CERTIFICATE IV. FNSTPB401 Complete business activity and instalment activity statements USER GUIDE. sample for review

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1 CERTIFICATE IV FNSTPB401 Complete business activity and instalment activity statements USER GUIDE

2 All Rights Reserved Copyright 2018 OfficeLink Learning Version 18.6 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 OfficeLink Learning. All registered trademarks or service marks are the property of their respective owners. While care has been taken in the preparation of this Training Tool, OfficeLink Learning, the developers do not accept any liability for any damage or loss (including indirect and consequential loss) incurred by any person as a result 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. OfficeLink Learning 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 The case study in this material uses fictional information.

3 Contents 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 Check Purchases Set Conversion Balances Set BAS Type and display Business Activity Statement Unit 2 Statutory, legislative and other requirements.. 19 Australian Taxation System List of abbreviations Researching Legislative, Statutory and Regulatory Requirements Overview of Legislation, Regulations and Codes of Practice Tax Agent Services Legislation Registration Requirements Continuing Professional Education Professional Associations Privacy The Notifiable Data Breaches Scheme Applying for an Australian Business Number (ABN) GST Legislation What is a Consideration? When is a sale connected with Australia? Are you carrying on an Enterprise or conducting a Hobby? Competition and Consumer Act GST Registration and Compliance How to calculate the GST Turnover Registering for GST Methods of reporting GST Selecting the reporting method GST reporting periods Revision: Case Study Copyright 2018 OfficeLink Learning i

4 Contents Case Study Case Study Valid tax invoices Types of supplies Summary of GST Decisions ATO Website BAS Agents Tax Practice BAS lodgement dates GST Unit 3 - Reporting GST using the Accounts method Simpler BAS Simpler BAS means simpler record keeping Methods of completing the Business Activity Statement Accounts method Simplified GST accounting methods for food retailers Unit 4 - Tax codes and the Calculation Worksheet method Getting started View tax rates Explanation of tax rates Add a Tax Rate: Not Registered for GST Add a Tax Rate: Non Income Tax Deductible Calculation Worksheet method of completing the Activity Statement GST amounts you owe the ATO from sales Using the Calculation Worksheet Checking Accounts and Tax Rates Unit 5 - Entering GST transactions in Xero Accounting for payment where part GST and part GST Free Payment to Supplier who has an ABN but Not Registered fro GST Payment for Expense that is Non Tax Deductible Payment with Part Private use Payment to Supplier who has no ABN Payment for GST only GST on Capital Imports Rounding the GST Amount Purchase to make Input Taxed Supplies Checking for Errors Income Received from Export sale Income Received from Input Taxed Sale Entering sale of an asset Entering the receipt of a cheque together with a recipient created tax invoice and tax invoice What is a recipient created tax invoice? ii Copyright 2018 OfficeLink Learning

5 Contents What is a valid RCTI? Writing a customer off as a bad debt Purchase of an Asset including GST Purchase of an Asset (going concern) GST-free Change Role to Adviser Accounting for the purchase of a new Motor Vehicle using a chattel mortgage, reporting GST on a non-cash basis or cash basis Identifying information outside the bookkeeper s scope Accounting for the purchase of a new computer on hire purchase What are the current rules of Hire Purchase? Accounting for Insurance Premium Funding Arrangements Claiming Fuel Tax Credits Recording Diesel purchased for the farm Unit 6 Other GST and tax issues Identifying information outside the bookkeeper s scope Luxury Car Tax (LCT) Luxury Car Tax Threshold Wine Equalisation Tax (WET) Grouping Branches The Margin Scheme Second-hand goods Imports Pre-establishment Costs Fringe Benefits Overview of Fringe Benefits Tax (FBT) Employee Contributions for your information only Inter-entity transactions Leaving the GST system Unit 7 - Payroll and the Activity Statement PAYG Withholding System Processing pays Voluntary Agreements Run Bank Reconciliation to enter Wage payments Payment of PAYG Withholding Reporting Wages and Tax withheld on the Activity Statement Unit 8 - Calculating and reporting the PAYG Instalment 225 PAYG Instalment System Who pays a PAYG Instalment? The Instalment Rate Copyright 2018 OfficeLink Learning iii

