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kempton.david
July 16, 2021
Question

How do I categorise an income tax refund so that it isn't taxed as regular sales?

  • July 16, 2021
  • 2 replies
  • 0 views
Original commenter did not share additional details

2 replies

N
Nona_O
July 16, 2021

Hi kempton.david,

 

I’m glad to assist you.
In Quickbooks Online, here is how we record a tax refund:

  1. Select GST on the left hand menu.
  2. Under To Pay, click Record Refund.
  3. Select the Account the payment will be deposited into and the Date of the refund.
  4. Input any Memo for the transaction.
  5. Select Save.

The record refund link inside the GST Centre can only be applied to a previously lodged BAS . In order to record that refund/payment against a previous BAS period, you have to first find the previously lodged BAS in the GST Centre and then select the Record Payment option in the Action column. 

 

Please reach out again if you have any other questions.

F
formwerx
June 13, 2022

Your suggestion is OK for GST refunds relating to a lodged BAS but the question is how to categorise an "Income Tax Refund".  Typically at the EOFY after lodging your Company Returns the ATO will either send you a refund or request an extra payment depending upon your profits and the amount of PAYGI Instalment that has been prepaid. How do you allocate that payment or refund that shows up on your bank statement?

    I
    IntuitAika
    June 13, 2022

    Hi formwerx,

     

    If an income tax refund received from ATO is not related to a lodged BAS, we can set up an income account and allocate it on your downloaded bank feed. Let me show you how to do this.

     

    1. On Accounting tab select Chart of Accounts.
    2. Select New. 
    3. On Account Type, select Other income.
    4. Select a Detail Type on the drop-down list. 
    5. Enter Name for the account created.
    6. Select Save and close.

     

    You can use that account created for income tax refund received from ATO. For income tax payment, let me show you how to set up an account for it.

     

    1. On Accounting tab select Chart of Accounts.
    2. Select New.
    3. On Account Type, select Expenses.
    4. On Detail Type, select Taxes Paid.
    5. Enter Name of the account. 
    6. Select Save and close.

     

    Furthermore, I would suggest to consult an accountant or a QuickBooks Certified ProAdvisor for accuracy on your tax reporting.

     

    Feel free to drop a comment below if you need further assistance. I'll be around to help. 

    I
    IntuitAika
    June 14, 2022

    Hi formwerx, 

     

    Just to check, do you lodge IAS (Income Activity Statement) in QuickBooks Online GST centre? If yes, you can click on Record payment on your IAS. Any payment recorded from the GST centre will hit your ATO Clearing account. Furthermore, you can generate a Journal report to see how GST and IAS payments are posted. Also, all expense accounts will affect and will be posted on your Profit and Loss report. 

     

    For more detailed information, you can check on this article: Reporting PAYG Instalments on BAS and IAS. 

     

    Let us know if you have any other questions. Have a nice day! 

    F
    formwerx
    June 14, 2022

    No I don't do monthly IAS reporting I do quarterly BAS reporting via the GST Centre. 

     

    As an example my PAYGI Instalment amount set by the ATO was $5k / quarter.  So in total I had prepaid $20k Company Tax by the EOFY.  However after submitting my Annual Company Tax Returns I should have paid $30k Company Tax so the ATO requested the $10k balance. This was paid by direct transfer to the ATO which then zero'd my ATO Online account so eth ATO are happy.  

     

    Next the $10k payment arrived on my QBO bank feed as usual and the question is - How do I allocate that $10k Company Tax payment to the ATO? 

     

    For my other company I have exactly the opposite situation and the ATO sent me a Company Tax refund as my quarterly instalments were too high  - How do I allocate that deposit that appears on my bank feed?

    I
    IntuitAika
    June 14, 2022

    Hi formwerx,

     

    Thank you for the detailed information you've provided. Once you've enabled PAYG Instalment on your tax settings and then lodge your BAS in QuickBooks Online, it will create a journal entry and by default the system used the account PAYG Instalment Liabilities. In that case, you can allocate the payment to PAYG Instalment Liabilities account to clear out the balance but if you have not lodged anything in QuickBooks Online, the payment must be recorded as an expense. 

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