Creating a new withholding tax code for overseas royalty payments

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Creating a new withholding tax code for overseas royalty payments

Hi, we have royalty payments to make to New Zealand. As they are non residents, 5% tax needs to be withheld. I have tried to set up a code similar to GST but it wont calculate the percentage correctly and seems to be rounding the figure up (this doesn't happen with GST calculations). I have attached a screen shot of how I set the code up.

Thanks in advance.

 

 

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Re: Creating a new withholding tax code for overseas royalty payments

Hi @MichelleGPN 

 

The software does that because for tax type "Voluntary withholdings", the amount is supposed to be reported in whole dollars to the ATO.

 

 As you mentioned, it does not happen if you choose the tax type as "GST" in the tax code's information, so changing the tax type for this code would help  you get the amount calculated to the nearest cent. However, doing this may have other reporting implications, therefore, I would recommend speaking to your accounting advisor if you want to do that.


Please let me know if you have any questions. 

Kind regards,
Komal

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Re: Creating a new withholding tax code for overseas royalty payments

Thanks @Komal_S , that explains part of the problem. Surely we aren't the only business using MYOB that has to withhold tax to overseas payments?

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Re: Creating a new withholding tax code for overseas royalty payments

Hi @MichelleGPN 


Yes, that's right. In saying that, many businesses that withhold tax for overseas payments would report them in whole dollars, thus remaining compliant. 

 

However, as I mentioned before, if you do have specific concerns about reporting the tax to the nearest cents or dollars for your business, consulting your accounting advisor would be highly recommended. 


Feel free to reach out should you have any other queries.

Kind regards,
Komal

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Re: Creating a new withholding tax code for overseas royalty payments

Thanks @Komal_S but when the GST reports are run it takes the tax withheld off the tax paid amount. I have been told I need to manually adjust by adding the amount back to tax paid and then add to tax collected. Is there a way for MYOB to calculate tax & GST properly?

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Re: Creating a new withholding tax code for overseas royalty payments

Hi @MichelleGPN 

 

Voluntary withholdings based tax codes are intended to be used for the PAYG voluntary withholdings scheme. These would be where you would withhold a portion of a transaction for the purpose of reporting under that scheme. For example, if you purchase goods/services of $100 from a subcontractor and you have a voluntary withholding of 20%, the amount you pay the supplier would be $80 as $20 has been withheld. Typically, voluntary withholdings are used on purchases, however, for sales, it would have the same effect and withhold a portion of the taxable amount. 

 

Based on your initial post, it sounds like the system is working as intended based on the set up of that code and withholding a portion of the sale and place that against the Account for Withholding Credits.

Kind regards,
Steven

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