Setting up tax codes

Tax codes are used to track tax paid to and by your business. Each tax code represents a particular type of tax.

Your AccountEdge software has an extensive list of tax codes that can be used in a variety of situations—for example, when doing business with overseas customers, when tracking capital acquisitions and so on.

Summary of tax types

When you create a tax code, you need to select which type of tax it is. There are eight tax types you can choose from. The table below describes what each tax type is for.


Tax Type	Description
Consolidated	This tax type is used for taxes that are made up of two or more tax codes or sub-taxes.
Import Duty	Importers, who are bringing goods into Australia from other countries, should use this tax type. Tax codes with this tax type are used to record the import duty payable on a purchase order without changing the total amount of the purchase order. (The import duty is treated as a separate transaction since the duty is payable to the ATO, not to the company supplying the goods.)
Sales Tax	This tax type is associated with the Wine Equalisation Tax.
Goods & Services Tax	This tax type is associated with the Goods & Services Tax assigned to sales and purchases. This tax type also is used for GST free goods and GST on Wine Equalisation Tax.
Input Taxed tax type	This tax type should be used by organisations, such as suppliers of financial services, that must pay GST on the purchases they make but don't collect GST from their clients or customers. The Input Taxed tax type also should be used by businesses that haven't registered for GST (businesses with turnover of less than $50,000 annually).
Luxury Car Tax	This tax type is used by the Automotive industry to handle the luxury car tax.
Voluntary withholdings	This tax type should be used for the PAYG voluntary withholdings scheme.
No ABN/TFN	This tax type should be used for suppliers that have not quoted ABNs on their invoices, or for amounts that are withheld from investment income because no tax file number was quoted. This type indicates that the tax code is a PAYG Withholding tax type and will always be rounded down to the nearest dollar. You should use a No ABN/TFN tax code of 48.5% for suppliers who do not quote an ABN on invoices for more than $50 tax exclusive, or where amounts are withheld from investment income because no tax file number was quoted. If both of these situations apply to your company, you will need to create two tax codes to handle them separately.

To create a tax code

1	Go to the Lists menu and choose Tax Codes. A list of tax codes appears.

2	Click New. The Tax Code Information window appears.

3	In the Tax Code field, type a code (up to five characters) for the new tax and press Tab.

4	Complete the other fields in this window.



A	Enter a description, type and rate.
B	Select the linked account for tax collected and for tax paid. These fields are only available for some tax types.

To assign tax codes to accounts

You can assign a tax code to any detail account in your accounts list. The tax code you assign will appear as the default tax code in a transaction where you allocate a deposit, cheque, or a non-item sale or purchase to this account.

For example, you have assigned the GST tax code to your electricity expense account. When you write a cheque to settle your electricity bill in the Spend Money window, and allocate it to this account, the GST tax code will appear in this window by default.

You can allocate a tax code to an account in the Edit Accounts window. To open this window, go to the Accounts command centre, click Accounts List, double-click the required account, and click the Details tab.

To assign tax codes to items

When you set up your items, you must assign a tax code to each of them.

You can assign a tax code to be used when you sell an item and a tax code to be used when you buy an item. That tax code will appear as the default in sales and purchases of that item unless you have specified that the customer’s or supplier’s tax code to be used instead.

Tax codes are assigned to items in the Buying and Selling tabs of the Item Information window. For more information, see Creating items.

To assign tax codes to cards

You can define a default tax code for a customer or supplier. You would only need to select a default tax code if the customer’s or supplier’s tax status takes precedence over that of the item or service being sold or purchased.

For example, if a customer is one to whom you only ever make export sales, you should assign the EXP (Export Sales) tax code to that customer’s card.

When you create a quote, order or invoice, the tax code assigned to the customer will be used as the default. This tax code will override the item’s tax code in an item sale, and the allocation account’s tax code in a non-item sale.

Tax codes are assigned to customers in the Selling Details tab of their Card Information window.

Make sure you select the Use Customer’s Tax Code option. (If this is not selected, the customer’s tax code will not be used, even if one has been assigned.)

Make sure you select the Use Supplier’s Tax Code option. (If this option is not selected, the supplier’s tax code will not be used, even if one has been assigned.)