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So I have capital purchases (motor vehicles) worth $12,000 to $600,000 GST inclusive. I have all the documentations.
I am maintaining two separate books: one for all the operating transactions (monthly recurring expenses and monthly income) –Company A
and the other one is created solely to record all the assets –Company B.
Company A records the purchase while Company B is the one paying for the said assets.
I am planning to record the above as related party transactions from the books of the above companies.
Credit: Due to related party
Debit: Due from related party
My problem now is how to record the above while recording the GST paid in the proper supplier.
Appreciate any help.
Solved! Go to Solution.
Who is the invoice made out to, Company A or B?
Are they actually separate Companies with their own ABN?
If you have vehicles in the $600K range you should keep them off the books and talk to your accountant. The problem is that vehicles in this price range often appreciate in value and( onsale) you finish up having to pay more GST than you did when you bought the vehicle.
Ron is right in that on the more expensive vehicles. Your Tax Accountant should be able to advise whether claiming back the GST, depreceiating the vehicle over the years, and the GST you would owe the ATO, plus tax on any capital gain is really worth putting it on the books.
Sometimes vehicles in this price range are a R&D project and there are other tax incentives, but sometimes they are just 'toys for the boys' that are claimed as a business expense.
If your tax accountant is 'worth their salt', they should be able to predict a break even point on claiming it or not claiming it.
Hi @Julie_A_C @ronatbas,
Thank you for your reply.
Company A and Company B have different ABN. And invoices were named under Company B. But Company A pays for the Lease of those assets under Finance Lease and also the one which paid those assets bought in cash.
Our Tax Accountant advised us to record the assets in separate entity (BTW, we are a start up Company). She told us that we can claim back the GST paid from those assets worth more than $20,000.
Thank you for your help.
So in the books of Company B, you will have a liability account set up as a credit card type called loan to Company A.
You will do a spend money on that liability account for assets purchased in cash and allocate to the equipment asset account and claim the GST back for Company B.
In company A you will do a spend money from the bank account and allocate to an asset account you create called Loan to Company B and marked as not reportable.
You can claim back GST on any item that has GST included in it's cost and that you hold a valid tax invoice for. Either there is some miscommunication about GST on items over $20,000 or your Accountant does not know what they are talking about. You may have bought a vehicle from a private person worth $50,000 but if they aren't registered for GST, there is no GST involved, and in that instance they woud not give you any tax invoice, but you would request a receipt from them detailing item purchased so you can at least have proof of payment to enable claiming it as a tax deduction.
For the assets that have been done on financing, in Company A it would be a simple monthly entry, being spend money from bank account and allocated to the Loan to Company B asset account.
In Company B though you would need to set up the Financing Company liability, do a spend money and allocate to the Equipment asset account, claiming back the GST in Company B.
You would then do a monthly recurring entry, spend money from the Loan from Company A liability account and allocate this to the Financing Company liability account you created.
Each month you should reconcile the loan account in Company A to the loan account in Company B, to ensure you have not missed processing an entry in one of the books.
Thank you very much for a detailed answer. This helped me a lot.