Xero - beautiful accounting software

Xero Business Community

Xero Business Community

Hi everyone, Come on over to the new discussions in Xero Central. It’s a more intuitive way to connect and chat all things business with one another. Ask questions, dish out answers, and get involved.

You can still view topics in the Xero Business Community to see all the useful knowledge that’s been shared there; and you can restart conversations you feel have been of huge value to you on Xero Central.

If you have brilliant ideas for innovations, you can keep on adding feature requests in the Xero Business Community, and voting on existing requests. There’s more in store, as we come up with the best way to take on your thoughts and share developments
Community > Accounting >

Do I pay AU GST on Undeposited Funds?

Started by Zane McIntyre -   in Accounting

I was wondering, as a general accounting question whether or not in Xero I can classify income as undeposited funds. The reason being is I need to do our BAS but there is a lot of money in our account which is essentially not ours. Our business works as an intermediary between two parties where only 25% of money in our account belongs to us. The rest is being held for our payees but I have to supply an invoice to the payer which is why it's being classified as income. Do I have to pay GST on all funds in our account or only what is considered our actual cash-flow?
Zane, you should talk to your accountant about this. If it is taxable supply then you MUST pay on it in NZ (not sure exactly how it works in Aussie). But it doesn't sound like it is really a taxable supply, so the answer should be "no." Your issue is how to account for it in Xero. You should look into using a liability account (as a suspense account) and set the GST code for this account as Non-GSTable. When the transactions go through the bank account they will be coded to the suspense account. You will then need to reconcile this manually. BUT, if you are issuing invoices then you will want to match the bank transactions against the invoice, so it is the coding on your invoice that will matter. Again, your accountant is your best advisor here.

Peter McCarroll  

Thanks so much for your reply it is greatly appreciated. It all certainly makes sense and I was simply looking for the solution I would use most similar to that of "Undeposited Funds" in MYOB.

Zane McIntyre  

Another way to do this I have found is:

1. Record a journal entry as at 31 December 2011 to “recode deposits and GST received in advance”

Debit sales (with GST applied) and credit Deposits Received with no GST for the amount of deposits that you are effectively holding as at 31 Dec.

2. Next quarter, simply reverse this journal and then record the amount of the Deposits being held as at 31 March as in Step 1

This will remove any GST from your BAS reports prepared by Xero, while not changing the way you currently do things.

Zane McIntyre