6 Contents PAYG Instalment Amount Calculation of PAYG Instalment Calculation of PAYG Instalment in Xero Case Study Case Study Lodgement Schedule Unit 9 - Preparing the Business Activity Statement Reflection on what you have covered in this workbook Financial Settings: Activity Statement Settings Reconcile Payroll Check all Data Entered Accounts Receivable Reconciliation Accounts Payable Reconciliation Reconcile Inventory Items List Check Bank Account Reconciliation Common Mistakes Run the General Ledger Report Check GST Audit Report Balance Sheet Profit and Loss Report Reconcile the GST Run the Final Activity Statement Print the Business Activity Statement Very Important Information on Lodgement Record Payment to ATO Finalising any GST from Conversion Balances The GST Reconciliation Report Reporting on a Cash Basis Check Tax in Aged Receivables Detail Report Check tax in Aged Payables Detail Report Run Activity Statement Report Run the GST Reconciliation Report Use the The Simpler BAS Locking Dates after BAS report has been submitted Unit 10 Correcting GST errors Correcting GST mistakes and Time limits Correcting errors Decrease input tax credit Increase GST to be paid Correcting GST errors with a Journal entry in the current BAS period iv Copyright 2018 OfficeLink Learning

7 Contents Appendix A Elements of Competency and Performance Criteria Appendix B Solutions to exercises Copyright 2018 OfficeLink Learning v

8 Tax rates and the Calculation Worksheet method Unit 4 Tax rates and the Calculation Worksheet method Learning outcomes In this unit, you will: view tax rates used in the organisation 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 Getting started In Unit 1 you set up access to the Organisation FNSTPB401 BAS Little Blue Distillery. Copyright 2018 OfficeLink Learning 79

9 Tax rates and the Calculation Worksheet method View Tax Rates 1. Login to your Xero account and display the Organisation BAS Little Blue Distillery (see Unit 1 for how to get access) 2. Click on the tab Settings General Settings. 3. Click on the Tax Rates link Tax Rates Settings Displayed below is a basic list of Tax Rates that your business could use: 4. Click on the button Change to advanced tax rates Change to advanced tax rates General Settings Change to advanced tax rates 80 Copyright 2018 OfficeLink Learning

10 Tax rates and the Calculation Worksheet method 5. Click on the prompt Change to advanced tax rates 6. The full list of Tax Rates appears click on the rate GST on Income 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 Components Tax Rate Display Name Tax Type Tax Rate Copyright 2018 OfficeLink Learning 81

11 Tax rates and the Calculation Worksheet method 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. Also use for expenses supplied where supplier has an ABN but is not registered for GST or it may be a hobby. 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 inc 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 Input Taxed when used with Income accounts 0% Used in track expenses that relate to making Input Taxed Sales, e.g. maintenance expenses for supplying a residential rental property. 0% Used to record Input Taxed Sales where GST cannot be charged, e.g. residential rent and interest received. 82 Copyright 2018 OfficeLink Learning

12 Tax rates and the Calculation Worksheet method 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 they do not as business while having an ABN 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. Copyright 2018 OfficeLink Learning 83

13 Tax rates and the Calculation Worksheet method 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 from a business where they have an ABN but are not registered for GST because their turnover is low. You could just use GST Free Expenses as it would then still be reported at both G11 and G14. However, if you wanted to use another tax rate to identify it in the GST Audit Report you can create one as shown here. 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 84 Copyright 2018 OfficeLink Learning

