found in Appendix B.

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Simpler BAS

Below is an extract from the ATO website describing the new Simpler BAS reporting method:

This is also a useful ATO video summarising the changes and the impacts on small business at www.ato.gov.au/Business/Business-activity-statements-(BAS)/Goods-and-services-tax-(GST)/GST-reporting-methods/#SimplerBAS

If a business lodges online, it won’t need to do anything to access Simpler BAS reporting, the ATO will automatically send out a BAS requiring less GST information.

If a business is a paper lodger, or uses accounting software to submit their BAS, it will simply need to leave the sections blank where that information is no longer required.

Simpler BAS does not affect how other taxes are reported, how often a business needs to lodge its BAS or the records the business must keep.

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https://www.ato.gov.au/Business/Business-activity-statements-(BAS)/Goods-and-services-tax-(GST)/GST-reporting-methods/#SimplerBAS





Simpler BAS means simpler record keeping

When using Xero, a business earning less than $10,000,000 needs to use only four tax rates to complete the GST section of the Simpler BAS:

• GST on Income and GST on Expenses: Use these rates to track GST received and paid on sales and purchases. The GST amounts will be reported at 1A and 1B on the Simpler BAS, and the value of the sales will be reported at G1.

• GST Free Income: Use this rate sales that are GST-free. The value of these sales is included in the amount reported at G1.

• BAS Excluded: Use this rate for transactions that don’t need to be reported at all on your Simpler BAS.

GST Free Expenses are not reported on the Simpler BAS.

A business may still choose to use multiple tax rates for its internal reporting and/or auditing purposes; however, the BAS reporting to the ATO will be simplified. The impact on the use of tax rates within accounting software is explained in more detail in Unit 4.

The case studies and exercises in this user guide will use the full reporting method so that students learn the most complex form of BAS reporting but will also advise on how Simpler BAS could be used if it is appropriate to the business in question.

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Methods of completing the Business Activity Statement

There are two methods of completing the Activity Statement:

• Accounts method

• Calculation Worksheet method (see Unit 4).

You will cover the Accounts method in this unit.

Accounts method

To learn how to use the Accounts method, you will write up the Cash Book for JJ’s Takeaway and complete the Business Activity Statement using the Accounts method.

JJ’s Takeaway, as the name suggests, is a small takeaway shop selling sandwiches, salads, fish and chips and other takeaways, drinks, milk, etc. The business is set up as a sole trader, has an ABN and is registered for GST reporting quarterly on a cash basis.

The Accounts method is a way of completing your activity statement directly from your accounting records.

On the following pages, you will complete the Cash Receipts and Cash Payments Books of JJ’s Takeaway, recording the information for the first week from the following source documents:

• cash register tapes (obtained from the cash register)

• cheque butts (obtained from the business’s cheque book)

• bank statement (obtained from the business’s bank). Sample

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Activity task

Entering source documents – JJ’s Takeaway using the Accounts method. You can choose which month you use.

Payments: Cheque Butts

Enter the cheque butts below and on the following page in the Cash

Payments Book on page 66. You will notice that three of the cheque

butts have been entered as examples.

A completed solution for the Cash Payments Books can be found in

Appendix B of this book.

Remember GST is 1/11th of the total amount including GST (unless

otherwise indicated).

No: 1001 1 May

To: Telstra

For: Telephone A/c

This cheque $330.00 [inc GST]

No: 1007 3 May

To: Australia Post

For: Postage Stamps


No: 1002 1 May

To: The Bakery

For: Bread/Bread rolls

This cheque $200.00 [GST-free]

No: 1008 4 May

To: Millers Markets

For: Fruit and Vegetables

This cheque $112.00 [no GST]

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Activity task (continued)

No: 1003 1 May

To: Ergon Electricity

For: Electricity


No: 1009 4 May

To: Able Wholesalers

For: Invoice 25

Wrapping Materials $385.00

Bottled Water [GST Free] $200.00

Personal $200.00

This cheque $785.00

GST to be claimed = $35.00

No: 1004 1 May

To: Ray Brown Real Estate

For: Monthly Rent

This cheque $1,100.00 [inc GST]

No: 1005 1 May

To: Local BP

For: Fuel $55, ice cream $2

Allocate the $2 ice cream to Drawings


No: 1010 5 May

To: Downs Equipment

For: New Computer - $1,650.00

Paper and Envelopes - $88.00

This cheque $1,738.00 inc GST

No: 1006 1 May

To: Downs Office Equipment

For: New Cash Register


No: 1011 5 May

To: Dairy Farmers

For: Milk

This cheque $300.00

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CASH PAYMENTS BOOK – JJ’s Takeaway

Date May

Particulars Cheque Number/

Ref

Total payment amount

Capital Payments

[total amount]

[G10]

Non-Capital

Payments [total less

not reported]

[G11]

GST Amount

[1B]

