GST Adjustment for a Sale

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GST Adjustment for a Sale

I have a client who has had sales with Retention held, however when the previous bookkeeper entered the sale into MYOB they entered the Retention as N-T instead of with the GST portion therefore the client paid too must GST at the time.  But the customer paid the correct amount.  Now the client is claiming the Retention and needs to issue the customer with the tax invoice with the correct GST for the customer.  However the client obviously does not wish to pay too much GST, any ideas, or have I confused everyone.  Thanks

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Re: GST Adjustment for a Sale

Hi @CarenK

 

I think you need to show us how the orginal invoice with retention held was done because my reading of how you are saying it doesn't seem to agree that the client has paid too much GST.

 

I assume they are on accruals and you say

I have a client who has had sales with Retention held, however when the previous bookkeeper entered the sale into MYOB they entered the Retention as N-T

so I would expect to see a sale of say $22,000 being Works done $20,000 (GST inc) Retention $2000 (N-T) total GST $1818.18, or there are two invoices, one for $20,000 (GST) and one for $2,000 (N-T), still only being $1,818.18 of GST being paid to ATO.

 

It would be a matter of changing the date on the invoice for the remaining $2,000 and either adding the GST to it (or making that inclusive).

 

Whether the retention is in a period where the tax return has been done and income tax has been paid on this amount or not will depend on how you need to proceed on changing the date on the retention invoice, as you may then need to do a credit note for the $2,000 (N-T) and create a new invoice.

 

You may need to liaise with the Tax Accountant, if these retentions have been included in a tax return and income tax paid and whether it would be better for an amedment be done to the Tax returns, given that some tax rates have reduced.

 

Julie Carter AIPA, BBus(Acctg),
MYOB Professional Partner, Registered BAS Service Provider
Associate Member of Institute of Public Accountants
Member Association of Accounting Technicians
ph: 0417 927 654 email: accuratebooks7@gmail.com
JAC' of All Trades Bookkeeping (Servicing from Leederville to Pinjarra, Fremantle to Armadale WA)


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Re: GST Adjustment for a Sale

Hi Julie

Thanks for that.  However the invoice states for example Total Invoiced $20,000.00 + GST $2,000.00 = $22,000.00 less $2,000.00 for Retention, however they have still paid $2,000 GST instead of $1,818.18, and yes these figures were in the last financial year and only claiming back the Retention amounts now.

The customer requries the invoice to state $2,000.00 + $200.00 for GST, however that will mean that my client will end up paying $2,200.00 GST so an extra $200.00.

The customer sent through Contract paperwork with the amounts they were deducting for the retention which included the GST deduction at the time, which means that is what they have paid.  However the previous bookkeeper did not enter it that way Smiley Sad

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Re: GST Adjustment for a Sale

Hi @CarenK

 

So your customer paid $20,000 previously and at that time only claimed $1,818.18 back from the ATO for GST even though the invoice they had said there was $2,000 GST in that amount and your client sent $2,000 off to the ATO.

 

You now need to make them out an invoice for the $2,000 retention coded GST so they can claim back the $181.81 GST.  It is not for $2,200, the whole contract sum should have only been for $20,000 plus GST (ie $22,000).

 

Once you have issued this for them you would then need to go into the invoice and amend for your records only.

 

Add another two lines as attached, with details stating that the GST amount has previously been recorded and sent to ATO refer original invoice no. xxxx.

 

If the actual contract was for $22,000 plus GST ($24,200) then it is a straight forward matter of issuing an invoice this time for $2,200 and your client sending off $200.  They will not have overpaid on GST.  It all depends on what the actual contract sum was, $20,000 or $22,000 plus GST.

 

What I would be worried about though is when the ATO does data matching, and you will need to speak to the Accountant about how you are going to deal with the situation.