14 Tax rates and the Calculation Worksheet method 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 that is to be allowed for e.g. Entertainment expenses 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 separate purchases made in the GST Audit Report. You can then enter the amount manually at G15 in the Calculation worksheet 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 use this tax rate are entered at G15 manually. Copyright 2018 OfficeLink Learning 85

15 Tax rates and the Calculation Worksheet method Calculation Worksheet method to complete 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. 86 Copyright 2018 OfficeLink Learning

16 Tax rates and the Calculation Worksheet method 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 web site at Sales Copyright 2018 OfficeLink Learning 87

17 Tax rates and the Calculation Worksheet method 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) Exports (must be exported in 60 days) Write notes below on the reporting of freight and insurance Other GST Free supplies GST-free list + businesses sold as a going concern, International travel and water Write notes below on GST-free supplies G1 G2 G3 GST on Income GST Free Income GST Free Exports Input Taxed when used with Sales Accounts GST Free Exports GST Free Income Your own rates used with Income accounts and with Tax Type - Sales - GST Free Sales - Exempt Income 88 Copyright 2018 OfficeLink Learning

18 Tax rates and the Calculation Worksheet method Description 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: Field Number G4 How to calculate the required figures 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 Total sales subject to GST after adjustments G8 G6 G7 G7 It is better to adjust your G1 amount than use 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. Copyright 2018 OfficeLink Learning 89

19 Tax rates and the Calculation Worksheet method 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: 90 Copyright 2018 OfficeLink Learning

20 Tax rates and the Calculation Worksheet method Description Field Number How to calculate the required figures Capital acquisitions - capital acquisitions - capital items include plant & equipment, motor vehicles (special rules apply), land & buildings (special rules apply) GST on Capital GST Free Capital - any amounts that relate to private use are also included at G15 GST on Capital Imports - returns, credits, adjustments to capital purchases are also allocated here Note: If you do not record capital and non-capital purchases separately and your annual Note on purchase of motor vehicles: The car limit for is $ This means that if you purchase a car over this amount, the maximum amount of GST you can claim at G10 is $5235. G10 turnover is expected to be less than $2 million then: you only need to record capital items costing more than $1,000 at G10 (capital purchases), and Note below the reporting of Stamp Duty. capital and non-capital items costing $1,000 or less can be Non-capital purchases - non-capital items for use in business - all other purchases - all other purchase adjustments, returns and credits can also be allocated here - special rules apply to second-hand goods G11 Note below the reporting of Stamp Duty on insurance premiums recorded at G11 (non-capital purchases). GST on Expenses GST Free Expenses GST on Imports Input Taxed (Purchases) Purchases from business with no ABN Your own tax rates (when used with Expense accounts) with the Tax Types: Purchases (also at G15) GST Free expenses (G14) or Exempt income (G13) e.g. Non Tax deductible GST not registered Total G12 G10 + G11 amounts Copyright 2018 OfficeLink Learning 91

21 Tax rates and the Calculation Worksheet method Description Field Number How to calculate the required figures Purchases for making input taxed sales - include expenses that relate to making input taxed sales where the GST has added to the cost of the activity, e.g. residential rent expenses Search the ATO web site for the financial acquisitions threshold. Find out what this amount is Input Taxed Your own rates when G13 used with Expense accounts and with the Tax Type: Exempt Income Purchases without GST in the price - include expenses with no GST in the purchase price - purchases from non-registered individuals GST Free Expenses - purchases which are GST-free GST Free Capital Write notes here on purchases without GST in the price G Amounts for no ABN Your own rates used Expense accounts and with Tax Type GST Free Expenses E.g. Not registered for GST 92 Copyright 2018 OfficeLink Learning