Stock Purchases GST-free

Bread/Fruit Veg/Milk

Other GST-

free e.g. Bank

Charges

Rent Telephone Electricity Ex GST

Other Purchases

or Expenses ex GST

Details Out-of-scope Not

reported on BAS e.g. loan payment

Drawings Not

reported on BAS

1 Telstra 1001 330.00 330.00 30.00 300.00

1002

1003

1004

1 Local BP 1005 57.00 55.00 5.00 50.00 Fuel 2.00

1006

1007

1008

1009

5 Downs

Equipment 1010 1,738.00 1,650.00 88.00 158.00

1,500.00

80.00

Computer

Stationery

1011

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Tax rates and the Calculation Worksheet method


Unit 4


Learning outcomes


• view tax rates used in the organisation

• edit and create tax rates

• learn about the Calculation Worksheet method of

completing the activity statement

• learn what to report at each field on the Calculation

Worksheet

• learn about the impacts of using Simpler BAS

• check the chart of accounts for tax rates applied

Getting started

In Unit 1 you set up access to the organisation BAS Little Blue Distillery.

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View Tax Rates

4. Login to your Xero account and display the organisation BAS Little Blue Distillery (see Unit 1 for how to get access)

5. Click on the tab Accounting Advanced

6. Click on Tax Rates

Displayed below is a basic list of Tax Rates that your business could use:

7. Click on the button Change to advanced tax rates

Change to advanced tax rates Change to advanced tax rates

Accounting

Advanced

Tax Rates

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8. Click on the prompt Change to advanced tax rates

9. The full list of tax rates appears – click on the rate GST on Income

A Tax Rate generally has a Display Name, a Tax Type and a Tax Component and a Tax Rate. 7. Click on Cancel to close the box

Tax Rate Display Name

Tax Type

Tax Components Tax Rate

GST on Income

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Explanation of tax rates

Set out below is an explanation of each of the tax rates used on the previous page. These are the full set of Tax Rates available. On the following pages, you will learn how these rates are used to complete the activity statement using the full reporting method.

You will also learn how to edit and create your own Tax Rates to cater for various situations.

Rate Tax Rate Description

BAS Excluded 0% Used to record transactions outside the GST net such as cash transfers, depreciation, wages and stock movements.

These transactions ARE NOT INCLUDED in the BAS.

GST Free Capital 0% Used to record your GST-free purchases that are Capital purchases.

GST Free Expenses 0% Used to record your GST-free purchases.

GST Free Exports 0% Used to record GST-free export sales.

GST Free Income 0% Used to record your GST-free sales.

GST on Capital 10% Used to record the purchase of capital acquisitions, e.g. work vehicle including GST.

GST on Capital Imports

0% Used to record GST charged separately on imported goods that are Capital expenses.

GST on Expenses 10% Used to record your purchases when GST has been charged.

GST on Imports 0% Used for GST charged separately on imported goods. Note that the 0% enables you to put the actual tax charged – it does not mean there is no GST on imports.

GST on Income 10% Used to record your sales when GST has been charged.

Input Taxed – when used with Expense accounts

0% Used in track expenses that relate to making Input Taxed Sales, e.g. maintenance expenses for supplying a residential rental property.

Input Taxed – when used with Income accounts

0% Used to record Input Taxed Sales where GST cannot be charged, e.g. residential rent and interest received.

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If a business is using the Simpler BAS method the only tax rates needed to complete their GST returns are:

• GST on Income and GST on Expenses – used to track GST received and paid on sales and purchases

• GST Free Income– used to track sales that are GST free

• BAS Excluded – used for transactions that don’t need to be reported on a BAS

The business may still choose to use multiple tax rates for its internal reporting and/or auditing purpose or they could choose to delete the tax rates they don’t need and simply code all transactions using the GST on Income and GST on Expenses, GST Free Income and BAS Excluded tax rates. Always seek advice from your Accountant before making changes to your company data.

As mentioned earlier, this book is about using the Full BAS reporting. We will also be addressing a few other amounts reported such as Voluntary Withholding amounts and Fuel Tax Credits. You will also create some custom tax rates.

GST Not Registered

0% Track expenses that would normally incur a GST credit, but have been purchased from a business that has an ABN but does not charge GST on sales because it is not registered for GST.

Non Income Tax Deductible

0% Used to track payments with GST which are not income tax deductible such as fines and entertainment expenses.

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Add a Tax Rate: Not Registered for GST

You may need to create a new tax rate. For example, for purchases that would normally incur GST but are from a business that has an ABN but does not charge GST on sales as it is not registered for GST because their turnover is low.

1. Click on the New Tax Rate button in the Tax Rates window

2. Click into the Tax Rate Display Name box and type GST Not Registered

3. Click into Tax Type and click on GST Free Expenses [this will

ensure it is also reported at G14]

4. Click into Tax Components and type GST

5. The Rate as 0%.

Even though there will not be any tax you still need to link accounts.

6. Click on Save

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Add a Tax Rate: Non Income Tax Deductible

Another example you may have occasion to use is the Non Income Tax Deductable rate of 0%. This caters for an expense in the business, for example for entertainment expenses, that is to be allowed however it is not income tax deductible and therefore any GST associated with the expense is not claimable either.