 

Going on how the original entries were done meant that the BAS would have showed sales of $20,000 (ex GST), but depending on what account the negative $2,000 went to (and I assume this was an income account), the income tax return would have shown sales as $18,000.  Therefore your data matching wont agree.

 

This will also apply for this year sales showing on BAS as nil and the income tax return will show $2,000.

 

Unless the negative for retention on the original invoice went to some sort of asset account, maybe called retentions due, if so this is where the 3rd line on the attached will be allocated to.

 

 

Julie Carter AIPA, BBus(Acctg),
MYOB Professional Partner, Registered BAS Service Provider
Associate Member of Institute of Public Accountants
Member Association of Accounting Technicians
ph: 0417 927 654 email: accuratebooks7@gmail.com
JAC' of All Trades Bookkeeping (Servicing from Leederville to Pinjarra, Fremantle to Armadale WA)


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Re: GST Adjustment for a Sale

Sorry Julie

 

I'm not explaining myself very well.  The customer has paid the correct amount of GST, as they do a Payment Claim Form, and send it through with the deducted Retention and the adjusted GST amount which MY client is supposed to alter in MYOB to accept the claim, however the previous Bookkeeper did not do this.

 

She left the claim the same and put the Retention through in MYOB as an N-T code, which means it did not adjust the GST amount

 

eg:  My client

Claim - $22,000.00 including GST

Less Retention - $2,000.00 N-T

GST - $2,000.00

Paid - $20,000.00

 

But the customer was:

 

Claim $22,000.00 including GST

Less Retention - $2,000.00 including GST

GST - $1,818.18

Paid - $20,000.00

 

Therefore my client has paid $2,000.00 GST but when they issue the customer the claim for the Retention the Claim will be $2,000.00 but the GST of $181.18 has already been paid by my client but not by their customer.

 

 

 

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Re: GST Adjustment for a Sale

hi @CarenK

 

Then like I said in the previous post, do the following

 

Your customer paid $20,000 previously and at that time only claimed $1,818.18 back from the ATO for GST even though the invoice they had said there was $2,000 GST in that amount and your client sent $2,000 off to the ATO.

 

You now need to make them out an invoice for the $2,000 retention coded GST so they can claim back the $181.81 GST.

 

Once you have issued this for them you would then need to go into the invoice and amend for your records only.

 

Add another two lines as attached (see previous post), with details stating that the GST amount has previously been recorded and sent to ATO refer original invoice no. xxxx.

 

Once again I state

 

What I would be worried about though is when the ATO does data matching, and you will need to speak to the Accountant about is how you are going to deal with the situation.

 

Going on how the original entries were done meant that the BAS would have showed sales of $20,000 (ex GST), but the income tax return would have shown sales as $18,000.  Therefore your data matching wont agree.

 

This will also apply for this year sales showing on BAS as nil and the income tax return will show $2,000.

 

This first part of my reply will sort the BAS situation, but you need to liaise with the Tax Accountant regarding the data matching done by the ATO. 

 

Unless your client is cash for BAS and accruals for Income Tax, as naturally these will never agree (but the difference gets down to amounts recorded as receivables and payables).

 

Maybe the time to reitereate to your client why he should have got a 'good' bookkeeper in the first place Smiley Surprised

 

 

 

Julie Carter AIPA, BBus(Acctg),
MYOB Professional Partner, Registered BAS Service Provider
Associate Member of Institute of Public Accountants
Member Association of Accounting Technicians
ph: 0417 927 654 email: accuratebooks7@gmail.com
JAC' of All Trades Bookkeeping (Servicing from Leederville to Pinjarra, Fremantle to Armadale WA)


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Re: GST Adjustment for a Sale

Thanks Julie for all your help, much appreciated, I was concerned about sending customer 1 invoice and adjusting for our records.  I had already spoken with the accountant regarding this, and they were a little unsure how to handle it in MYOB.

 

I totally agree with the "good" bookkeeper comment, you should see some of the other entries Smiley Sad

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