22 Tax rates and the Calculation Worksheet method Description Field Number How to calculate the required figures Estimated purchases for private use or not income tax deductible - include all expenses relating to planned private use - acquisitions which include GST but cannot be claimed include penalties payable under Australian law, travel expenses for relatives, recreational club expenses (except FBT), entertainment expenses (except FBT), uniforms and non-cash business benefits (In most situations, I find the client does not include the private use in G11 when recording, therefore G15 will not be used, however when the total amount is recorded in G11, then a Private Tax Rate should be used when calculating the private use component at the end of the year.) G15 In Xero these amounts if they occur are entered manually. The value can be determined from the GST Audit report if you create a Tax Rate. The Tax Rate should use the Tax Type Purchases but with a 0% e.g. Non Income Tax Deductible Total G16 G13 + G14 + G15 Total purchases subject to GST G17 G12 G16 Adjustments G18 It is better to adjust your G10 or G11 amount than use G18. Total purchases subject to GST after adjustments G19 G17 - adjustments GST on purchases Divide G19 by 11 (GST Paid) G20 GST Paid Note: If a business is using Simpler BAS they no longer need to report their total purchases. Fields G10 to G20 on the BAS can be left blank and just the GST included in the price of their purchases is reported at 1B. Copyright 2018 OfficeLink Learning 93

23 Tax rates and the Calculation Worksheet method Use the following tax rates and amounts to complete the Calculation Worksheet to calculate the amount of GST Paid. tax rate Amount GST on Expenses $11,000 GST on Capital $44,000 GST Free Expenses $420 GST Free Capital $210 Non tax deductible $630 Input Taxed $5,000 GST not registered $630 Solution can be found in Appendix B. You must use the correct tax rates so that GST is correctly reported on the Business Activity Statement. 94 Copyright 2018 OfficeLink Learning

24 Tax rates and the Calculation Worksheet method Checking Accounts and Tax Rate When you switched to used Advanced Tax Rates earlier the prompt reminded you that accounts had to be checked. 1. Click on Settings Chart Accounts 2. Click on the Account Interest Received 3. Click on the drop list button for Tax and click on Input Taxed 4. Click on Save The Tax rate for Interest Received is now Input Taxed. Copyright 2018 OfficeLink Learning 95

25 Tax rates and the Calculation Worksheet method 5. Scroll down to Entertainment expenses and click. This Tax Rate should be Non Deductible for Income Tax. 6. Click on the drop list button for Tax and scroll to the end of the Tax rate list Non Deductible for Income Tax should appear if you created it on page Click on Save 8. Scroll down to Wages and Salaries and click This Tax Rate should be BAS Excluded. 9. Click on the drop list button for Tax and click on BAS Excluded 10. Click on Save 11. Click on Superannuation 12. Click on the drop list button for Tax and click on BAS Excluded 13. Click on Save 96 Copyright 2018 OfficeLink Learning

26 Tax rates and the Calculation Worksheet method Accounts for Capital Assets should have the Tax Rate GST on Capital while the associated Depreciation account should be BAS Excluded. 1. Click on the account Furniture and Fittings 2. Click on the tax drop list button and click on GST on Capital 3. Click on Save 4. Repeat for each of the Fixed Asset accounts. Note: Hawk Cottage is BAS Excluded as it is used solely to provide long term residential rent which is an Input Taxed Supply. Copyright 2018 OfficeLink Learning 97

27 Tax rates and the Calculation Worksheet method Skills checklist Tick the skills that you have learnt in this unit. Skills 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 Chart of Accounts for Tax Rates applied You have completed Unit 4. Turn to Unit 5 to enter transactions in Xero using the correct tax rates. 98 Copyright 2018 OfficeLink Learning

28 Entering GST transactions in Xero Unit 5 Entering GST transactions in Xero Learning outcomes In this unit, you will: account for payments where GST does not equal 1 / 11 th 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. Copyright 2018 OfficeLink Learning 99

29 Entering GST transactions in Xero Accounting for payment where part GST part GST Free Expense The situation where the amount of GST is not just 1/11 th 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 1/11 th of $355. EFT: Business Account Date: 1/04/2018 Pay: Australia Post Postage (within Australia + International) Total Amount inc GST: $ Amount of GST included: $25.00 We use this amount to work out the portion that is GST Free. GST is 1/11 th 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 = $ 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. 100 Copyright 2018 OfficeLink Learning

