PURPOSE:

This documentation details how users can change their Tax Systems within the Sage Pastel Partner software.

SCOPE:

If a company registers for GST, there are two methods of paying GST i.e. Cash Based GST and NON Cash (Invoice/Accrual) Based GST.

If the company wants to change this method, they must apply to the Australian Tax Office (ATO), and only the ATO has the authority to change the method. If the ATO agrees that the company conforms to the prescribed regulations, they will inform the company on what day this change will take place.

THE DIFFERENCES OF BOTH TAX SYSTEMS:

1.) CASH BASED GST:

With cash Based GST you only pay GST to the ATO once you have received the payment from a customer or once you have paid a supplier. GST on Cash expenses is payable immediately. Cash based GST only has a cash flow effect on customer and supplier transactions.

With Cash Based GST there are two GST accounts applicable:

• The GST Provision account which contains all the GST for the outstanding accounts of customers and suppliers.
• The GST Control account which contains all the GST payable to the ATO. 

Once a payment has been made or received, the GST will be transferred from the GST Provision account to the GST Control account as part of cash base processing.

2.) NON CASH (INVOICE) BASED GST:

With invoice based GST, the GST is payable once the transaction has been completed. (E.g. a customer buying goods, buying from a supplier or a normal expense payable)

With Non Cash (invoice) based GST there is only a GST Control account; No Provision Account is Created.

Please Note: That it is essential that backups be made before proceeding with any of the steps below

CHANGING FROM CASH / PAYMENT BASED GST TO INVOICE BASED GST:

When you change from Cash/Payment Based GST to Invoice Based GST it means that all the GST from outstanding customers and suppliers accounts that was not paid to the ATO is now payable. You therefore need to transfer the value from the GST Provision account to the GST Control account- this will be done through a journal entry.

Please Note:

• The system needs to be changed from Cash/Payment Based GST to Invoice Based GST before any transactions for the new period are entered.
• If the period is already closed for financial figures that you were supposed to change to the new GST basis, you can do the adjustment in the current month.
• Make sure that you keep accurate record of all calculations in case the ATO needs it for a GST audit.

1.) TO CHANGE THE TAX SYSTEM, WE SUGGEST THE FOLLOWING STEPS:

• Change the Tax System to Invoice Based GST in the Setup…TAX / GST / Sales Tax menu.
• If you make use of the Tax Type Report and Tax Box Report to determine GST payable / claimed to / from the Receiver of Revenue, it is essential that all preceding transactions concerning customers and suppliers are reflected in these reports. We therefore recommend the procedure outlined in Step A.
• If you do not make use of the above mentioned reports to calculate the GST payable / claimed to / from the Receiver of Revenue, and you do not want the preceding transactions to reflect in the relevant Tax reports in Pastel, please proceed to Step B.

1.1) STEP A (All transactions will appear in Tax Reports)

When changing from Payment Based GST to Invoice Based GST, the GST in the GST Provision account is now payable to the ATO. Step A is therefore divided into two parts i.e. GST transactions relevant to the customers and GST transactions relevant to the suppliers.

Customers:

1. Before doing the journal entries to transfer the GST amount, the value must be obtained for the customers. To determine this value the following report must be run under View…Customers…Monthly / Periodic…Tax Age Analysis. This is a summary of the GST amounts on the outstanding balances of the customers. Ensure that the report is run for the correct period e.g. if the new method is applicable from October the report must be printed for September.
   
2. As explained in the above the GST amounts must be journalised. The entry type found under Setup…Customers…Documents…Invoice must be used for this. Before the journal entries are done, the following must be taken in consideration:
1. We would suggest that the option under Setup…Entry Types…Contra in Detail (select the entry type as explained in point c) must be selected before doing the journal entries.
2. To do the journal entries go to Process…Journals/Cash Book.
3. Select the relevant entry type to do the journal entries (please refer to point 2 to obtain the correct entry type)
4. In the selected entry type, set the Contra Account of the batch  to a Suspense Account e.g. 999/000 (The contra account is setup under Batch Options)
5. The following accounts will be affected:
• Debit the GST Provision account with the GST amount obtained in point 1. A 100% GST Adjustment code must be used. The amount will be transferred out of the GST Provision account to the GST Control account.