Creating a separate tax rate will show these purchases separately in the Transactions by tax rate report and the values will be fed through correctly to the Transactions by BAS field report.

1. Click on the New Tax Rate button in the Tax Rate window

2. Click into the Tax Rate Display Name box and type Non Deductible for Income Tax

3. Click into Tax Type and click on Purchases

4. Click into Tax Components and type GST

5. The Rate as 0%.

6. Click on Save

This will have the effect of including the purchase at G11. GST will not be calculated. You will learn later how the value of any purchases made using this tax rate are entered at G15 manually.

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Calculation Worksheet method of completing the Activity Statement

In Unit 3, you used the Accounts method.

In this unit, you will use the Calculation worksheet method.

Activity task

Refer to the ATO guidelines GST – How to complete your activity statement, to answer the following question.

Read the section ‘Choose a method to complete your activity statement’.

What is the difference between the accounts method and the calculation worksheet method of completing the activity statement?

........................................................................................

........................................................................................

........................................................................................

........................................................................................

........................................................................................

........................................................................................

Solution can be found in Appendix B.

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GST amounts you owe the ATO from sales

Tax rates have been created to enable the GST amounts you owe the ATO from the sales section of the GST calculation worksheet to be completed.

This sheet is included with your files.

For complete lists of what to report and not to report in each field of the Sales section refer to the ATO website at:

www.ato.gov.au/Business/GST/In-detail/Managing-GST-in-your-business/Reporting,-paying-and-activity-statements/Completing-your-BAS-for-GST/?page=4#Step_1__Sales

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https://www.ato.gov.au/Business/GST/In-detail/Managing-GST-in-your-business/Reporting,-paying-and-activity-statements/Completing-your-BAS-for-GST/?page=4#Step_1__Sales





Description Field Number

How to calculate the required figures

Total sales Does not include:

- salary, wages, gifts, pensions, annuities

- trust & partnership distributions

- dividends, loans received, donations received

- tax refunds

- partnership contributions

- capital subscriptions

Special rules apply to non-profit bodies, supplies of

interest in real property, long-term accommodation,

gambling

Write notes below on settling an insurance claim (BAS Excluded rate is used – out of scope)

.........................................................................

.........................................................................

.........................................................................

G1

GST on Income

GST Free Income

GST Free Exports

Input Taxed when

used with Sales

Accounts

Exports (must be exported in 60 days)

Write notes below on the reporting of freight and

insurance.

.........................................................................

.........................................................................

.........................................................................

.........................................................................

G2

GST Free Exports

Other GST Free supplies GST-free list + businesses sold as a going concern,

International travel and water

Write notes below on GST-free supplies.

................................................................................

.........................................................................

.........................................................................

.........................................................................

G3

GST Free Income

Your own rates used

with Income accounts

and with Tax Type

- Sales

- GST Free Sales

- Exempt Income

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Description Field Number

How to calculate the required figures

Input taxed sales Financial supplies, lease or hire of residential

premises, long-term accommodation, sale of

residential premises, sale of food by school

tuckshops, precious metals)

Note here circumstances which may be elected as

input taxed:

.........................................................................

.........................................................................

.................................................................................

.........................................................................

.........................................................................

G4

Input Taxed

Sales using Income

type accounts which

use the Tax Rate Input

Taxed.

Total GST-free & input taxed sales

G5

G2 + G3 + G4

Total sales subject to GST

G6

GST

Adjustments

G7 It is better to adjust

your G1 amount than

use G7.

Total sales subject to GST after adjustments

G8

G6 – G7

GST on Sales Divide G8 by 11 (GST Collected)

G9

GST Collected

Note: If a business is using Simpler BAS only the field G1 needs to be reported. The rest of the fields can be left blank.

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Using the Calculation Worksheet for Sales

Use the following tax rates and sales amounts to complete the GST Calculation Worksheet to calculate the amount of GST collected on sales.

Solution can be found in Appendix B.

Tax Rate Amount

GST on Income $8,864 GST Free Exports $1,000 GST Free Income $1,400 Input Taxed $ 21

Using the Calculation Worksheet for Expenses

The GST amounts the ATO owes you from purchases section of the GST calculation worksheet requires the following information:

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Entering GST transactions in Xero


Unit 5


Learning outcomes


• account for payments where GST does not equal 1/11th

• pay an account for GST only

• round the GST amount

• enter payment for entertainment expenses

• enter the payment of invoices from suppliers not registered

for GST

• enter the payment of invoices from suppliers with no ABN

• enter a sale including GST amount

• enter the receipt of a Recipient Created Tax Invoice where

expenses have been deducted

• write account off as a bad debt

• enter the sale of an asset

• account for private use when the bill is paid

• enter the purchase of an asset with GST

• enter the purchase of an asset (as a going concern)

• account for hire purchase agreement and payment

• account for premium funding arrangement and payment

• account for chattel mortgage agreement and payment

• account for fuel tax credit

• view GST reports.

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Accounting for payment where part GST part GST Free Expense

The situation where the amount of GST is not just 1/11th of the total charge can happen easily where some items have GST applied and some do not.

