Invoice Tax Total is not 10% of Net Total

Legacy KB ID: 3628

Question

Why isn’t the Tax total on my invoice equal to 10% of the Net Total?  It doesn’t match by a couple of cents. 

All items on the invoice are charged GST and are correct.

 

Answer

Reckon Accounts follows the original ATO instruction for charging GST which is, an item’s cost must contain the tax component rounded to the nearest cent. 

The tax law is not specific whether multiple line invoices should charge the GST per item or on the total of the invoice. 

The ATO accepts either calculation.

In Reckon Accounts where a number of items are included on an invoice, it is possible that due to the rounding effect the Tax Total will not be exactly 10% of the Net Total. 

Software developers have settled on one or the other method. 

If you wish the Tax Total to be exactly 10% of the Net Total, then you will need to insert adjusting entries on your invoice. 

  1. Determine the amount of the difference – say the difference is 0.01.
  2. If Total Tax is more than 10% of Total Net, then create a Dollar Discount item to adjust the tax and enter 0.10 with GST so that -0.01 tax is calculated.
  3. If Total Tax is less than 10% of Total Net, then create a charge item to adjust the tax and enter 0.10 with GST so that 0.01 tax is calculated.
  4. Neutralise the effect on the Net Total:
    1. Where Total Tax is more than 10% of Total Net, create a Charge item to add back the net adjusting entry and enter 0.10 with FRE tax code.
    2. Where Total Tax is more than 10% of Total Net, create a Dollar Discount item to add back the net adjusting entry and enter 0.10 with FRE tax code.
Your Tax Total has now been adjusted. 


Need more help?

Ask the Reckon Community at: https://community.reckon.com/categories/reckonaccounts

Or Log a Support Ticket: https://www.reckon.com/au/support/

How did we do?

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