Suppliers:

Before doing the journal entries to transfer the GST amount, the value must be obtained for the suppliers. To determine this value run the View…Suppliers…Monthly / Periodic…Tax Age Analysis report. This is a summary of the GST amounts on the outstanding balances of the suppliers. Ensure that the report is run for the correct period e.g. if the new method is applicable from October the report must be printed for September.

1. As explained in the above the GST amounts must be journalised. The entry type found under Setup…Suppliers…Documents…Supplier Invoice must be used for this.
   
2. Before the journal entries are done, the following must be taken in consideration:
1. We would suggest that the option under Setup…Entry Types…Contra in Detail (select the entry type as explained in point c) must be selected before doing the journal entries.

2. To do the journal entries go to Process…Journals/Cash Book.
3. Select the relevant entry type to do the journal entries (please refer to point 2 to obtain the correct entry type)
4. In the selected entry type, set the Contra Account of the batch  to a Suspense Account e.g. 999/000 (The contra account is setup under Batch Options)
5. The following accounts will be affected:
• Credit the GST Provision account with the GST amount obtained in point 1. Use a 100% GST Adjustment code. The amount will be transferred out of the GST Provision account to the GST Control account.

1.2) STEP B (Transactions will not appear in Tax Reports)

When changing from Payment Based GST to Invoice Based GST, the GST in the GST Provision account is payable to the ATO. Step B is therefore divided into two parts i.e. TAX transactions relevant to the customers and TAX transactions relevant to the suppliers.

Customers:

1. Before doing the journal entries to transfer the GST amount, the value must be obtained for the customers. To determine this value run the View…Customers…Monthly / Periodic…Tax Age Analysis report. This is a summary of the GST amounts on the outstanding balances of the customers. Ensure that the report is run for the correct period e.g. if the new method is applicable from October the report must be printed for September.
2. Any entry type can be used to do the journal entries e.g. General Journal.
3. The following accounts will be affected:

• Debit the GST Provision account with the amount obtained in point 1.
• Credit the GST Control account with the same value.

Suppliers:

1. Before doing the journal entries to transfer the GST amount, the value must be obtained for the suppliers. To determine this value run the  View…Suppliers…Monthly / Periodic…Tax Age Analysis report. This is a summary of the GST amounts on the outstanding balances of the suppliers. Ensure that the report is run for the correct period e.g. if the new method is applicable from October the report must be printed for September.
2. Any entry type can be used to do the journal entries e.g. General Journal.
3. The following accounts will be affected:

• Credit the GST Provision account with the amount obtained in point 1.
• Debit the GST Control account with the same value.

CHANGING FROM INVOICE BASED GST TO PAYMENT BASED GST:

With the change from Invoice Based GST to Payment Based GST all the GST already paid to the ATO, on the outstanding balances from customers and suppliers needs to be transferred from the GST Control account to the GST Provision account- this will be done through a journal entry.

Please Note:

• If the period is already closed, for financial figures, that you were supposed to change to the new GST basis, you can do the adjustment in the current month.
• Make sure that you keep accurate record of all calculations in case the ATO needs this for a GST audit.

1.) TO CHANGE THE TAX SYSTEM, WE SUGGEST THE FOLLOWING STEPS:

1. Change the Tax System to Payments Based GST only after all the transactions has been posted (all the transactions for the period should be finished).
2. If you make use of the Tax Type Report and Tax Box Report to determine GST payable / claimed by / from the Receiver of Revenue, it is essential that all preceding transactions concerning customers and suppliers are reflected in these reports. We therefore recommend the procedure outlined in Step A.
3. If you do not make use of the above mentioned reports to calculate the GST payable / claimed by / from the ATO, and you do not want the preceding transactions to reflect in the relevant GST reports in Pastel, please proceed to Step B.

1.1) STEP A (All these transactions will appear in Tax Reports)

With the change from Invoice Based GST to Payment Based GST all the GST already paid to the ATO, on the outstanding balances from customers and suppliers needs to be transferred from the GST Control account to the GST Provision account. Step A is therefore divided into two parts i.e. GST transactions relevant to the customers and GST transactions relevant to the suppliers.