This payment is for a postage bill and includes $25 GST. The total including GST is $355 – however $25 is not 1/11th of $355.

EFT: ANZ Business Date: 1/04/2018

Pay: Australia Post

Postage (within Australia + International)

Total Amount inc GST: $355.00 Amount of GST included: $25.00

We use this amount to work out the portion that is GST Free.

GST is 1/11th of the Charge that includes GST. So, GST amount multiplied by 11 will give the Charge including GST amount.

Postage bill (including GST) = $25 x 11 = $275.00

Therefore, the total amount of the bill less the charge including GST should give us the GST free amount.

International postage bill (GST-Free) = $355 - $275 = $80.00

Go to the following page to look at how this is entered in Xero. Sample

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1. Click on + Spend money

2. Click on ANZ Business then Next

3. Check that Tax Inclusive appears in Amounts are

4. In the To box type Australia Post and TAB

5. Enter the date 1/4/2018 then TAB to the Total box and type 355.00 – it is useful to enter the total amount here as a check against the line totals

Now for the details.

6. Click into the Description box on the first line and type Domestic postage then TAB

7. In Qty type 1 then TAB to Unit Price and type 275.00

8. TAB to Account and type 315 and TAB

9. Check that GST on Expenses appears in the Tax Rate box

10. Click into the Description box on the second line and type International postage then TAB


12. TAB to Account and type 315 and TAB

13. Click in the drop list button for Tax Rate and select GST Free Expenses

14. Check the total Includes GST in the transaction – it should be $25

15. Click on Save

Includes

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Check Business Activity Statement Report

As we enter the transactions in this chapter you should check the Transactions by tax rate and Transactions by BAS field reports to learn how Xero feeds the transaction values to the BAS fields. It will also help you to recognise errors.

1. Click on Accounting Activity Statement and select the reporting period June 2018

2. Click on the Transactions by tax rate tab

3. Check the tax rate GST Free Expenses – it should now list the international postage for $80.00 and GST as 0.00. The domestic part should appear in the GST on Expenses list.

Note: To check any entry you can just click on the Account link and the original transaction will be displayed. When you have finished just click the Browser Back button to return to the report.

Link to transaction

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4. Click on the Transactions by BAS field tab – we will compare the latest figures to the starting report in Unit 1.

5. Check G11 Non-capital purchases – notice that the total value has gone up by the full $355 to $1015 (660 + 355 = 1015)

6. Check 1B GST on Purchases – notice that the $80 GST Free part of the purchase has fed through to here under GST Free Expenses. The total GST on Purchases has therefore just gone up by the $25 in the domestic postage from $60 to $85

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Enter payment of an invoice from a supplier who quotes an ABN, but is not registered for GST

Plant Nation has an ABN which is displayed but is not registered for GST because their turnover is less than $75,000.00. So, while Plant Nation still might pay GST on purchases, they make they cannot claim these credits for GST paid. Also, they do not charge GST on sales.

Russ bought some pot plants to decorate the Cellar Door area. The terms are COD, so he paid immediately with his Business card by EFT.

Plant Nation Invoice ABN 45 458 458 458 15

TO: Little Blue Distillery

1 Scotchmans Road

Date: 05/4/2018 Terms: COD

Plants for cellar door area $155.00

No GST has been charged on this invoice. Paid

Before we record the purchase, we need to check for an adequate Tax Rate. Earlier in the book on page 84 we created this Tax Rate. It should appear in the Tax Rates. If you did not do this, then return to page 84 and complete it now.



3. Type Plant Nation in the To box then TAB. This is a new supplier

which is automatically added to the list of contacts.

4. Enter the date 5/4/2018 then TAB to the Reference box and type Inv 15

5. TAB to the Total box and type 155.00 – it useful to enter the total amount here as a check against the line totals

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6. Click into the Description box on the first line and type Pot Plants for Cellar Door (Plant Nation not registered for GST) then TAB


8. TAB to Account and type 429 for Cellar Door Amenities and TAB

9. Click in the drop list button for Tax Rate and select GST Not Registered

10. Check the total GST in the transaction – it should be $0.00

11. Click on Save & Add another

Note: If the business is using Simpler BAS you could choose to code this transaction as GST Free Expenses.

GST

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Check Business Activity Statement Report

Now let’s check to see how this transaction changes the BAS reports


2. Click on the Transactions by tax rate tab

3. Check the tax rate GST Not Registered – it now lists the Plant Nation purchase for $155.00 and GST as 0.00.

Note: Remember, to check any entry you can just click on the Account link and the original transaction will be displayed. When you have finished just click the Browser Back button to return to the report.

Link to transaction

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4. Click on the Transactions by BAS field tab – let’s see how the totals have changed

5. Check G11 Total Non-capital purchases – the total has gone up by $155 to now be $1170. You can see the Plant Nation purchase under a new sub section GST Not Registered.