30 Entering GST transactions in Xero 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 it useful to enter the total amount here as a check against the line totals Now for the details. 6. Click into Description and type Domestic postage then TAB 7. In Qty type 1 then TAB to Unit Price and type TAB to Account and type 315 and TAB 9. Check that GST on Expenses appears in the Tax Rate box 10. Click into Description and type International postage then TAB 11. In Qty type 1 then TAB to Unit Price and type 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 Includes GST 15. Click on Save Copyright 2018 OfficeLink Learning 101

31 Entering GST transactions in Xero Check Business Activity Statement Report As we enter the transactions in this chapter you should check the GST Audit Report and the GST Calculation Sheet to learn exactly how the transactions affect these reports. It will also help you to recognise errors. 1. Click on Reports Activity Statement 2. Click on the GST Audit Report tab 3. Check that the dates are from 1 Apr 2018 to 31 May 2018 and then click on Update 4. Check the Tax Rate GST Free Expenses it now lists the International postage for $80.00 and GST as The Domestic part appears in the GST on Expenses list. Link to transaction Note: To check any entry you can just click on the Account link and the original transaction will be displayed. When finished just click the Browser Back button to return to the report. 102 Copyright 2018 OfficeLink Learning

32 Entering GST transactions in Xero 5. Click on the GST Calculation Worksheet tab we will compare the latest figures to the report on page Check G11 Total Non-Capital Purchases it has gone up by the full $355 to $1015 ( = 1015) 7. Check G14 the GST Free part of the purchase has fed through to here - $80 8. Check G17 it is only $935 ($1015 less $80) 9. G20 (GST on Purchases) it has gone up by $25 from $60 to $85 Copyright 2018 OfficeLink Learning 103

33 Entering GST transactions in Xero 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, 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 TO: Date: 05/4/2018 Little Blue Distillery 1 Scotchmans Road Terms: COD Plants for cellar door area $ 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. 1. Click on + Spend Money 2. Click on ANZ Business then Next 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 TAB to the Total box and type it useful to enter the total amount here as a check against the line totals 104 Copyright 2018 OfficeLink Learning

34 Entering GST transactions in Xero 6. Click into Description and type Pot Plants for Cellar Door area (Plant Nation not registered for GST) then TAB 7. In Qty type 1 then TAB to Unit Price and type TAB to Account and type 429 for General Expenses 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 $ 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 Copyright 2018 OfficeLink Learning 105

35 Entering GST transactions in Xero Check Business Activity Statement Report As we enter the transactions in this chapter you should check the GST Audit Report and the GST Calculation Sheet to learn exactly how the transactions affect these reports. It will also help you to recognise errors. 1. Click on Reports Activity Statement 2. Click on the GST Audit Report tab 3. Check the Tax Rate GST Not Registered it now lists the Plant Nation purchase for $ and GST as Link to transaction Note: To check any entry you can just click on the Account link and the original transaction will be displayed. When finished just click the Browser Back button to return to the report. 106 Copyright 2018 OfficeLink Learning

36 Entering GST transactions in Xero 4. Click on the GST Calculation Worksheet tab we will compare the latest figures to the report on page Check G11 Total Non-Capital Purchases it has gone up by $155 to be now $ Check G14 the GST Free part of the purchase has fed through to here - $80 + $155 is $235 in total 7. Check G17 it is still only $935 ($1170 less $235) 8. G20 (GST on Purchases) is still $85 Copyright 2018 OfficeLink Learning 107

