Bit confused as to which account i allocate an INCOME TAX REFUND.
Is it a credit to a liability account as Income tax payable (as its a refund)
or allocated to other income and create a new account Income tax refund??
or does it go somewhere else ?
Good question.
Depends on the Business Structure eg Sole Trader or Company.
A Sole Trader would post to a Income Tax Refund to Equity.
Make sure the PAYG - I Ledger is correct (if using one).
A Company would should have a Current Asset called Income Tax Refund FY23.
Some Tax Accountants leave the Current Liability Income Tax Payable as negative.
Let me know.
Duncan
Hi Jen65,
Thank you for your post.
Thank you DuncanS, for sharing insights. Typically, the allocation used for the fund should be the same as the original account used to pay for this type of ATO payment. e.g. if it was "PAYG" used in the original ATO payment transaction (Spend Money), then this allocation account should be also be used in Received Money transaction now for the refund. You can also check on this Help Article: Recording ATO or IRD payments and credits for your reference.
Whenever in doubt about which allocation account to use for your business set up, we do suggest confirming that with your Accounting advisor.
Contact us again if you have questions or concerns. We are happy to help.
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Kind Regards,
Cel
Celia,
A Tax Accountant when preparing the Financial Records for Tax Purposes will journal the PAYG - I for the FY to the Income Tax Payable account. Thus the PAYG - I ledger in nil in the Financial Records at year end.
As I mentioned, for a Company there should be a Current Asset called Income Tax Refund FY23.
The Income Tax Refund from the ATO should be the same as this figure. This ledger should be nil once the Tax Refund is received and allocated within MYOB.
Duncan