6. Scroll down and check 1B GST on Purchases – the Plant Nation purchase has been added to the list of transactions under GST Not Registered but as no GST can be claimed the total GST on Purchases is still $85. Sam

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Enter a payment for Entertainment Expenses using Non Deductible for Income Tax Rate

EFT: Date: 9/04/2018 Pay: Peppers Tavern Meals – staff party at Peppers Tavern Total: $880.00 inc GST

Note: Tax deductions are generally not allowable for entertainment expenses. There are several exceptions where the expenses are deductible – refer to Taxation Ruling 97/17. (FBT is not covered in this unit.)

The above payment is not a tax-deductible expense; therefore, the GST paid cannot be claimed under Section 69-5 of the GST Act.

Before we record the purchase, we need to check for an adequate tax rate. Earlier in the book on page 85 we created the required tax rate so it should appear as an option when you come to select the tax rate. If you did not do this then return to page 85 and complete it now.



3. Type Peppers Tavern in the To box then TAB

4. Enter the date 9/4/2018 then TAB to the Reference box and type

Receipt 406

5. TAB to the Total box and type 880.00 – it useful to enter the total

amount here as a check against the line totals

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6. Enter the purchase as shown in the screenshot below ensuring that the tax rate is Non Deductible for Income Tax

7. Check that GST is 0.00

The Tax Rate used is Non Deductible for Income Tax as the GST cannot be claimed.

8. Save the transaction

Now to check what’s happened in the BAS reports.


10. Click on the tab Transactions by tax rate

11. Scroll down to find the sub heading Non Deductible for Income Tax

GST

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12. Click on the tab Transactions by BAS field

13. Check G11 Total Non-capital purchases – the total has gone up by $880 to now be $2050. You can see the Peppers Tavern purchase under a new sub section Non Deductible for Income Tax.

14. Scroll down and check 1B GST on Purchases – the Peppers Tavern purchase has been added to the list of transactions under Non Deductible for Income Tax but as no GST can be claimed the total GST on Purchases is still $85.

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Accounting for part private use: Telephone

The telephone account is paid for the month, a total of $220. However, 10% of the bill is regarded as Private Use = 10% x 220 = $22. This portion of the spend needs to be allocated to the Directors Loan account

EFT: Date: 16/04/2018

Pay: Telstra Telephone A/c Amount: $220 inc GST

1. Enter the following new Spend Money transaction from the ANZ Business account.

• $220.00 has been taken out of the Business bank account.

• Directors Loan amount = $20 + 10% GST $2 = $22.00.

• The business portion of the Telephone A/c = $198.00.

• GST Paid on the business portion – 1/11th of $198.00 = $18.00.

2. Save the transaction.

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For this expense we have dealt with the private portion by treating it as a loan to a Director. As the tax rate for the Directors Loan account is BAS Excluded the private use amount is not included in any part of the BAS reporting.


4. Click on the Transaction by BAS field tab

5. Check the total amount at G11 – notice that it has only increased by $198, the business portion of the telephone account, from 2,050 to 2,248.

6. Scroll down and check 1B GST on Purchases – notice that only the business portion of the purchase has been added to the list of transactions, under GST on Expenses, and the total GST on Purchase has increased by just $18 to $103.

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Payment of invoice from supplier without an ABN

The following amount was transferred to pay Susan Smith:

EFT: Date: 20/4/2018

Pay: Susan Smith (business with no ABN) Cellar Door Cleaning Amount: $106 ($200 – Withholding Tax $94)

Rounded

Susan Smith has given the business an invoice for $200.00. Susan’s business (not regarded as a hobby) does not have an ABN, and consequently is not registered for GST.

Because both the payer and the payee are conducting a business and the invoice amount is over $75, a 47% Withholding Tax is deducted from the invoice. You will create a new account to deal with this.

1. Select to enter another Spend Money transaction from the ANZ Business account.

2. Click on the To box and type Susan Smith then TAB

3. Enter the date 20/4/18 then TAB to the Total box and type 106 – the resulting amount paid

4. Click on the Amounts Are box and click on Tax Exclusive

5. Click in Description and type Cleaning Cellar Door then TAB

6. In Qty type 1 then TAB to Unit Price and type 200.00 then TAB

7. In account type 408 for the Cleaning account then TAB

8. Click on the Tax Rate drop list button and select GST Not Registered –Susan is not registered for GST and hence there is no GST in the purchase.

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9. Click into Description on the next line and type No ABN Withholding tax then TAB

10. In Qty type 1 then TAB to Unit Price and type -94.00 then TAB

11. In Account click on the drop list button and click on + Add New Account

12. Click on the drop list button for Account Type and click on Current Liability

13. Type 830 in the Code box

14. Type No ABN Withholding Tax in both the Name and Description box

15. Check that BAS Excluded appears in the Tax box

16. Click on Save

17. Click on Save to save the transaction

We will cover the reporting of No ABN Withheld amounts later in the book as they are not included in the BAS reports. 18. Click on Accounting Activity Statement and select the

reporting period June 2018

19. Click on the Transaction by BAS field tab. Notice the payment to Susan has been added to the list of G11 Non-capital Purchases under the sub heading GST Not registered.

20. Scroll down and check 1B GST on Purchases – the payment to Susan has been added to the list of transactions under GST Not Registered but as no GST can be claimed the total GST on Purchases is still $103.

