Handling Layby payments in New Zealand GST101 and Business Tax Returns

Legacy KB ID: 5520

Question

How do I apply Layby payments to correctly reflect in my GST101 returns and Business Tax calculations?

Answer

You should refer to your Accountant for specific guidance.

The IRD website indicates that tax should not be attributed on Layby sales until final payment is received, regardless of whether you are tracking tax on a Cash or Accrual method. 

Users should be familiar with the KB ‘Applying Reckon Point of Sale Layby Payments in Reckon Accounts’ for full details.

 

Directions for Cash basis reporting

1.    Do not apply payments to layby invoices until final payment is received

2.    When final payment is received, re-date all the payments to the final payment date and apply them to the invoice.

 

Direction for Accrual basis reporting

Reckon Accounts accrual basis treats an invoice as a tax event on the date of the invoice.  The layby invoice must be adjusted to exclude it until full payment is received.

1.    Mark layby invoices (and Adjustment Notes) as pending until final payment is received

2.    When final payment for a layby is received:

a.    mark the layby invoice (and any related Adjustment Note) as Final, and,

b.    re-date that invoice (and Adjustment Note) to the final payment date.

3.    Apply the payments (and Adjustment Notes if any) to the invoice

See the KB ‘Applying Reckon Point of Sale Layby Payments in Reckon Accounts’ for full details.

 

Additional Notes

If tracking tax on an accrual basis on POS 2016 or earlier editions, instead of making the unpaid invoices and adjustment notes pending, you could redate them to a far future date so that they don’t affect your tax reports. Then when final payment is made, redate them to the final payment date and apply the payments.

 

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