Using liability account for ATO ICA: how/when to adjust the various tax accounts?

JoeW

I have followed the excellent advice in many forum posts here and now have a liability account for the compant ATO ICA, as a credit card liability to allow Spend/Receive Money and Reconcile modules.

 

Each IAS/BAS original or amended statement goes into the ATO ICA liability. It is fully in sync with the actual ATO ICA account, both reconciling as of EOFY but also as a running balance. Payments from my bank account and refunds received to it also reconcile. Cash boost credits and offsets against ATO ICA balance owed to the ATO, ditto. In theory it seems like I'm doing everything correctly.

But... I don't think I am.

When do the underlying tax-related accounts get zeroed out? When do they get "paid"?

Example:

1. Activity statement shows I owe the ATO $147.00 for PAYGW.
2. I generate a Spend Money transaction from my ATO ICA "credit card" to pay PAYGW liability account $147.00.
3. My ATO ICA liability account agrees with the ATO.
4. I then receive a $10,000 ATO Cash Flow Boost payment. The ATO shows this is offset against my $147.00 debt.
5. I generate a Receive Money transaction to my ATO ICA "credit card" for the $10,000.00 payment, against an income account ATO Cash Flow Boost.
6. My ATO ICA liability account agrees with the ATO, they owe me $9,853.00.
7. ATO refunds me $9,853.00.
8. I generate a Spend Money from my ATO ICA "credit card" for $9,853.00 to my bank account.
9. My ATO ICA liability account now agrees with the ATO (zero balance), and also agrees with my bank account (transaction paid in of $9,853.00).

So far so good right?

 

But what happens to the PAYGW liability account? It is still down $147.00. When and how do I show that that amount was "paid" via offset with a credit? I thought this was done in the ATO ICA account but it's bothering me greatly that I don't show a zero balance in the PAYGW liability account.

 

Likewise payments to the ATO are currently payments to my ATO ICA "credit card" and not to the underlying PAYGW and GST liabilities.

I would expect that when the ATO says there is a zero balance and my ATO ICA liabilty account agrees, that I should also see a zero running balance as of that day for PAYGW, and that GST Paid = GST Collected. But I don't and so I feel sure I have missed something basic.

Apologies for long post, I don't know enough to write you a short one so I wrote a long one.

Tracey_H

Hi @JoeW 

 

Thanks for your post and the detailed information, it sounds like you are processing these transactions correctly. The Spend Money transaction at step 2 should be allocated to the PAYG liability account so would be 'payment' and reduce that liability account. The ICA account should show a credit for the PAYG Spend money transaction and a debit for the Receive Money cash flow boost transaction. Leaving a net balance of $9853, being the refund amount.

 

Personally I'd recommend using the Pay Liabilities instead of Spend Money to record payment of PAYG withholding amounts. You would need to change the Pay from Account to your ICA account, change the Liability type to Taxes and tick the transactions.

 

Generally speaking, the PAYG liability account won't be zeroed out because of the timing of activity statement payments. For example, the PAYG liability for September is $147 which you pay on the 15th October but you've processed two October payruns so the liability account will show the october balance as owing. I used to reconcile the PAYG liability account in the Reconcile Accounts window, it's a great way of making sure your payment amounts are correct and recorded correctly.

 

Another option for the Spend Money at step 8 is a Transfer Money transaction from the ICA account to the bank account. This will clear the ICA account and record the deposit in the bank account for reconciling.

 

Please let me know if you need further help with this.

 

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