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Payroll and the Activity Statement


Unit 7


Learning outcomes


• learn about the PAYG Withholding System

• process pays

• print payroll reports

• reconcile payroll for the month

• learn about Voluntary Agreements

• learn when to pay PAYG Withheld

• learn how to report wages and PAYG on the Activity

Statement.

This unit assumes you already know how to process payroll using Xero.

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PAYG Withholding System

In this unit, you will process a few pays but will concentrate on the reporting of the PAYG Withholding, Voluntary Withholding and ABN Withholding on the Activity Statement.

A business must deduct PAYG Withholding from the following payments:

• salaries, wages, allowances, bonuses or commissions paid to

employees

• payments to company directors

• return to work payments

• eligible termination payments

• payments for unused leave

• compensation and sickness or accident payments

• payments to individual contractors under a voluntary agreement

• payments to individuals under labour hire arrangements if carrying

on a labour hire business

• payments for a business to another business where the supplier

has not provided an ABN.

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Processing pays

Note: These tax figures are estimates for this exercise. For actual rates, please visit the ATO website www.ato.gov.au As the financial year for our case study is 2018/19 the super is calculated as 9.5%.

1. Log in to the BAS Little Blue Distillery organisation in Xero.

2. Click on tab Payroll Overview

Set Payroll Accounts

3. Click on Edit Payroll Accounts

4. Ensure the selected accounts are as shown in the screenshot below.

5. Click on Save if necessary

In Xero the tax tables used will be for the current year. Sample

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http://www.ato.gov.au/



Set Pay Calendar

Employees will be paid weekly by direct deposit.

6. Click on Little Blue Distillery Settings Payroll settings

7. Click on the Calendars tab and then click on Add

8. Make the settings as shown here for Weekly pay, Start date is April 2 2018, First Payment Date is April 9 2018

9. Click on Add

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Set Up Pay Items

We will just add very basic pay items here. The book FNSTPB402 Payroll goes into extensive detail on setting up and maintaining a payroll system.

10. Click on the Pay Items tab in the Payroll settings window

This tab is divided into four types of pay items: Earnings, Deductions, Reimbursements and Leave.

11. Check that Earnings is displayed – several default Earnings will be displayed

12. Click on Ordinary Hours to view the settings

13. Click on the box Reportable at W1 on …

14. Click on Save

Ordinary Hours

Reportable as W1

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15. Click on the button Add Overtime Earnings

16. Enter the details for this new item and then click on Add

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17. Click on the Leave tab of the Pay Items tab

There are many items already set up. Annual Leave is already set with an entitlement of 152 hours for the year. Personal/Carer’s Leave is also set up with the entitlement of 76 hours already set.

18. Click on the Superannuation tab

19. Click on Add Superannuation Fund

20. Click into the Name box and start type AustralianSuper and click on it when it appears

21. Click on Add

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Add Employee Details

1. From the main menu bar click on Payroll Employees

2. From the Add Employee drop down menu select Add New

The Employee Details tab appears where you can enter various information about the employee.

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3. Enter the details for Tony White and then click on Save – many more tabs will appear for the employee.

4. Click on the Employment tab.

5. Click on Start Date and enter 1/04/18

6. Click on Payroll Calendar and click on Weekly

7. Click on Ordinary Earnings Rate and click on Ordinary Hours

8. Click on Holiday Group and click on New South Wales

9. Click on + Add a super membership

10. Click on the Fund box and click on AustralianSuper

11. Type 123123 in the Employee Number and OK

12. Click on Save

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The next step is to set up pay details for the employee.

1. Click on the Taxes tab

2. Click on the Tax File Number box – we will enter a dummy number

3. Click on Employment Basis and click on Full-time employment

4. Check that Tax Free Threshold Claimed is ticked

5. Click on Save Only

6. Click on the Bank Accounts tab

7. Enter some text into each box and then click Save.

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1. Click on the Pay Template tab of the Payroll window

2. Click on + Add Earnings Line

3. Click on the drop list button for Earnings Rate and click on Ordinary Hours

4. Leave Enter Rate selected then click on OK

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5. Click on + Add Earnings Line again

6. Click on the Earnings Rate and click on Overtime 1.5 then OK

7. Click on + Add Superannuation Line and OK

8. Add the number of ordinary hours worked by Tony, 38 and his hourly rate of pay, $25.00 and then click on Save

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Run Payroll

For this first pay run Tony worked his normal hours so it will be very straightforward.

1. From the main menu bar click on Payroll Pay employees

2. Click on + Add Pay Run

3. Check that 8 Apr 2018 appears and click on Next

4. Click on Post Pay Run and Yes to the prompt

5. Click on Close

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The next week Tony works 4 hours overtime at time and half on top of his normal hours.

6. Click on + Add Pay Run

7. Check that 15 Apr 2018 appears as the date and click on Next

8. Click on the employee name to display the full details of the pay

9. Click on the Hours box for Overtime 1.5 and type 4.0 then TAB

Notice that the Overtime Rate is displayed automatically as 1.5 times the normal rate. The pay will be recalculated.