37 Elements of Competency and Performance Criteria Appendix A Elements of Competency and Performance Criteria Elements and Performance Criteria FNSTPB401 Element Performance Criteria Reference 1 Identify compliance and other requirements applicable to business activity 2. Analyse and apply industry codes of conduct associated with work activities 1.1 Research and document legislative, regulatory, industry and organisational requirements relating to activity statements and seek expert advice to clarify issues where applicable. 1.2 Review, interpret and apply legislation relating to taxes reported on activity statements 1.3 Identify, document and apply policies in relation to compliance with Code of Professional Conduct as stipulated in legislation relevant to activity 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 1.5 Identify and access information, advice and services outside scope of operation, establishing and using networks where necessary. 1.6 Identify and document lodgement schedule requirements 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 2.1 Review, interpret and apply relevant industry codes of conduct and identify the applicable governing bodies 2.2 Document and apply relevant policies and procedures to ensure compliance with code of conduct requirements Units 2, 3 & 4 Units 2-10 Units 2-10 Unit 2 Units 2-10 Units 2 & 8 Units 2 Unit 2 3 Review and apply goods and services tax (GST) implications and code transactions 2.3 Identify and document own competency development requirements relating to changes in legislation Unit 2 Unit Identify, interpret and apply and record GST principles Units 3 & Identify and code purchases and/or payments as per GST classifications 3.3 Identify and code sales and/or receipts as per GST classifications 3.4 Process accounting data to comply with tax reporting requirements Units 3 & 5 Units 3 & 5 Units 3 & 5 Copyright 2018 OfficeLink Learning 287

38 Elements of Competency and Performance Criteria Element Performance Criteria Reference 4 Report on payroll activities and amounts withheld 5 Complete and reconcile activity statement 6 Lodge activity statement 4.1 Calculate and reconcile total salaries, wages and other payments for reporting period to enter onto a BAS 4.2 Verify or calculate pay as you go (PAYGI) amount where applicable, or calculate for other payments where applicable 5.1 Prepare and reconcile activity statement reports, identify and correct statement errors and amend bookkeeping entries as required 5.2 Review extraordinary transactions in the accounting system, including transactions involving capital acquisitions and imports 5.3 Make adjustments for previous quarters, months or year-end where necessary according to legislative guidelines 5.4 Complete BAS and/or IAS return according to current statutory, legislative, regulatory and organisational schedule 5.5 Reconcile figures completed on BAS and/or IAS form with journal entries, financial statements, GST and other control accounts 6.1 Check activity statement and ensure sign off by authorising person required by statutory, legislative and regulatory requirements 6.2 Lodge activity statement in accordance with statutory, legislative and regulatory requirements Unit 7 Unit 5, 7 & 8 Units 3, 9 & 10 Unit 6 Unit 10 Units 3 & 9 Unit 9 Units 9 & 10 Units 8, 9 & Copyright 2018 OfficeLink Learning

39 Solutions to exercises Appendix B Solutions to exercises Unit 2 Page 23 Discuss and list a minimum of three methodologies you could utilise to research legislative, statutory and regulatory requirements applicable to bookkeeping activities. Some suggested responses can include: network with other experienced bookkeepers/accountants, access ATO information, talk to/visit professional associations. Discuss and list the differences between the Superannuation Guarantee (Administration) Act and the Superannuation Guarantee Charge Act. The Superannuation Guarantee (Administration) Act 1992 regulates the compulsory super contributions that employers are required to make for their employees whilst the Superannuation Guarantee Charge Act regulates the charges made on any shortfall in the amount contributed. Page 41 Are the following businesses or hobbies? 1 Wendy makes and sells wooden toys from her home. Wendy runs a business. 2 Troy makes wooden toys at home. This would be regarded as a hobby. Page 45 What happens with late lodgement or payments? You may incur penalties for late lodgement, in addition to general interest charge on unpaid amounts. Copyright 2018 OfficeLink Learning 289

