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This is my first time using the forum. I am getting a bit confused as to when I should use the INP tax code.
I've read heaps but am wondering what the difference is between that and GST code.
Can anyone clarify it for me please?
Unless you are providing financial services you should probably delete the code. Use GST as your tax code (if you are registered for GST) as that will let you claim tax you have paid and record tax you have collected.
I would suggest that you get a Certified Consultant to assist you on site with your setup. It will cost you money for the visit but the consultant should be able to help you setup your file correctly and give you some basic training in using the program.
Hi Kath and Clive,
I was just reading about the input tax sales code because I was trying to confirm what code I should allocate to bank interest. My reading suggested that I should use the ITS - input tax sales for bank interest. Clive do you see any issues with this?
Oh I think I got confused - I was looking at INS (rather than INP). Anyway for your info, this is what I found on INS - Input Tax Sales recording in relation to bank interest...
Hi Kath / Clive / Helen,
I think the issue that Clive is getting at here is that the issue of INP and ITS is generally safeguarded by accountants for people providing financial services and/or dealing in investments as their primary business basis.
In the short of it... both INP and FRE go in and come off the BAS and there is no GST involved in both cases so from the ATO's perspective it really doesn't make a lot of difference, especially since the calculation sheet method isn't actually used on the BAS that you lodge anyway.
I may be chastised by some of the others for saying this but generally speaking bank charges and interest should just be entered through the FRE taxcode unless you have significant investments that form the majority of your income (I'll condition that by reiterating 'Always check with your accountant first if you are unsure!').
As Clive also pointed out.. to have it set up right from square one is a high priority.. so getting a Certified Consultant to go over your setup of tax codes and set defaults / advise on additional taxcodes or ones that need to be removed it will go a long way to making sure you're getting it right from the get-go.
Best of luck. =)
The other tricky thing about the INP / ITS codes that I'd never really understood until just now when I did a google search on it is the reason why they are set up as 10% as default (instead of 0% because under the input taxed system you can not claim GST).
It's to do with the fact that the purchases may be entered as inclusive or exclusive of the GST depending on reporting requirements of the entity. So if you do pursue these codes be VERY careful to make sure that they are set up for your situation.
There are MYOB support notes about input taxed codes and their applications.
Here's the one that I found that explains it - http://myobaustralia.custhelp.com/cgi-bin/myobaust
Going on further from all of this I always set up a NT code being No tax. The only things I will allocate to GST Free (FRE) coding are items that are actually free and are listed on the ATO site as GST Free. These include medical, food, some education and essentials (like water). Other things like registration of motor vehicles, council rates and bank charges (those that have no GST), bank interest paid and earnt I record under NT (no tax).
When you use INP you will see the amount of GST noted there but if you look (recap) the entry that MYOB is about to process you will see that it has expensed the amount in full and not allocated the GST to be claimed back. This would be used for example if you had a residential property which you can not charge GST on and therefore any repairs/maintenance expenses etc are unable to have GST claimed back. In this instance you would use the INP tax code.
Hope this explains it for you.
You are correct that INS or ITS (whatever you want to call it) is set up as a GST type code with a zero rate. It is used to differentiate income that should be recorded at G1 and G4 on the BAS Worksheet. You will notice that G4 does not appear on the actual BAS. Apart from interest received you should also record dividends received against this tax code.