10. Scroll down and click on Save then Close

11. Click on Post Pay Run and Yes to the prompt

12. Click on Close to return to the Pay Runs main page

The following week Tony works an additional 2 hours overtime.

Click on employee

Hours

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Preparing the Business Activity Statement


Unit 9


Learning outcomes


• learn how to check the organisation data for accuracy before preparing the Business Activity Statement

• review a list of common mistakes

• print GST reports to check accuracy

• learn how to reconcile GST collected and GST paid

• print the Audit report and reconcile with information in the organisation data

• print the Business Activity Statement

• learn how to enter the payment of the BAS

• learn how to lock dates in your organisation.

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Reflection on what you have covered in this workbook

So far in this workbook, you have covered the following units.

Unit 2 Statutory, legislative and other requirements in the bookkeeping industry and gathering information

Unit 3 Reporting GST using the Accounts Method and understanding other reporting methods including Simpler BAS.

Writing up a Cash Receipts and Cash Payments Book and preparing an Activity Statement

Unit 4 Tax rates and the Calculation Worksheet method

Unit 5 Entering GST transactions in Xero

Unit 6 Other GST and tax issues

Unit 7 Payroll and the Activity Statement

Unit 8 Calculating and reporting the PAYG Instalment

Financial settings – Little Blue Distillery

Assume Little Blue Distillery’s reporting options are as follows:

• GST is reported QUARTERLY on an ACCRUAL BASIS

• The Business claims fuel tax credits each quarter.

• PAYG Withholding is reported QUARTERLY.

• The PAYG Instalment is set at $1,200 each quarter.

• The fringe benefit obligation is $1,000 each quarter.

1. Click on Accounting Activity Statement Settings

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Business Activity Statement Settings

GST Accounting method

Choose between Cash basis or Accrual basis.

GST Calculation Period

Monthly – a BAS will be generated monthly

Quarterly – calculate GST and report it in the period specified

Annually – A BAS will be generated on the full year

PAYG Withheld Period

None – choose this if you do not have any PAYG withheld

Monthly – an IAS will be generated for each month (if GST is not monthly) and PAYG tax boxes will be displayed on the BAS each quarter or monthly if the GST is calculated monthly

Quarterly - PAYG tax boxes will be displayed on the BAS each quarter

PAYG Income Tax Method

None – choose this if you do not need to make PAYGI instalments

Option 1 – pay an instalment amount set by ATO

Option 2 – calculate an instalment amount based on a percentage of income

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Each of these additional obligations boxes can be ticked if required, to add the appropriate fields to the Activity Statement Summary.

Now let’s set Little Blue Distillery’s reporting options as follows:

• GST is reported Quarterly on an Accrual basis

• PAYG Withholding is reported Quarterly

• A set PAYG Instalment of $1200 is paid quarterly

• The Business claims fuel tax credits each quarter

• An FBT instalment of $1,000 is paid each quarter

1. Click on Save and continue

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Reconcile Payroll Reconcile the Payroll – this was already covered in Unit 7.

Check all data entered Check the following in the organisation.

Tasks

(Please confirm all procedures with your Tax Accountant.) Comment

1 Check with other staff that all data for the period has

been entered.

All cheques and payments to the last day of

reporting period

All deposits and receipts to the last day of reporting

period

All credit card transactions until the last day of

period

All sales invoices (if reporting on an accrual basis)

All supplier invoices (if reporting on an accrual

basis)

2 In practice display the Transactions by Tax Rate Audit

Report for the previous period. Check that the figures

have not changed. If they have changed, find the

offending entries – perhaps the dates were unlocked at

some point and changes have occurred.

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Accounts Receivable Reconciliation

Tasks


3 Print the Aged Receivables Detail or Summary

report, whichever is appropriate at the end of

reporting period.

Confirm the list is accurate, i.e. are these

invoices outstanding or has the payment been

entered incorrectly perhaps in Receive Money.

Check customers for any unusual or unexpected

balances?

PRINTOUT 10 – Aged Receivables Summary as at 30 June 2018

Do you consider the Receivables to be accurate? .............................

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Accounts Payable Reconciliation

Tasks


4 Print the Aged Payables Detail or Summary report,

whichever is appropriate as at end of reporting

period.

Confirm the list is accurate, i.e. are these

invoices outstanding or has the payment been

entered incorrectly, perhaps in Spend Money.

Check suppliers for any unusual or unexpected

balances

PRINTOUT 11 – Aged Payables Summary as at 30 June 2018

Do you consider the Payables to be accurate? ................................

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Inventory Reconciliation

Tasks


5 Print the Inventory Item List at the end of reporting

period.

Does the value of inventory on hand reconcile

with the Inventory account in the Balance Sheet?

If out of balance, look for journal entries or

inventory adjustments allocated to Inventory

instead of a reason such as cost of sales or write-

off.

PRINTOUT 12 – Inventory Item List as at 30 June 2018

Does the inventory reconcile? .....................................................

We have not used tracked inventory in this user guide, so it should be 0.00.