40 Solutions to exercises Unit 4 Page 86 What is the difference between the accounts method and the calculation worksheet method of completing the activity statement? When using the Accounts Method, GST on sales and purchases are taken directly from the accounting records. When using the Calculation Worksheet Method, you complete the worksheet using information from your accounts and then follow the instructions on the worksheet to transfer the amounts to your activity statement, e.g. G9 = G8 divided by 11. The answer at G9 is then transferred to 1A. Page 88 G1 Write notes below on settling an insurance claim. (BAS Excluded rate is used out of scope) Do not include anything that is constituted as an insured party settling a claim under an insurance policy or settling a claim under compulsory third party scheme (where you are not an operator of such a scheme). G2 Write notes below on the reporting of freight and insurance. The amounts for freight and insurance for transport relating to that export are reported at G3. G3 - Write notes below on GST-free supplies. These are entries that the Legislation says are free of the GST tax system, for example, bank fees and donations. 302 Copyright 2018 OfficeLink Learning

41 Solutions to exercises Page 89 G4 - Note here circumstances which may be elected as input taxed: Under some circumstances you may be able to elect for the following sales to be input taxed, i.e. you do not charge GST on the sale, however, you cannot claim the GST on any purchases related to this sale. Page 90 provision of long-term accommodation provided to an individual in commercial residential premises sale of food by school tuck shops and canteens, and sales connected to fundraising events conducted by eligible charities, gift deductible entities and government schools where certain conditions are satisfied. Using the Calculation Worksheet Use the following tax rates and amounts to complete the GST Calculation Worksheet to calculate the amount of GST Collected. Note: If a business is using Simpler BAS they would just need to report $11,285 at G1 and $805 1A. Copyright 2018 OfficeLink Learning 303

42 Solutions to exercises Page 91 G10 - Note below the reporting of Stamp Duty. Do not report the Stamp Duty component of any capital purchases [it is out of scope and not reported] G11 - Note below the reporting of Stamp Duty on insurance premiums. Report the price of insurance premium related to your business less the amount of stamp duty. Page 92 G13 Search the ATO web site for the financial acquisitions threshold. Find what this amount is. The entity will exceed the financial acquisitions threshold if either or both of the following apply: the amount of all the input tax credits to which the entity would be entitled for its financial acquisitions would exceed $150,000 (on or after 1 July 2012) or such other amount specified in the GST regulations (first limb test); and the amount of the input tax credits to which the entity would be entitled for its financial acquisitions would be more than 10% of the total amount of input tax credits to which it would be entitled (second limb test). You determine if you exceed the financial acquisitions threshold in a given month based on acquisitions in: that month or the previous 11 months, and that month and the next 11 months AT/ATO/fpF5'&PiT= Copyright 2018 OfficeLink Learning

43 Solutions to exercises G14 - Write notes here on purchases without GST in the price. These are entries where a supplier is not registered for GST but does have an ABN. A purchase from a supplier who does not earn $75,000 would supply an Invoice and the tax rate used would be GNR. Extract from ATO website Page 94 Note: If a business is using Simpler BAS they would just report $5000 at 1B. Copyright 2018 OfficeLink Learning 305

44 Solutions to exercises Unit 5 Page 169 PRINTOUT 2 Transaction Journal for the month Page 166 Page 163 Page 159 Page 158 Page Copyright 2018 OfficeLink Learning

45 Solutions to exercises PRINTOUT 2 (continued) Page 156 Page 155 Page 155 Page 151 Page Page Page Page 148 Copyright 2018 OfficeLink Learning 307

46 Solutions to exercises PRINTOUT 2 (continued) Page 140 Page 138 Page 135 Page Copyright 2018 OfficeLink Learning

47 Solutions to exercises PRINTOUT 2 (continued) Page 134 Page 133 Page 129 Page 129 Page 125 Page 127 Page 124 Page 120 Copyright 2018 OfficeLink Learning 309

48 Solutions to exercises PRINTOUT 2 (continued) Page 118 Page 115 Page 113 Page 111 Page 108 Page 104 Page Copyright 2018 OfficeLink Learning