Customers:

1. Before doing the journal entries to transfer the GST amount, the value must be obtained for the customers. To determine this value run the  View…Customers…Monthly / Periodic…Tax Age Analysis report. This is a summary of the GST amounts on the outstanding balances of the customers. Ensure that the report is run for the correct period e.g. if the new method is applicable from October the report must be printed for September.
2. As explained in the above the GST amounts must be journalised. The entry type found under Setup…Customers…Documents…Invoice must be used for this. But before the journal entries are done, the following must be taken in consideration:
1. We would suggest that the option under        Setup…Entry Types…Contra in Detail (select the entry type as explained in point c) must be selected before doing the journal entries.
2. To do the journal entries go to Process…Journals/Cash Book.
3. Select the relevant entry type to do the journal entries (please refer to point 2 to obtain the correct entry type)
4. In the selected entry type, set the Contra Account of the batch  to a Suspense Account e.g. 999/000 (The contra account is setup under Batch Options)
5. The following accounts will be affected:
• Credit the Suspense account with the value obtained in point 1 and use a 100% GST Adjustment code. This entry will credit the Suspense account (999/000) and debit the GST Control Account.
• Credit the GST Provision account with the same value, but do not use any tax on this entry. This entry will credit the GST provision account and debit the Suspense account (999/000).

Suppliers:

1. Before doing the journal entries to transfer the GST amount, the value must be obtained for the suppliers. To determine this value run the View…Suppliers…Monthly / Periodic…Tax Age Analysis report. This is a summary of the GST amounts on the outstanding balances of the suppliers. Ensure that the report is run for the correct period e.g. if the new method is applicable from October the report must be printed for September.
2. As explained in the above the GST amounts must be journalised. The entry type found under Setup…Suppliers…Documents…Supplier Invoice must be used for this. But before the journal entries are done, the following must be taken in consideration:
1. We would suggest that the option under        Setup…Entry Types…Contra in Detail (select the entry type as explained in point c) must be selected before doing the journal entries.
2. To do the journal entries go to Process…Journals/Cash Book.
3. Select the relevant entry type to do the journal entries (please refer to point 2 to obtain the correct entry type)
4. In the selected entry type, set the Contra Account of the batch to a Suspense Account e.g. 999/000 (The contra account is setup under Batch Options)
5. The following accounts will be affected:
• Debit the Suspense account with the value obtained in point 1 and use a 100% GST Adjustment code. This entry will debit the Suspense account (999/000) and credit the GST Control Account.
• Debit the GST Provision account with the same value, but do not use any tax on this entry. This entry will debit the GST Provision account and credit the Suspense account (999/000).

Please Note: Change the TAX System to Payment/Cash Based GST under Setup…TAX / GST / Sales Tax

1.2) STEP B (Transactions will not appear in Tax Reports)

With the change from Invoice Based GST to Payment/Cash Based GST all the GST already paid to the Receiver of Revenue, on the outstanding balances from customers and suppliers, needs to be transferred from the GST Control account to the GST Provision account. Step A is therefore divided into two parts i.e. GST transactions relevant to the customers and GST transactions relevant to the suppliers.

Customers:

1. Before doing the journal entries to transfer the GST amount, the value must be obtained for the customers. To determine this value run the View…Customers…Monthly / Periodic…Tax Age Analysis report. This is a summary of the GST amounts on the outstanding balances of the customers. Ensure that the report is run for the correct period e.g. if the new method is applicable from October the report must be printed for September.
2. Any entry type can be used to do the journal entries e.g. General Journal.
3. The following accounts will be affected:
• Debit the GST Control account with the amount obtained in point 1.
• Credit the GST Provision account with the same value.

Suppliers:

1. Before doing the journal entries to transfer the GST amount, the value must be obtained for the suppliers. To determine this value run the View…Suppliers…Monthly / Periodic…Tax Age Analysis report. This is a summary of the GST amounts on the outstanding balances of the suppliers. Ensure that the report is run for the correct period e.g. if the new method is applicable from October the report must be printed for September.
2. Any entry type can be used to do the journal entries e.g. General Journal.
3. The following accounts will be affected:

• Credit the GST Control account with the amount obtained in point 1.
• Debit the GST Provision account with the same value.

Please Note: Change the Tax System to Payment Based GST under Setup…TAX / GST / Sales Tax.

If you require further assistance or information, please contact our support department. If you do not have a support contract, please contact sales@sagepastel.com.au