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Check all bank accounts are reconciled

Tasks


6 Are all the Bank Accounts reconciled on the last day

of the reporting period?

Business Account

Petty cash

Credit Card

Loan Accounts

Check the outstanding cheques – are they correct or

are there cancelled cheques or entries entered twice?

Are the outstanding cheques stale?

Check the outstanding deposits – are they correct or

entries entered twice?

................................................................

PRINTOUT 13 – Bank Reconciliation Summary as at 30 2018 April

Note: You would ordinarily do bank reconciliations up to end of June, but in this user guide we have only reconciled the business account to the end of April.

Tasks

(Please confirm all procedures with your Tax Accountant) Comment

7 Consider private usage % and enter appropriate journals.

8 Check all Clearing and Suspense accounts have a ‘0’ balance.

9 Review the list of common mistakes on page 248.

Do you have any of these mistakes in your company file?

If so, make the necessary corrections.

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Common mistakes

Description of Common Mistakes

Motor Vehicle Registration payment allocated to GST. Should be:

Registration: GST Free Expenses

CTP Insurance: GST on Expenses

Stamp Duty: BAS Excluded

Insurance Premium all claimed as GST. Should be:

Insurance: GST on Expenses


Phone accounts may include a monthly mobile phone re-payment

plan all claimed as GST. Should be:

(a) Original cost of phone – GST on Capital, and Phone Loan

A/c – BAS Excluded.

(b) All payments allocated to Phone Loan – BAS Excluded.

Existing Customer and Supplier Adjustments/Credits not applied to

open invoice amounts.

Payments to the ATO not allocated to correct accounts – Has the

GST account been applied?

The correct amount of GST is not claimed when the GST element of

a motor vehicle purchase exceeds the Car Limit for the year (see Unit

2)

Purchase of a new motor vehicle all claimed as GST. Should be:

Car: GST on Capital

CTP Insurance GST Expenses

Registration: GST Free Expenses


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Elements of Competency and Performance Criteria


Appendix A


Elements and Performance Criteria – FNSTPB401

Element Performance Criteria Reference

1 Identify compliance and other requirements applicable to business activity

1.1 Research and document legislative, regulatory, industry and organisational requirements relating to activity statements and seek expert advice to clarify issues where applicable.

Units 2, 3 & 4

1.2 Review, interpret and apply legislation relating to taxes reported on activity statements

Units 2 -10

1.3 Identify, document and apply policies in relation to compliance with Code of Professional Conduct as stipulated in legislation relevant to activity

Units 2 - 10

1.4 Identify scope of services that can be provided by a registered BAS Agent under the Tax Agent Services Act, including limitations of services compared to those of a Tax Agent

Unit 2

1.5 Identify and access information, advice and services outside scope of operation, establishing and using networks where necessary.

Units 2 - 10

1.6 Identify and document lodgement schedule requirements

Units 2 & 8

1.7 Assess entity’s cash flow and payment options and arrangements, and initiate discussion with management to ensure sufficient funds are available to meet statutory requirements

Units 2

2. Analyse and apply industry codes of conduct associated with work activities

2.1 Review, interpret and apply relevant industry codes of conduct and identify the applicable governing bodies

Unit 2

2.2 Document and apply relevant policies and procedures to ensure compliance with code of conduct requirements

Unit 2

2.3 Identify and document own competency development requirements relating to changes in legislation

Unit 2

3 Review and apply goods and services tax (GST) implications and code transactions

3.1 Identify, interpret and apply and record GST principles Units 3 & 5

3.2 Identify and code purchases and/or payments as per GST classifications

Units 3 & 5

3.3 Identify and code sales and/or receipts as per GST classifications

Units 3 & 5

3.4 Process accounting data to comply with tax reporting requirements

Units 3 & 5

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Element Performance Criteria Reference

4 Report on payroll activities and amounts withheld

4.1 Calculate and reconcile total salaries, wages and other payments for reporting period to enter onto a BAS

Unit 7

4.2 Verify or calculate pay as you go (PAYGI) amount where applicable, or calculate for other payments where applicable

Unit 5, 7 & 8

5 Complete and reconcile activity statement

5.1 Prepare and reconcile activity statement reports, identify and correct statement errors and amend bookkeeping entries as required

Units 3, 9 & 10

5.2 Review extraordinary transactions in the accounting system, including transactions involving capital acquisitions and imports

Unit 6

5.3 Make adjustments for previous quarters, months or year-end where necessary according to legislative guidelines

Unit 10

5.4 Complete BAS and/or IAS return according to current statutory, legislative, regulatory and organisational schedule

Units 3 & 9

5.5 Reconcile figures completed on BAS and/or IAS form with journal entries, financial statements, GST and other control accounts

Unit 9

6 Lodge activity statement

6.1 Check activity statement and ensure sign off by authorising person required by statutory, legislative and regulatory requirements

Units 9 & 10

6.2 Lodge activity statement in accordance with statutory, legislative and regulatory requirements

Units 8, 9 & 10

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FNSTPB401 Complete Business Activity and Instalment Activity Statements ...€¦ · Complete...

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